Japan has developed strong ties of interdependence with other Asian countries. As such, from a foreign policy perspective, it considers it a matter of top priority to help the Asian economy recover from the crisis conditions that struck in 1997.

This chapter presents an overview of continuous efforts by Japan in the sphere of regional assistance. It begins with a discussion of steps taken over the past two years, chiefly through ODA, to help Asia recover from the effects of its recent economic crisis. Attention then shifts to a summary of the second Tokyo International Conference on African Development (TICAD II) and follow-up undertakings led by Japan, with a discussion of international efforts, and the Japanese role, in fostering the self-reliant development of countries in Africa that have been sidestepped by trends in globalization.

Section 1 Towards Economic Recovery in Asia

1. Overview

In the second half of 1997, many parts of Asia faced spreading currency and financial crisis precipitated by the depreciation of the Thai baht. This event fueled concerns over the potential impact to the economic systems of countries throughout the region, and in some cases even generated serious doubts about the outlook for political stability. Foreign investors reacted by withdrawing huge sums of capital from Asia's money markets, triggering a collective fall in currencies and stock prices throughout the region, and notably in Indonesia, Thailand, Malaysia, and the Republic of Korea. Serious repercussions rippled through the real economy as well, and ultimately gave way to an unprecedented economic crisis. Although the causal agents and severity of the crisis varied country by country, several structural deficiencies have been cited as common factors: e.g., fragile financial sectors and shortages of the personnel required for the formulation and implementation of economic and development policy.

Efforts in structural reform and self-help, together with aid from the international community, have enabled most countries of the region to return an atmosphere of calm to their currency and financial markets, improve some of their macroeconomic indicators, and begin shaking off the effects of the currency crisis. On the whole, since the beginning of 1999 the Asian economy has begun showing signs of renewed brightness.

However, returning to a path of strong economic growth and stable development will demand action to address several key challenges. These range from financial system reform, the liquidation of bad debts, human resources development, and the cultivation of small enterprise and other segments of the industrial sector to steps aimed at offsetting deficiencies in funding and frameworks for the alleviation of poverty and assistance to the socially vulnerable. Although initiatives led by all countries affected will be a must, aid from the international community at large will also be necessary. To be sure, most countries of the region already have the fundamentals needed for this undertaking, including universal systems of education and high savings rates. It is anticipated that they have the latent capacity to place themselves back onto a strong and sustained track of long-term economic growth, provided they harness their fundamental strengths and carry through with essential steps in reform.

Japan has traditionally devoted aid priority to countries in East Asia (including Southeast Asia). This regional priority has also been sustained as an element of the Medium-Term Policy on ODA. Although the region is still reeling from the shocks of the recent economic crisis, it has been a recognized center of global economic growth for some years now. Various factors highlight the region's enormous need for continued and appropriately tailored aid. For one, economic recovery and sustained growth in Asia will be crucial to economic growth at the global level. Second, the region has strong, interdependent ties with Japan. Furthermore, many people in Asia are still suffering under conditions of severe poverty.

2. The Aid Track Record and Future Directions

Japan to date has announced over $80 billion in aid to help Asian countries deal with their financial and economic crises. Several countries of the region faced difficulty in importing staple foods, medicine, fuel, and other commodities essential for daily life or industrial operations. In August 1997, a package of emergency financial aid (chiefly through IMF channels) was finalized for Thailand. This was followed by similar commitments of large packages of international assistance to the Republic of Korea and Indonesia. As its own contribution to these packages, Japan implemented considerable assistance of public financing.³⁰ In addition, it provided an assortment of measures that were designed to help Asian countries raise needed funds, promote private sector business activity, and facilitate the flow of trade and investment.³¹ To offset funding shortfalls , the New Miyazawa Initiative (announced in October 1998) incorporated aid arrangements for economic recovery ($15 billion) to set aside for their possible short-term capital needs during the process of implementing economic reform, as well as measures for medium- to long-term financial assistance for economic recovery ($15 billion) (Chart 19). Additionally, in December 1998, Japan announced a Special Yen Loan Facility as assistance for economic structural reform (Chart 20).

