Section 2. Series of Development-Related International Conferences

Efforts to Alleviate Poverty Aggravated by Globalization
1996	Heavily Indebted Poor Countries (HIPC) Initiative
September 2000	Millennium Declaration is adopted at the UN Millennium Summit Formulation of the Millennium Development Goals (MDGs)

September 11 Terrorist Attacks in the United States

International Community Strengthens Efforts to Deal with Development Issues
January 2002	International Conference on Reconstruction Assistance to Afghanistan (Tokyo)	Over $4.5 billion in assistance is pledged. Japan announces it would provide up to $500 million over the following two and a half years.
March 2002	Announcement of aid increases by the U.S.A., the EU, and other donors (at the International Conference on Financing for Development)	The U.S.A. pledges that it would increase its annual ODA by about $5 billion by 2006 from the level of approximately $10 billion in 2001. The EU announces an overall increase of ODA from 0.33% of GNI to 0.39% by 2006. Canada, Australia, and Norway also announce ODA increases.
June 2002	G8 Kananaskis Summit	Results are achieved on assistance to Africa, the education sector, and other issues.
August 2002	Initiative for Development in East Asia (IDEA) Ministerial Meeting (Tokyo)	The meeting confirms the significance of the East Asian development approach, which places emphasis on economic growth and human resources development.
August 2002	World Summit on Sustainable Development (WSSD, Johannesburg)	Agreements are reached to improve access to basic sanitation, energy resources, etc. Japan and the U.S.A. announce a partnership in the water sector.

Future Events
March 2003	Third World Water Forum (Kyoto)	Discussions to be held on concrete measures for solving problems related to water (water shortages, water pollution, flooding and resulting food shortages, and infectious diseases) in developing countries.
June 2003	G8 Evian Summit (France)	Issues and problems related to water, Africa, etc. to be discussed.
September 2003	Third Tokyo International Conference on African Development (TICAD III)	Discussions to be held on wide-ranging issues related to African development, such as peace building and development issues.

Regarding the conditions mentioned in the previous section, a series of international conferences held in 2002 focused on development and repeatedly discussed a variety of development issues. The following introduces the main development issues that were discussed at three major conferences: the International Conference on Financing for Development in Monterrey, Mexico, in March; the Group of Eight (G8) Summit in Kananaskis, Canada, in June; and the World Summit on Sustainable Development (WSSD) in Johannesburg, South Africa, in August and September. And an explanation of Japan's stance follows.

(1) The Achievements of Major International Conferences

At these conferences, heated discussions were held on how the international community should work together for development in the 21st century by taking a comprehensive view of development issues. This gives a certain direction to the international community's efforts to tackle such issues in the present century. The direction is explained below, along with an outline of the three conferences and a review of their achievements.

International Conference on Financing for Development Leaders from 50 countries, including US President George W. Bush and French President Jacques Chirac, participated in the International Conference on Financing for Development, held from March 18 to 22, 2002, in Monterrey, Mexico. Discussions on the securing of financing for development were pursued from a variety of angles, resulting in the adoption of the Monterrey Consensus.

The consensus confirms, first of all, that financing for development needs to be secured through all possible means?including domestic funding, ODA, debt relief, investment, and trade?and that policy coherence should be enhanced. Second, it contains such measures to encourage development as improvements in aid effectiveness and promotion of good governance in recipient countries. The Monterrey Consensus offers a comprehensive prescription for development issues and, together with the November 2001 Doha Ministerial Declaration of the World Trade Organization (WTO), served as a basis for discussions at subsequent international conferences. The United States and the EU announced initiatives to increase their ODA prior to the conference, as mentioned in Section 1 (2).

Japan's then Senior Vice-Minister for Foreign Affairs Shigeo Uetake emphasized at the meeting the importance of ownership by developing countries and partnership within the international community. He also expressed Japan's determination to continue seriously working on development assistance as one of the world's largest donors.

G8 Kananaskis Summit Development was also a significant agenda item at the G8 Summit in Kananaskis, Canada, on June 26 and 27. Serious attention was devoted particularly to issues relating to Africa and education.

