Official Development Assistance (ODA)
3. ODA Country Policy toward Major Recipients
Japan's ODA in Laos
1. Basic Policies
(1) Laos's Position in Japan's ODA
Japan provides assistance to Laos, taking into account the following factors.
| 1) | Japan has traditionally had friendly ties with Laos, whose stability and development are of great importance for the future economic growth of the entire Indochinese region, in as much as Laos shares borders with Thailand, Myanmar, China, Viet Nam and Cambodia. |
| 2) | In addition to being an LLDC, i.e., one of the world's least developed nations, Laos' landlocked geography places limitations on its economic development plans. |
| 3) | Since 1986, Laos has been pursuing a policy of opening its economy to the rest of the world and seeking to convert its economic system from a centrally planned to a market one; it has also been making progress toward greater democracy as evidenced by the adoption of a new constitution in 1991 and the holding of national parliamentary elections in 1992 and 1997. |
| 4) | The Asian economic crisis has gradually come to affect Laos. Within this context, the country is still shouldered with structural fiscal and trade deficits. Upon joining ASEAN in July 1997, it also joined the ASEAN Free Trade Area; membership obliges it to lower its tariffs to countries within AFTA by 2008. In preparation for this change, Laos is in great need of aid, indispensable for the improvement of its fiscal structure and the organization and building appropriate institutions. |
Japan was Laos's top bilateral aid donor in 1997, and plays an important part in international aid for Laos in such fora as the Laos Round-Table Conference. Laos ranks 30th among recipients of Japanese bilateral aid based on cumulative net disbursements up to 1998.
(2) Priority Areas for Japan's ODA
On the basis of studies and research concerning development conditions and tasks in Laos and its development plans, as well as policy dialogues between Japan and Laos, including the High-Level Mission on Economic and Technical Cooperation sent to Laos in March 1998, Japan has given priority to assistance in the following areas.
| 1) | Human resources development Trained personnel are in short supply in every area of Laotian society, making human resources development a task of the highest urgency. Emphasis is to be placed on supporting the transition to a market economy, strengthening administrative services, developing agriculture and the building infrastructure. Special emphasis is to be placed on: a) training administrative personnel, b) training customs personnel and tax collection personnel, c) training public enterprises and private sector managers and engineers, d) promoting higher education, and e) training in banking and the financial sector. |
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| 2) | Basic human needs
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| 3) | Agriculture and forestry Though agriculture accounts for over 60% of GDP and employs about 80% of the working population in Laos, with a growing population and an increase in food imports, there are no clear assurances that Laos attain self-sufficiency in food. Emphasis in Japanese ODA is to be placed on the following specific agriculture-related areas: a) planning and formulation of agricultural policy, b) improvement of irrigation facilities, c) improvement of post-harvest measures, d) curbing of slash-and-burn agriculture and preserving forests, and e) rural development. |
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| 4) | Industrial infrastructure Hydropower is a valuable source of foreign currency for Laos; in the future, efforts should be made to foster industries other than electric power for export, while proceeding cautiously and taking into careful account environmental considerations and the demand for electric power in neighboring countries. The construction of roads and bridges should aim to improve the main east-west and north-south road arteries for the time being, then strengthen their maintenance later. |
(3) Matters for Consideration
- Among the tasks that transcend the individual priority fields described above, assistance is also necessary to improve Laos's ability to formulate development plans and propose and implement policies and to strengthen the country's legal and institutional infrastructure.
- At the December 1997 Japan-ASEAN summit meeting, then-Prime Minister Hashimoto proposed to promote the Japan-ASEAN Program for Comprehensive Human Resource Development based on support for the fostering of human resources needed for sustainable development of the economy.
2. The Current Economic Situation in Laos and Tasks to Be Addressed
(1) Major Economic Indicators
| 1997 per capita GNP and GNP growth rates (1990-1997 average) |
Real GDP growth rate | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| $400; 3.9% (World Bank figures) |
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(2) Current Situation
Under policies promoting greater openness, efforts are being made to stimulate the economy through the active introduction of market mechanisms. In general, Laos has managed to maintain stable growth but, because of the influence of the Asian economic crisis, the kip-dollar rate fell by approximately 25%. As the crisis continues to make its effects felt in Laos, inflation and the low value of the kip are placing great downward pressure on prices, with the result that the country has become largely dependent on foreign assistance. Structural problems in the form of fiscal and trade deficits have yet to be solved. Moreover, as the economy expands and liberalizes, regional differences and the gap between the rich and the poor is growing.