Of assistance mentioned above $70 billion in aid has already been made concrete of which about $7.7 billion has been implemented as ODA (as of December 1999). In formulating these aid packages, traditional policy dialogues as well as, policy dialogues on the New Miyazawa Initiative and the Special Yen Loan Facility were held. Assistance under these arrangements has accordingly been made with close attention to the aid needs of each country. Following is a description of aid provided chiefly as ODA (Chart 18).

2.1 Aid for Undertakings in Structural Reform

Japan has assisted several Asian countries address challenges in the area of economic structural reform, including financial sector reform and institutional changes for improved market efficiency. In particular, it has extended yen loans to support Asian countries affected by the recent economic crisis continue with the structural adjustment programs they have worked out with the World Bank, IMF, and Asian Development Bank. Assistance in the form of yen loans could also be provided to such countries that implement measures in economic reform independently agreed with Japan through policy dialogues. For example, in April 1999 Japan provided a yen loan (¥20 billion) to help Viet Nam implement a program of economic reforms in accordance with a bilateral agreement. That loan was made after Viet Nam formally submitted an action plan to carry out the Private Sector Promotion Program, one of a series of initiatives in economic reform.

On top of this, Japan has extended non-project grant aid as a means of enabling certain Asian countries to move forward with their structural adjustment programs. Additionally, it has placed teams of government personnel on assignments abroad to serve as policy advisers on structural adjustment (Chart 18).

Japan is also preparing to enhance its assistance for "soft" type assistance such as the promotion of support industries, human resources development for adequate economic and social management and the transfer of more-advanced technologies, and economic structure reform. The focus will be put on in addition to "hard" assistance such as economic infrastructure-related projects and projects in the fields of agricultural and rural development.

2.2 Assistance to the Socially Vulnerable

In many Asian countries, the recent economic crisis fueled a spiral in prices for various import-dependent commodities, including foods, medicines, and drug precursor materials. Additionally, austere fiscal policies prompted an uptrend in the cost of education, health care, and many utilities and public services, together with cuts in assorted subsidies. These developments placed an inordinately heavy burden on the shoulders of socially vulnerable citizens: namely, the poor, elderly, and swelling masses of unemployed. Deteriorating levels of nutrition, together with climbing health-care costs and a consequent reduction in access to services, have become a serious humanitarian issue because of the serious impact they have on children, pregnant women, the elderly, disabled, and chronically ill.

In preparing packages of aid for Asian countries hurt by the recent economic crisis, Japan has been guided by an awareness of the importance of aid for the disadvantaged classes of society. In April 1998, it sponsored an international symposium in Tokyo on the theme, "Asian Economic Crisis and Health: The HumanﾐCentered Approach." That forum was focused primarily on the necessity of devoting adequate attention to nutritional intake, health care, and other basic indicators of the quality of life, and of accurately identifying and countering the effects that the economic crisis had on the socially vulnerable. As such, it proved instrumental in fostering a heightened awareness of the value of international cooperation within these contexts.

In his December 1998 policy address in Hanoi titled "Toward the Creation of a Bright Future for Asia," and also, during the Tokyo forum for an "Intellectual Dialogue on Building Asia's Tomorrow," Prime Minister Keizo Obuchi laid special stress on the importance of human security as a guiding perspective for future undertakings in development assistance. In June 1999, Japan sponsored the International Symposium on Development, "Development: With a Special Focus on Human Security" thus providing an opportunity to review the role of development and explore future paths for development assistance driven by a human security focus.³² Further, on the occasion of Prime Minister Obuchi's state visit to the U.S. in May 1999, Japan and the U.S. reaffirmed their commitment to aiding Asia's economic recovery, with priority on aid for the socially vulnerable.