Poverty in Africa is one of the most serious problems facing the international community. The G8 countries held several meetings following the Genoa Summit in 2001 to discuss how they could tackle the problems of Africa, and this culminated in the adoption of the G8 Africa Action Plan at Kananaskis. This plan offers the basis for the G8's support and cooperation for the New Partnership for Africa's Development (NEPAD). It calls for selectivity, described in Section 2 (2) below, as well as such financial measures as the allocation to Africa of 50% or more of the total amount of new aid announced at Monterrey in March, if African countries make efforts toward good governance and additional contributions by the G8 to cover the shortfall in the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, which could reach as high as $1 billion.

Regarding education, a report entitled "A New Focus on Education for All" outlining the measures that should be taken by both developing and developed countries to deliver basic education was submitted to the G8 leaders. This report was compiled by education experts in the G8 Education Task Force, which had been giving close attention to universal primary education, education for girls, and other issues for about a year since the Genoa Summit.

Prior to the Kananaskis Summit, Japan launched new initiatives to address Africa's problems, including more than ¥250 billion (approximately $2 billion) within five years for education in low-income countries. (See Chapter 2, Section 2 [2] for details regarding new support for Africa; and Chapter 2, Section 5 [1] for information about educational support.)

World Summit on Sustainable Development The WSSD?the last of the series of major development-related international conferences in 2002?was held in Johannesburg, South Africa, from August 26 to September 4, 2002. This was the largest international conference ever held and was attended by many government leaders and heads of international organizations. Participants from Japan included Prime Minister Junichiro Koizumi, Foreign Minister Yoriko Kawaguchi, and then Environment Minister Hiroshi Ohki.

In May, when Prep. Com 4, a ministerial level meeting, was held in Bali, Indonesia, developed and developing countries were sharply divided on such issues as ODA, debt relief, and trade, and the success of the Johannesburg Summit was in doubt. However, a rough agreement was reached at a senior-working-level meeting held in New York prior to the summit, and this enabled a relatively quick agreement at the WSSD on development issues in conformity with the Doha Ministerial Declaration and the Monterrey Consensus. Nevertheless, tough negotiations were held over the setting of numerical targets for sanitation and renewable energy. These talks resulted in the adoption of the Plan of Implementation containing a new sanitation target of halving the proportion of people without access to basic sanitation by 2015 as part of the Millennium Development Goal (MDG) of ensuring access to safe drinking water.

Also at the WSSD, countries announced their projects to contribute to sustainable development in cooperation with international organizations, NGOs, and others. These projects were compiled as Partnership Initiatives and adopted as official summit (so-called Type II) records. Japan registered 29 projects in 10 sectors: education, health, trade and foreign direct investment, agriculture and food, energy, the environment, climate change, forests, biodiversity, water, and science and technology.

Near the summit venue, national governments, international organizations, NGOs, private enterprises, and other groups carried out a broad range of activities, such as hosting exhibitions, seminars, and symposiums, to publicize their efforts toward sustainable development and to introduce examples of their success. Japan's public and private sectors jointly set up the Japan Pavilion and organized various exhibitions and events to introduce Japan's policies, views, and contributions to the international community. On what was designated as Development Day, seminars were held at the Japan Pavilion on the topics of the "Global Transmission of East Asian Development Approach: Gist of the Outcome of the Initiative for Development in East Asia (IDEA) Ministerial Meeting"; "Growth Driven by Trade, Investment, and Economic Cooperation: The East Asian Experience in Economic Development and Cooperation"; and a "Multiple Approach towards the Promotion of Trade and Investment." Many people attended these seminars. (See Chapter 2, Section 2 [1] C for details about IDEA.)

In addition, prior to the summit, Japan announced an independent set of concrete, comprehensive cooperation measures toward sustainable development known as the Koizumi Initiative.

(2) Main Development Issues

Some of the issues that were repeatedly discussed at the abovementioned international conferences were the achievement of the MDGs, securing of financing for development, aid effectiveness, good governance, selectivity, and public-private partnership. They have become the leading development issues today, having also been taken up at such international forums for development as the Development Assistance Committee (DAC) and the annual meetings of the World Bank and the International Monetary Fund (IMF).

Achievement of the MDGs In the agreements reached at the series of international conferences, the MDGs were confirmed as being the common targets of the international community, and recipient countries, donor countries, international organizations, and others discussed collaborative efforts to achieve these goals.