(3) Tasks to Be Addressed
- Improvement of the operating deficit by increasing exports
- Eradication of poverty and the development of agricultural and rural areas
- Redressing the chronic fiscal deficit (e.g., by instituting tax reforms and increasing tax revenues)
- Improving market economy management (e.g., by upgrading the country's administrative capabilities, whose inefficiency is caused by the lack of skilled personnel)
- Promoting reforms in fiscal structures accompanying AFTA membership
- Increasing food self-sufficiency
- Curbing destruction of forests caused by slash-and-burn agriculture and promoting forest conservation and afforestation
- Upgrading primary and higher education and building and improving the health and medical care system
- Fostering engineering and managerial human resource development
- Improving electric power, road, and other infrastructure
3. Development Programs
The 1996-2000 Economic and Social Development Plan
- Per capita GNP: from $385 in 1995 to $500 in 2000
The Long-Term Development Plan
- Making Laos an ex-LLDC by the year 2020
4. Aid Statistics
(1) Japanese Assistance
| Calendar Year | ODA Loans | Grant Aid | Technical Cooperation | Total | Rank of Total Contribution |
|---|---|---|---|---|---|
| 1998 | 3 | 62 | 21 | 86 | 17th |
| Cumulative through 1998 | -2 | 469 | 150 | 617 | 30th |
(2) Assistance from DAC Countries
| Total Bilateral Aid | 1st | 2nd | 3rd |
|---|---|---|---|
| 165 | Japan: 79 | Germany: 17 | Sweden: 16 |
(3) ODA from International Organizations
| Total Aid | 1st | 2nd | 3rd |
|---|---|---|---|
| 177 | ADB: 86 | IDA: 41 | *CEC: 15 |
Japan's ODA in Malaysia
1. Basic Policies
(1) Malaysia's Position in Japan's ODA
Japan provides assistance to Malaysia, taking into account the following factors.
| 1) | Malaysia has strong historical ties with Japan, as part of a neighboring region, and is a country of vital importance to Japan, both politically and economically, with a close relationship of interdependence in areas such as trade and investment. |
| 2) | Japan and Malaysia enjoy relations that are extremely favorable overall. In particular, Malaysia has promoted its Look East Policy, to introduce the work ethic and managerial philosophy of Japanese companies, since Malaysia places a high priority on developing human resources to construct a peaceful and stable nation of multiple ethnicity. |
| 3) | Malaysia's recent rapid economic development in the 1980s has been accompanied by various problems, including environmental issues and income disparity. |
| 4) | After experiencing the economic difficulties brought about by the 1997 Asian economic crisis, Malaysia began its recovery by introducing currency exchange management and a fixed market system, stimulating the economy with aggressive financial measures, and implementing reforms in the financial sector, such as for the disposition of bad debt. Although Malaysia has begun to recover from this crisis, there is still need to support the country's efforts for economic reform. |
To continue to support Malaysia's social and economic development, Japan announced a total of approximately ¥114.1 billion in new ODA loans in March and April 1999 (the first in five years), as part of its October 1998 New Miyazawa Initiative. In addition to these loans, Japan also indicated that it would provide support for cooperation in capital funds under the guarantee function of JEXIM and approximately $9 million in other types of public financing.
Malaysia is the 12th largest recipient of public Japan's bilateral ODA (based on cumulative net disbursements up to 1998).
(2) Priority Areas for Japan's ODA
On the basis of studies and research concerning development conditions and tasks in Malaysia and its development plans, as well as policy dialogues between Japan and Malaysia, including the High-Level Mission on Economic and Technical Cooperation sent to Malaysia in March 1993 and subsequent policy talks, Japan has given priority to assistance in the following areas.
| 1) | Environmental conservation Achieving a balance between the environment and development is necessary to achieve sustainable growth in Malaysia. Full consideration must be given to environmental factors in the course of development. Japan's cooperation will take into consideration a) preservation and sustainable use of natural resources, including forests, b) reform and improvement of urban environments, and c) measures to combat industrial pollution. |
| 2) | Poverty eradication and regional revitalization Malaysia's rapid economic development has increased income disparities between sectors and regions. While absolute poverty has declined dramatically, relative poverty has become more apparent, and thus the highest priority is to be given to a) revitalizing rural areas (building of economic and social infrastructure), b) promoting agriculture, and c) promoting industries in rural areas. |
| 3) | Human Resources Development and the Promotion of Small- and Medium-Scale Industries (SMIs) For Malaysia's future development, there is a need to focus support on a) human resources development and b) the fostering of SMIs and supporting industries. Taking into account the country's priorities, Japan will consider specific cooperative measures focusing on the training of skilled workers and technicians, and higher education; the promotion of human resources development in the high value-added industries, the financial sector, and social welfare and safety and hygiene; and cooperation for the Look East Policy and the empowerment of women. Moreover, Malaysia must foster the linkage between SMIs and export and supporting industries, which have supported the country's present economic growth, by improving industrial development research, productivity and adding value; by spreading and improving the use of information technology; by fostering the service industry; and by improving standards and testing. |
(3) Matters for Consideration
- Given the country's high average per capita income, aid is limited to grant assistance for grassroots projects and grant aid for cultural activities. Because of the Asian financial crisis, however, Japan implemented emergency measures in 1997 for the support of government-dispatched Malaysian students in Japan in order for them to continue their studies.
