Chapter 2

Section 2. Japan’s Statements and Contributions for each Major Point of Discussion

1. Poverty Reduction and Economic Growth, the Role of Infrastructure

In international discussions on development to date, there has been a gradually increasing tendency to place more importance on economic growth. In 2003, due to Japan’s statements based on its experience in the East Asian countries, once again the focus was placed on the importance of the role played by economic growth, especially infrastructure development, in achieving sustainable economic growth and the Millennium Development Goals (MDGs) through improvements of the investment environment, etc.

In a communiqué¹¹ issued at a meeting of the World Bank-International Monetary Fund (IMF) Joint Development Committee (hereafter to be referred to as the “Joint Development Committee”) held in April, it was stated that “We emphasized the critical role of investment in infrastructure for economic growth, and its linkages with the provision of social services and the attainment of the MDGs. We welcomed the Bank’s renewed commitment to increase its support to such investment” and the committee asked the World Bank to report on its further efforts at the next meeting in September. In response to this, the “Infrastructure Action Plan¹²” was studied within the World Bank and the draft was presented to the Joint Development Committee at its September meeting. In the draft, it states that “In the context of a multi-sectoral/CDF (Comprehensive Development Framework) approach to reach the MDGs, infrastructure service delivery plays a critical role both for supporting economic growth as well as improving social service delivery,” and that “reliable and cost-effective provision of infrastructure services” contributes to achieving the health and education-related MDGs directly and indirectly. The communiqué¹³ of the Joint Development Committee also stated that “[infrastructure contributes to] sustainable economic growth and reaching the MDGs by improving the investment climate and supporting the development requirements of low and middle-income countries” and that this will be studied further by the next meeting of the Joint Development Committee in April 2004.

Infrastructure project in Viet Nam: Can Tho Thermal Electric Power Generator Project (Photo: Japan Bank for International Cooperation (JBIC))

The World Bank believes that “Unless the world’s poor—from South Asia to Latin America to Sub-Saharan Africa—gain greater access to transport, electricity, water and telecommunications, the likelihood of achieving the internationally agreed goal of cutting extreme poverty in half by 2015 will remain in serious doubt.” Specifically, the World Bank studies the impact of water supply on literacy rate and that of transportation infrastructure on school enrollment rate, emphasizing their importance¹⁴.

The importance of infrastructure has also been indicated once again in the Organisation for Economic Co-operation and Development-Development Assistance Committee (OECD-DAC). At the DAC High-Level Meeting held in April 2003, it was pointed out that economic growth is essential for poverty reduction, that promotion of trade and private investment in developing countries is important for economic growth, that it is important to coordinate ODA and private investment in a way that they generate a synergistic effect, and that it is important to develop an environment which leads to economic growth and private investment (governance, institutions, domestic security, etc.) in recipient countries¹⁵.

Column 1

Recent Measures by POVNET

POVNET is an organization under the auspices of DAC which was established in June 1998. As the result of a reform of DAC organizations in 2002, POVNET was re-launched as a forum for discussion of economic growth and poverty reduction. I knew that DAC was looking for a new POVNET chairman but I never dreamed that I would be a candidate for the position. The Government of Japan had been stating that “economic growth is necessary for poverty reduction and development of infrastructure is important for economic growth” at international stages for some time and this was a rare opportunity for a person involved in Japan’s ODA to take up this assertion and discuss it in DAC. So, although I felt I am not really qualified for the position, I decided to accept it when the Ministry of Foreign Affairs (MOFA) approached me about it. As a result of the election for chairman in June 2003, I was selected to be the vice-chairman but the chairman was absent from my first meeting as vice-chairman and it was decided to proceed with the meeting immediately after I took office. That meeting decided to establish three task teams—on infrastructure, agriculture and private sector development—in the new POVNET. Of these, based on developments to date, it was tacitly expected that Japan would lead the task team discussing infrastructure and poverty reduction. Consequently in addition to the vice-chairmanship, I was also asked to be task team leader and I accepted this position too. Since September the task team has drawn an activity plan, received approval of the plan at a POVNET meeting and has prepared and held the first workshop based on the activity plan. In that process, I received support from my MOFA superiors and colleagues at JBIC, Professor Tsuneaki Yoshida, and cooperation from the German delegation which shared my perception of the problems. I believe that if I had not received this cooperation the work would not have proceeded well to this point so I am extremely grateful to everyone who helped. The Task Team on Infrastructure has set itself the ambitious goal of formulating a common position for the DAC members with respect to infrastructure assistance. After clarification of the measures being taken by each country with respect to infrastructure assistance at a workshop scheduled to be held in March 2004, discussion will turn to specific issues and approaches at a second workshop to follow up the first. The active participation of all members of POVNET is necessary to produce beneficial results so my intention is to run the workshops in a way that everyone could participate in the discussions equally. Deputy Director General of the Sector Strategy Development Department of Japan Bank for International Cooperation, Jin Shoji

In response to this, OECD-DAC gave the authority to discuss a growth agenda to the “Network on Poverty Reduction” (POVNET), a forum conventionally established to discuss poverty reduction, established task teams for infrastructure, agriculture, and private sector development, and commenced discussions on poverty reduction and economic growth. Japan is actively leading the discussions, serving as a vice-chairman of the POVNET and leader of the infrastructure task team.