In tandem with these initiatives, Japan has supplied assistance totaling ¥93.5 billion ($790 million) in the form of counterpart funds³³ generated by sector program loans³⁴ (SPLs) and non-project grant aid.³⁵ This has been utilized for conventional programs in poverty alleviation as well as for the satisfaction of basic human needs (BHN) with programs for job creation, improved health-care services, agricultural sector development, and the establishment of social safety nets.³⁶ Furthermore, Japan has encouraged the IMF and other international organizations to have their own programs devote more attention to the needs of the socially vulnerable. Aid of this nature will be of immense value in facilitating efforts in structural reform while alleviating much of the consequent "pain."

TOPICS 9. Japanese Aid Reaching Impoverished Patients in Indonesia

2.3 Aid for Human Resources Development and Foreign Student Programs

Aid for human resources development, capacity enhancement for economic management, institutional reforms, and other initiatives can assure that ODA serves a longer-term role in helping Asia counter the effects of its economic crisis. This is one reason why the World Bank and other international organizations have been concentrating their aid efforts in these fields. Many Asian countries affected by the crisis have been actively investing their resources in programs for the cultivation of engineers and other skilled personnel. Programs of human resources development have for some time been a priority of Japanese aid to countries in Southeast Asia. However, efforts in this field have earned renewed attention as a foundation for aid that can foster sustainable development in countries hit by this unprecedented crisis. As a recent underpinning of that renewed emphasis, Japan in December 1997 announced its Japan-ASEAN Program for Comprehensive Human Resources Development, an undertaking aimed at providing aid for the training of some 20,000 participants over a five-year span. Priority was assigned to the training of (i) future political and social leaders, (ii) national and local administrators in the fields of economic and social management, and (iii) private business managers and engineers. Although the program had already attained its stated objectives as of May 1999, Japan has continued to provide aid for the training of highly qualified personnel. Furthermore, it has redoubled its efforts in this field with local programs of training for some 10,000 corporate managers, in addition to emergency programs of human resources development run by JICA.

To promote human resources development such as a program to send foreign students to Japan, the government also introduced (in December 1997) a set of concessional terms and conditions for yen loans (exchange student loans), which assist human resources development programs such as that to send foreign students to Japan. Emergency grant, moreover, was provided as a means of assisting various Asian countries sustain their student exchange programs with Japan. Furthermore, in the interest of strengthening bilateral relations, the Grant Aid for Development Scholarship was introduced in FY1999 to assist developing countries that run their own programs to dispatch students to Japan.

In the years ahead, Japan will continue to actively provide assistance for efforts in human resources development. This will include training programs in Japan as well as the deployment of advisers and experts in developing countries to assist in the task of formulating economic policy and laying the legal and institutional foundations for economic and financial operation. In the process, moreover, it will maximally enlist the expertise and experience of Japanese business professionals.

2.4 Aid for Undertakings in Regional Cooperation

Some countries in Asia have already reached the point of economic liftoff and begun serving as donors of aid to other developing countries in the region. To harness the development experience of such countries, Japan has actively supported "South-South" cooperation³⁷ as a more effective form of aid, and has been promoting cooperation between countries in Asia and Africa through this process. In April 1999, ASEAN accomplished its founding aspiration of becoming a cooperative framework for the entire Southeast Asian community of nations. Further, Japan has embraced development policies that call for stronger regional cooperation and unity.

Against this backdrop, when the recent economic crisis struck, Japan decided to contribute $20 million in a "Solidarity Fund" to the ASEAN Foundation as a means of fostering heightened interpersonal exchange and closer development cooperation ties between Japan and ASEAN. At the ASEAN Post-Ministerial Conference in July 1999, Japanese Foreign Minister Masahiko Koumura also pledged that Japan would assist in the implementation of the Hanoi Action Plan, a six-year program for attainment of the medium-term targets of ASEAN Vision 2020. Japanese efforts in this area will be focused primarily in aid projects for the socially vulnerable, human resources development, AIDS countermeasures, environmental conservation, and the development of the Mekong River basin. Concrete projects for utilization of the Solidarity Fund will be determined through consultation between Japan and the ASEAN Foundation.

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