- In response to then-Prime Minister Hashimoto's proposal, the Japan-ASEAN Program for Comprehensive Human Resource Development, at the Japan-ASEAN summit conference in December 1997, Japan will support the development of the human resources needed to achieve sustainable economic growth.
- Support for economic structural reform in Malaysia and economic stabilization through the implementation of support measures in Asia will be continued.
- Under the leadership of Prime Minister Mahathir, the promotion of the Multimedia Super Corridor (MSC) project, which is a government project that will shift Malaysia's economic infrastructure to an information-based one.
2. The Current Economic Situation in Malaysia and Tasks to Be Addressed
(1) Major Economic Indicators
| 1997 per capita GNP and GNP growth rates (1990-1997 average) |
Real GDP growth rate | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| $4,530; 5.8% (World Bank figures) |
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(2) Current Situation
Malaysia had achieved outstanding economic performance from the second half of the 1980s, but it has been beset by economic difficulties from the 1997 Asian economic crisis, recording negative growth in 1998. The Malaysian government did not seek IMF assistance, independently pursuing austerity measures to control the economy. Later, it turned to the introduction of economic stimulus measures-such as the restructuring of bad loans and financial institutions and fixing the exchange rate at 3.8 ringgit to the US dollar-to halt the economy's slide. The result has been an increase in liquidity, high foreign currency reserves and improvements in the trade balance. On the other hand, the implementation of such measures has made the supply of foreign capital and measures to support the socially disadvantaged indispensable. Malaysia recorded negative economic growth in 1998 and estimates only 1% growth in 1999. The 1999 budget calls for priority to be placed on aggressive financing and preferential tax treatment to stimulate domestic demand, and there are signs of recovery at the Malaysian Central Bank.
(3) Tasks to Be Addressed
- Steps must be taken to stimulate the economy and build confidence in the financial system.
- Malaysia requires improvements in economic infrastructure, which has become a bottleneck in the country's development.
- Anti-pollution policies are needed to combat problems such as atmospheric pollution and industrial waste. Policies are also necessary to protect the natural environment.
- Steps must be taken to rectify income disparities and regional imbalances and to implement measures for the socially vulnerable.
- Efforts must be made to develop sufficient skilled labor and technical experts to adapt to the growing sophistication of industry and the economy and to improve the quality of the manufacturing industry.
- Supporting industries must be fostered, and better coordination must be achieved between export industries and domestic manufacturers.
3. Development Programs
National Development Policy (1991-2000): long-term policies
- While striving to achieve two major goals of national unification as well as the elimination of poverty and social reorganization, the Bumiputera Policy (a policy to improve the economic status of Malays) is being employed in a flexible manner so as not to inhibit economic growth.
The Seventh Malaysia Plan (1996-2000): mid-term program Goals:
| i) | Strengthen the macroeconomy |
| ii) | Develop skilled labor and experts |
| iii) | Eradicate poverty and reform society |
| iv) | Strengthen the financial sector |
| v) | Improve public sector debt and corporate governance |
| vi) | Stimulate agricultural and rural development |
| vii) | Regain growth in manufacturing |
| viii) | Improve the services sector |
| ix) | Strengthen information technology |
| x) | Strengthen scientific skills and technology |
| xi) | Improvement of quality of life through environmental protection and the provision of social services |
Main Economic Targets (5-year average):
- Rate of real GNP growth: 3.0%
- A surplus in the current account of 4.7% of GNP
4. Aid Statistics
(1) Japanese Assistance
| Calendar Year | ODA Loans | Grant Aid | Technical Cooperation | Total | Rank of Total Contribution |
|---|---|---|---|---|---|
| 1998 | 116 | 4 | 56 | 176 | 10th |
| Cumulative through 1998 | 613 | 76 | 951 | 1,640 | 12th |
(2) Assistance from DAC Countries
| Total Bilateral Aid | 1st | 2nd | 3rd |
|---|---|---|---|
| -244 | Denmark: 10 | Germany: 6 | Australia: 3 |
(3) ODA from International Organizations
| Total Aid | 1st | 2nd | 3rd |
|---|---|---|---|
| 9 | UNDP: 5 | *UNTA: 2 | UNHCR: 1 |
Japan's ODA in Mongolia
1. Basic Policies
(1) Mongolia's Position in Japan's ODA
Japan provides assistance to Mongolia, taking into account the following factors.
| 1) | Since 1990, Mongolia has pursued a policy of democratization and a shift to a market economy. |
| 2) | Stability in and economic development of Mongolia is important for the political and economic stability of the surrounding region. |
| 3) | Mongolia is a landlocked country and in a period of transition to a market economy. However, the country has insufficient economic infrastructure, and poverty is growing. Mongolia therefore has a substantial need for assistance. |
Mongolia ranks 32nd among countries receiving bilateral assistance from Japan (based on cumulative aid net disbursements up to 1998).