First of all, the monitoring of the state of achievement and improvements in the reliability of developing-country statistics are required to achieve the MDGs. Regular verification of the state of achievement of the MDGs in all developing countries is essential. For this purpose, the United Nations will compile a comprehensive report on the state of progress every five years from 2005 (the UN Secretary General's Report) as well as Millennium Development Goals Country Reports to undertake monitoring at the national level. At present statistics of the developing countries are not adequate for proper monitoring, especially in the most impoverished countries, and the international community needs to enhance its support for capacity building to developing countries in this area.

Second, research on formulating concrete strategies toward the achievement of the MDGs is needed. The United Nations and the World Bank are playing a central role in such research, and it is important that the results be properly applied in formulating strategies in each developing country.

Third, it is necessary for people in both developed and developing countries to deepen their understanding of and support for the MDGs and for various organizations and groups to voluntarily offer their broad collaboration toward the goals' achievement. For this purpose, the Millennium Campaign will be launched by the United Nations, centered on the UN Development Programme (UNDP).

Securing Financing for Development To achieve the MDGs, funds far in excess of the total assistance offered today are required. For example, the United Nations estimates it will require an additional $50 billion a year, and the World Bank between $40 billion and $60 billion. Total ODA to developing countries, though, has recently been hovering at around $50 billion annually, and so the problem of funding was a much-discussed topic at major international conferences in 2002. The result of these talks was a confirmation of the importance of mobilizing all possible financial resources, such as foreign direct investment and trade, in addition to using domestic funds in developing countries and ODA.

The role of ODA should, accordingly, be considered within the framework of the overall flow of funds to developing countries and trade in the global economy. Indeed, the perspective of development is becoming increasingly important in trade talks; this is illustrated by the fact that the new round of multilateral trade negotiations launched at the Fourth Ministerial Conference of the WTO in Doha, Qatar, in 2001 is called the Doha Development Agenda. It reflects the fact that increasing numbers of developing countries are joining the WTO.

With the advance of globalization, foreign direct investment is sharply increasing, so there has been a long-term rise in private-sector funds as a share of total flows from DAC countries and international organizations to developing countries. Since 1996, however, the flow of private investments has declined sharply, and the relative share of ODA, whose volume has remained comparatively stable, has been rising. This and the following factors have made ODA an extremely important source of financing for development for developing countries.

To revitalize international trade and foreign direct investment in developing countries, it is important to improve the international system of trade and investment through negotiations in the WTO and other forums; in addition, support for capacity building in these countries is crucial. Japan thus applies its ODA to help build institutions and develop human resources in developing countries to revitalize trade and investment in developing countries. At the WSSD in Johannesburg, Japan expanded the pledge that it had made at the tenth meeting of the UN Conference on Trade and Development (UNCTAD) by announcing it would provide trade-related capacity building to 4,500 people over five years from fiscal year 2000.

Generally speaking, private-sector investment tends to focus on the construction of infrastructure, especially in sectors where profits can be expected, such as telecommunications and energy. Approximately 80% of private financing since 1990 has flowed into six of the more developed countries, and profits from trade and investment have been distributed unevenly from country to country. Private-sector investment is unlikely to flow into social sectors like education and health and into the building of roads and harbors, which are not very profitable. Private funds alone are therefore not enough to build the necessary social and economic foundations in developing countries, and ODA will continue to play a vital role owing to its public and policy-oriented nature.

For some developing countries that are unlikely to reap much profit from trade or to attract substantial private-sector investment because their industrial foundations are weak, official flows remain an important source of financing for development. There are some countries where development assistance totals more than half of the national budget.

Debt Problem In order to secure financing for development, many developing countries have had to borrow heavily. The only way a majority of these countries could repay these loans was to procure foreign currency through exports of primary goods. A fall in the prices of primary goods since the 1980s and a rise in the prices of imports following the oil crises have, however, caused the balance of payments of these countries to deteriorate, and many became unable to repay their debts.

To rectify this situation, the IMF and World Bank provided support for developing-country economies from the 1980s through a shrinking of the bloated government and public sectors and by means of liberalization and deregulation to promote structural reforms. These measures achieved some success, but there were some countries where the anticipated effects were not fully realized. The end of the Cold War and the progress of democratization in the 1990s resulted in heightened political instability and an intensifying of ethnic conflict, moreover, which had a highly destabilizing effect on the economy and caused the debt problem to resurface. Countries suffering from heavy debts came to be known as heavily indebted poor countries (HIPCs), and 42 countries, mostly in Africa, have been acknowledged as HIPCs by the IMF and the World Bank as of 2002.