As stated in Part 1, Japan is placing importance on economic growth and the role of infrastructure in poverty reduction and has been emphasizing this point of view in international discussions. For example, the Poverty Reduction Strategy Paper (PRSP) for Viet Nam formulated in May 2002 was entitled the “Comprehensive Poverty Reduction and Growth Strategy (CPRGS),” taking into account the fact that the Government of Viet Nam is placing importance on economic growth. Initially the content of the CPRGS placed priority on expanding basic services in the social sector without including a point of view to achieving poverty reduction through large-scale infrastructure development and economic growth. Then Japan, while respecting the ownership of the Government of Viet Nam, and in collaboration with the World Bank and other institutions, called on Viet Nam to expand the scope of the CPRGS. As a result, in the Consultative Group Meeting for Viet Nam of December 2002, a conclusion was drawn to introduce and expand the element of large-scale economic infrastructure to the CPRGS. In response to this conclusion, the Government of Viet Nam began work to add a new chapter about large-scale infrastructure to the CPRGS. The additional chapter on CPRGS was completed in November 2003 and reported by the Viet Nam delegation in the Consultative Group Meeting for Viet Nam in December 2003.

Through this process, in order to support the work to expand the CPRGS by the Government of Viet Nam, Japan has conducted survey research concerning the contribution of large-scale infrastructure to economic growth and poverty reduction and presented the significance of infrastructure. The result of these studies were shared by the Government of Viet Nam, major donor countries, and international organizations at a number of workshops, such as “Infrastructure Development for Growth and Poverty,” where vigorous discussions were held about what kind of process infrastructure contributes to economic growth and poverty reduction, etc. The work by the Government of Viet Nam to “expand the CPRGS” was carried out based on these discussions.

JBIC, along with the World Bank and the Asia Development Bank (ADB), and with support from the Government of Japan, has commenced joint surveys concerning infrastructure development in East Asia towards their common goals of economic development and poverty reduction in the region. These joint surveys plan to restudy the roles and results of infrastructure development implemented in East Asia, in particular its role and importance for poverty reduction, and then seek a way for a new international public-private partnership and a way for funds procurement that promotes more efficient infrastructure development. During the surveys, JBIC intends to hold seminars and workshops and support network-building as well as the promotion of dialogue between the stakeholders such as governments of developing countries, the private sector and NGOs. Then the results of the surveys are expected to be used by policy-makers in developing countries involved in infrastructure development, international development financial institutions, and the related organizations of donor countries.

In addition, Japan plans to conduct surveys concerning infrastructure, economic growth, and poverty jointly with the United Nations Development Program (UNDP). In these surveys, two ASEAN countries and one African country will be selected to conduct micro level and macro level surveys of the relationships between infrastructure, economic growth, and poverty reduction. The macro level research will basically be a compilation of the existing literature on the subject, while the micro level survey is to put the focus on regions and conduct empirical research concerning the relationships between the supply of small-scale infrastructure, the revitalization of regional economies and poverty reduction. The relationship between infrastructure supply and growth and poverty reduction in the selected country will be analyzed from the macro and micro perspectives and the results compiled into a recommendation that substantially contributes to poverty reduction strategies in developing countries.

The role Japan has played in achieving a convergence of the various opinions concerning the relationship between poverty reduction and economic growth and forming an international consensus was highly praised in the OECD-DAC Peer Review of Japan carried out in December 2003. (Refer for details.)

11. Refer to http://siteresources.worldbank.org/DEVCOMMINT/NewsAndEvents/20125700/April2003DCCommunique_E.pdf for details.
12. Refer to http://siteresources.worldbank.org/INTTRM/Resources/InfrastructureActionPlan.pdf for details.
13. Refer to http://www.imf.org/external/np/cm/2003/092203.htm for details.
14. Refer to http://www.worldbank.or.jp/04data/07press/pdf_fy2002/20020220_205.pdf for details (in Japanese).
15. Refer to the Chairman’s Summary for the DAC High Level Meeting of April 2003 (http://www.oecd.org) for details.