Japan also contributes to building an international framework for assisting Mongolia, and on seven occasions since 1991, Japan and the World Bank have co-chaired the Consultative Group Meeting for the creation of an international framework for providing support for Mongolia and serving in a leadership capacity.
(2) Priority Areas for Japan's ODA
On the basis of studies and research concerning development conditions and tasks in Mongolia and its development plans, as well as policy dialogues between Japan and Mongolia, including the High-Level Mission on Economic and Technical Cooperation sent to Mongolia in March 1997, Japan has given priority to assistance in the following areas.
| 1) | Building economic infrastructure and upgrading conditions to promote industry (rehabilitation of infrastructure, including energy, transportation and communications)
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| 2) | Intellectual support and human resources development for the transition to a market economy Cooperation in providing expertise on economic policy formation as well as legal, administrative and fiscal reform by sending experts and accepting trainees. |
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| 3) | Revitalization of agriculture and livestock industry Cooperation in compiling long-term agricultural policies, management structure building by cooperative associations, and building distribution networks for agricultural and livestock products, as well as cooperation involving development and diffusion of agricultural technologies. |
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| 4) | Support for basic human needs (BHN) (education, health and medical services, and water supply)
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(3) Matters for Consideration
- Ownership is extremely important for Mongolia, including the creation of clear development plans for each sector. Moreover, Japan's assistance must also be used effectively through self-help efforts on the part of Mongolia.
- The suitability of ODA for each project is determined separately, although this does not imply any denial of the privatization strategy being pursued by Mongolia. Furthermore, in the course of future assistance, Japan will engage in thorough discussions with Mongolia and will take into consideration the beneficiaries of the projects, the results thereof, and the organizational capability for implementation.
- Support for recovery from structural problems in financing, balance of payments and foreign debt through the promotion of industry and exports.
2. The Current Economic Situation in Mongolia and Tasks to Be Addressed
(1) Major Economic Indicators
| 1997 per capita GNP and GNP growth rates (1990-1997 average) |
Real GDP growth rate | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| $390; -1.4% (World Bank figures) |
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(2) Current Situation
In 1994, Mongolia achieved a positive GDP growth rate in 1994 and a 6.3% growth rate in 1995. However, the Russian currency crisis and a drop in commodity prices on the international market, including for the country's main exports of copper and cashmere, have pulled the annual GDP growth rate back to the 2-3% range.
(3) Tasks to Be Addressed
- Expansion of Mongolia's domestic economic infrastructure
- Improvement of the foreign investment environment
- Definition of clear policies for industrial promotion, and accumulation of private-sector business managerial and supervisory know-how
- Improvement of state enterprise management
- Reduction of Mongolia's external debt
- Steps to deal with Mongolia's sizable non-performing bank loans
3. Development Programs
Long-Term National Economic Development Plan (initiated in May 1996)
| 1) | 1996-2000: During this stage, Mongolia will extract itself from its economic crisis and build a stable economic infrastructure. Emphasis is to be placed on building infrastructure (GDP growth rate of 4%). |
| 2) | 2001-early 2010s: This will be a preparatory stage for high growth. The main task during this period will be rebuilding and modernizing industrial technologies (GDP growth rate of 6%). |
| 3) | 2010 through the 2020s-This will be a high growth period. Mongolia will strive to build a sophisticated economic and industrial structure, and a self-sufficient economy (GDP growth rate of 8-10%). |
4. Aid Statistics
(1) Japanese Assistance
| Calendar Year | ODA Loans | Grant Aid | Technical Cooperation | Total | Rank of Total Contribution |
|---|---|---|---|---|---|
| 1998 | 34 | 38 | 21 | 94 | 15th |
| Cumulative through 1998 | 153 | 300 | 149 | 602 | 32nd |
(2) Assistance from DAC Countries
| Total Bilateral Aid | 1st | 2nd | 3rd |
|---|---|---|---|
| 118 | Japan: 78 | Germany: 14 | USA: 12 |
(3) ODA from International Organizations
| Total Aid | 1st | 2nd | 3rd |
|---|---|---|---|
| 129 | ADB: 67 | IDA: 34 | IMF: 8 |