The burden of debt hinders development and cannot be ignored from a humanitarian viewpoint as well as from the perspective of ensuring international peace and stability. Thus the international community in 1999 approved the Enhanced HIPC Initiative² to reduce the debts of the HIPCs to a sustainable level, in addition to continuing its earlier efforts. The new initiative calls for raising the reduction rate of ODA debts from 67% to 100% and the concessional rate of lending from 80% to, in principle, 90%.

The need for fast and effective implementation of the Enhanced HIPC Initiative was emphasized repeatedly at the series of international conferences. At the Kananaskis Summit, the G8 leaders committed their assessed contributions in recognition of the fact that the HIPC Trust Fund would have a shortfall of up to $1 billion. As an official bilateral creditor, Japan will provide debt relief amounting to $4.8 billion for the 26 countries that have reached the "decision point"³ under the initiative - the largest contribution among the G8 countries (accounting for about one-fourth of the G8 total). In October 2002, furthermore, Japan announced that it would contribute $56 million to the HIPC Trust Fund, in addition to its original payment of $200 million.

Aid Effectiveness As explained above, it has been pointed out that poverty reduction is not just a matter of income but a multifaceted problem that requires a comprehensive development approach. This has led to the establishment of the MDGs by the United Nations and the Comprehensive Development Framework (CDF) and Poverty Reduction Strategy Papers (PRSPs) by the World Bank. In response to these new approaches, international forums for development issues, such as OECD-DAC, have taken up the issues of how to implement the PRSPs and work toward achieving the MDGs.

There have been greater moves to review aid modalities in order to increase aid effectiveness, particularly in recipient countries with limited aid absorption capacities. The following issues are mainly discussed: (1) stand-alone project-based approaches implemented by various donors may not lead to macro-level impact, even if they achieve results at the individual-project level, (2) a results-based approach should be applied more vigorously by setting up indicators and strengthening monitoring and evaluation, and (3) differences in the procedures of donors may impose an excessive burden on recipient countries.

The United Kingdom, the Netherlands, and Scandinavian countries advocate establishing common funds, providing direct budget support and reinforcing joint monitoring systems, and accordingly revising the procedures of all donor countries in order to strengthen ownership by recipient countries and enhance aid effectiveness. Japan, the United States, France, Germany, and others, meanwhile, basically agree on aid coordination to improve aid effectiveness but maintain that the project-based approach is valid and that it is important to combine various aid modalities, such as projects and common funds, while enhancing consistency between individual projects and overall plans in accordance with each recipient country's needs and capacities.

Despite these differences, in the field, all donors are working together for aid coordination. New aid modalities, such as common funds and budget support, are being implemented in some countries, mainly in Africa. At the same time, the project-based approach still plays an important role in recipient countries that lack adequate administrative and fiscal management capacity and/or a fine-tuned development plan and that do not heavily depend on aid. Therefore, many donor countries and international organizations are still providing assistance for individual projects. On the other hand, Japan and the United States contribute to common funds and provide budget support in some countries, such as Tanzania and Uganda, where accountability is ensured and new aid modalities are considered appropriate and effective.

Good Governance Good governance is a concept that looks at the political, economic, and social management of the state and addresses such concerns as whether the government is making efforts to promote development and improve national welfare; whether it is functioning effectively and efficiently; whether it is exerting its authority properly; and whether it is upholding human rights. It incorporates such notions as a democratic political structure (parliamentary democracy), the rule of law, an efficient and accountable government, appropriate levels of information disclosure by the government, checks against corruption and military spending, the existence of civil society, a gender-equal society, and the guarantee of human rights. Good governance is thought to be essential to promoting development in an effective and efficient manner and necessary for the equitable redistribution of the "fruits of growth" gained through development within society - including poor people.

At the series of international conferences, discussions on the topic of good governance were highly charged. The developed countries argued that good governance is necessary for the effective use of development assistance and cited domestic reforms as a prerequisite for its provision. The developing countries countered that good governance requires capacity building?such as the securing and training of human resources, the building of institutions, and legal improvements in various sectors?and that assistance is necessary for these purposes. Negotiations came to a temporary halt over which should come first, assistance or good governance.

Selectivity One of the development issues that provoked the biggest arguments at the G8 Kananaskis Summit was selectivity. In the G8 Africa Action Plan, the G8 countries agreed to strengthen support for African countries that promised to pursue policies toward good governance, economic growth, and poverty reduction in order to support the aims of NEPAD.

There were two factors behind the emergence of such a concept. The first was the realization that assistance had not been utilized effectively in countries where good governance was not assured and that the effectiveness of aid could be raised by extending it only to those countries and sectors where it would be utilized effectively and efficiently. The second was the thinking that developing countries could be induced to undertake reforms by clearly indicating that they would not receive or would get less assistance without reform.

The Millennium Challenge Account (see Chart 4) announced by the United States in March 2002 to increase development assistance by $5 billion clearly adopts the selectivity approach by declaring that only countries carrying out their promises of good governance, investment in people (education and healthcare), and sound macroeconomic policies would receive assistance.

In April 2002 the World Bank announced the Fast-Track Initiative (FTI) for basic education at its Development Committee that is also premised on selectivity. The FTI, based on the Education for All (EFA) action plan, aims to focus assistance on countries meeting a certain set of criteria from among the 88 developing countries that would have difficulty achieving EFA without aid. The criteria include the completion of development of a PRSP by the end of 2002, the existence of a national education plan, and a large population of out-of school children. After considering these factors, 23 countries were selected for the FTI, and the initiative is now going through a pilot phase. (See Chapter 2, Section 5 [1] for details about the FTI.)

Problems with this approach have been pointed out, however. The question of whether or not assistance is being used effectively cannot always be ascertained mechanically on the basis of several indicators, and judgment must ultimately be made on a case-by-case basis for each country and each sector. Also, it is clear that some countries to which assistance will be cut off or reduced as a result of these initiatives still need aid.

Accordingly, although the concept of selectivity is common among the donors as a general idea, each donor has been left to use its discretion in deciding which countries receive added support and in what schemes. Donor countries and international organizations also share the view that assistance is required even by countries that do not qualify for aid based on the concept of selectivity owing to governance problems, such as corruption and lack of democratization, involvement in a conflict, or other factors. The OECD-DAC and World Bank are jointly conducting discussions on how assistance may be provided effectively to the so-called poor performers that may not qualify for aid due to the concept of selectivity.

In accordance with the Principles of its 1992 ODA Charter, Japan has been implementing aid by giving due consideration to such factors as democratization, the introduction of market-oriented economies, and the securing of basic human rights in developing countries. At the same time, Japan believes that assistance is important for capacity building in developing countries and gives emphasis to boosting their capacity, including that for governance.

Progress of Public-Private Partnerships Cooperation between the public and private sectors in development is growing increasingly active. One reason for this is the expanded role being played by civil society, including NGOs, on the development scene as key players in the disbursement of aid. Another is the higher presence of NGOs at international forums, as illustrated by the approximately 8,000 NGO members who attended the WSSD. Furthermore, as ODA and other official development flows fail to grow, the mobilization of private-sector funds, including those from NGOs, is increasingly important.

National governments have thus strengthened their cooperative links with the private sector, such as by including members of NGOs and private companies in their delegations to international meetings. It is becoming more common, moreover, for the government and NGOs to co-host side events at these meetings as equal partners and to jointly launch initiatives. In the Global Fund to Fight AIDS, Tuberculosis, and Malaria launched in January 2002, NGOs, foundations, and others were enlisted as official members of its board, which is the fund's highest decision-making body, alongside national governments.

In addition to strengthening their ties with NGOs, governments have recently been forming development partnerships with private companies because investment and trade have come to be seen as playing a key role in development. As mentioned above, summaries of a vast number of development-related projects based on public-private partnerships were adopted at the WSSD as Type-II documents and included as official records of the conference. Among the projects were those involving not only NGOs but also private companies as partners. Many businesspeople gathered at the summit site and, through parallel events, introduced their companies' vanguard environment-friendly technologies.

2. Agreed upon at the Cologne Summit in 1999, the Enhanced HIPC Initiative represents an enlargement of the HIPC Initiative for international debt relief. It provides "faster, broader, and deeper" relief, including a 100% reduction of ODA debts and a 90% reduction of adequate concessional lendings.

3. The Enhanced HIPC Initiative is being implemented in two stages. In the first stage, the state of implementation of the IMF and World Bank's structural adjustment program in the debtor country and its efforts toward poverty reduction and social development are monitored. When the country is recognized as having met a certain set of goals, a judgment is made on whether or not the application of the Enhanced HIPC Initiative is necessary based on conditions in each country (decision point). Monitoring is thereupon continued for a period, and when it is determined that conditions for the implementation of the initiative have been met, then full debt relief is implemented (completion point).

(3) Japan's Stance

One of the most important issues henceforth for Japan and other members of the international community, needless to say, is to implement the agreements reached at the series of international conferences steadily with the aim of achieving the MDGs. The international community as a whole must come up with concrete strategies regarding each agreement. As a leading donor country, Japan's policy is to support developing countries through ODA and to participate actively in international discussions. Above all else, the government must gain the Japanese public's understanding and support for ODA and improve ODA in keeping with recent international trends in development assistance, as described above. Details of ODA reform are provided in Chapter 3. Here, the directions of Japan's ODA are explained in the light of the recent international trends. (See Chapter 2, Section 5 for Japan's efforts toward the achievement of the MDGs.)

Prioritization and Clarification of Assistance In order to provide more effective support to developing countries using limited funds, it is necessary to further prioritize assistance and clarify the order of importance. Japan has emphasized poverty reduction through economic growth in accordance with its ODA Charter, Medium-Term Policy on ODA, and other initiatives and has actively engaged in building economic and social infrastructure, developing human resources, providing intellectual support, and addressing global environmental problems. Indeed, East Asian economic development can be seen as a result of the trade and investment induced by these efforts. At the same time, Japan has formulated and announced initiatives relating to the consolidation of peace and worldwide development goals in response to recent international ODA trends. During 2002 Japan announced its concept of support for the consolidation of peace in Afghanistan, Palestine, and Sri Lanka. At the Kananaskis Summit in June it announced a comprehensive package of support measures for African countries, and also in June it revealed educational support initiatives. Prior to the WSSD in Johannesburg in August Japan published an initiative relating to environmental cooperation, and during the summit, Japan jointly announced with the United States an initiative regarding water and sanitation.

Greater Efficiency of Assistance Japan believes that promoting development more effectively requires a closer sharing of views and information among donor countries and multilateral organizations as well as the coordination of their respective aid programs with the development policies of recipient countries under the ownership of recipient-country governments. Many donors share these ideas, so opportunities for consultation among representatives of recipient countries, donor countries and organizations, NGOs, and others are increasing for the purpose of developing and effectively implementing PRSPs, sector development plans, and other development-related plans and strategies. Japanese embassies and overseas offices of the Japan International Cooperation Agency (JICA) and the Japan Bank for International Cooperation (JBIC) work in close coordination with each other and participate actively in such consultations.

To ensure the effectiveness of Japan's assistance, Japan must consult closely with aid recipients and donors. For that purpose, Japan must clarify its aid policies and gain the understanding of recipient countries through policy dialogue. Japan is consequently making various efforts to formulate fine-tuned Country Assistance Programs and to strengthen dialogue with recipient governments.

It is also establishing a uniform evaluation system covering the ex-ante, mid-term, and ex-post stages of aid disbursement to obtain desired results and implement ODA more efficiently and effectively. Evaluation helps to enhance the efficiency of projects, and the results can promote effective coordination with the development efforts of recipient-country governments and other donor countries and organizations.

Japan is also making an active effort to simplify and harmonize its assistance procedures. Based on respect for the ownership of recipient countries and the belief in the importance of a practical and flexible (that is, country-specific and diversified) approach in the light of recipient-country needs, Japan is harmonizing the implementation procedures for yen loans with the financing procedures of the World Bank and the Asian Development Bank (ADB) for Viet Nam and other countries. Efforts are also being made to simplify procedures for technical cooperation and grant aid to reduce the burden of recipient countries.

The effective implementation of assistance requires not only efforts by donor countries but also capacity improvements in recipient countries. Japan thus continues to actively provide technical cooperation for capacity building. By utilizing a broad range of assistance resources, such as support for the provision of technical cooperation not just by Japan but also by more developed countries to less developed ones (South-South cooperation), Japan seeks to enhance the effectiveness of its aid to meet the diverse needs of each developing country.

Ensuring Proper ODA Scale ODA operations be of adequate scale. For 10 consecutive years from 1991 to 2000, Japan was the world's top ODA donor, providing an average of approximately $12 billion a year in aid. Owing to severe economic and fiscal conditions and an increasingly critical domestic view on ODA, though, Japan's ODA budget has declined by more than 20% over the last five years. In 2001 Japan was overtaken by the United States as the world's top provider of ODA in value terms. But Japan continues to be one of the world's largest donor countries, and expectations of its ODA among developing countries and multilateral organizations remain extremely high. Moreover, ODA is one of the most important diplomatic tools Japan has to make an international contribution, since there are some restrictions on military measures. Former UN High Commissioner for Refugees Sadako Ogata has described ODA as a measure of a country's "dignity." While taking notice of the severe domestic economic and fiscal situation, the government will make further efforts to gain the public's understanding of its ODA.

Efforts to Solve the Debt Problem Regarding the debt problem, it is important to continue pushing for the prompt and steady implementation of the Enhanced HIPC Initiative while ensuring poverty reduction through debt relief. As explained above, Japan is the largest contributor to this initiative among the G8 countries. In promoting this initiative, Japan believes it is important to adopt a balanced approach that takes into consideration the contributions made by each creditor country toward debt relief. As a part of its ODA reform efforts, Japan in December 2002 decided to adopt a new method of debt relief. Instead of the traditional approach of furnishing grant aid for debt relief in return for repayment of ODA debts, from fiscal year 2003 it will simply forgive the yen loans owed to Japan. The decision was made from the point of view of easing the administrative burden on developing countries and in consideration of the progress made in creating a mechanism to internationally monitor the debt-reduction efforts of debtor countries. (See Chapter 3, Section 1 [5] for details.)

Invigorating Trade and Investment through Improved Market Access and Trade-related Technical Assistance Japan has long claimed that development requires mobilizing all possible financial resources, including trade and investment as well as ODA, and that in order for developing countries to attain sustainable poverty reduction, they must achieve economic growth through their own efforts through trade and investment. Japan has thus been making efforts to invigorate trade among developing countries by expanding market access. Concretely, Japan in April 2001 improved market access for goods from less developed countries (LDCs), providing tariff- and quota-free market access for nearly all mining and industrial products. Furthermore, Japan decided to expand the number of agricultural and marine products from LDCs qualifying for preferential duties beginning in April 2003. As a result, the tariff- and quota-free share of total imports from LDCs will increase to 93% in value terms. Also, Japan provides trade-related technical assistance through ODA and contributions to multilateral organizations. Within the framework of the WTO, the Doha Development Agenda Global Trust Fund (DDAGTF) was established to provide trade-related technical assistance to developing countries following the Doha Ministerial Declaration in November 2001. Japan actively contributes to this fund, which the WTO secretariat uses to carry out a broad range of activities, including the formulation and implementation of technical assistance and training plans each fiscal year and the building of a database of trade-related technical assistance. Japan, furthermore, will call attention to the need for trade to be positioned as an important pillar of development policy.

Strengthening Partnerships with NGOs Japan is making efforts to strengthen partnerships with NGOs and other groups at international conferences and in the field of assistance. For example, many Japanese NGOs attended the WSSD, and five NGO representatives took part as advisors to the Japanese government delegation. The Japan Pavilion, which hosted many parallel events, was a joint project of the public and private sectors.

The Japanese government is deepening its cooperation with NGOs in various ways as their on-site role becomes more important, as in cases where support activities must be implemented quickly, such as in emergency humanitarian crises or cases where fine-tuned assistance is required. The Ministry of Foreign Affairs, Ministry of Finance, JICA, and JBIC each hold regular meetings with NGOs and assign NGO Counselors around the country to facilitate NGO activities. The government is also making special efforts to expand and strengthen the budget for NGO support within the overall ODA budget. Japan's NGO-related budget amounted to ¥5.65 billion in fiscal year 2002, more than three times the ¥1.86 billion budget in fiscal year 1999. (See Chapter 3, Section 3 [1] regarding coordination with NGOs.)