| Part II. | INTERNATIONAL ASSISTANCE TRENDS WITH RESPECT TO DEVELOPMENT ISSUES |
There has been an increasing awareness that in order to advance
development policies in developing countries, merely pursuing increases to the
aid disbursements of developed countries will not necessarily lead to effective
results but rather that it is necessary to discuss the domestic policies of
the developed countries, including trade policies and agricultural policies.
For example, developing countries have stated that the total value of subsidies
to agriculture in developed countries is far higher than the total value of
assistance and that agricultural subsidies are putting pressure on the primary
product exports of developing countries.
The OECD is taking a progressive approach to this issue and has commenced an
analysis of what the relationship should be between the sectors of trade, investment,
agriculture, health, education, the environment, and development cooperation
in order to achieve the international development goals. And a US think tank
is carrying out research that creates an index to measure the coherency of policy
in developed countries (the Commitment to Development Index).
Japan believes that it should understand development from an integrated perspective.
For example, in the priority issues of the new ODA Charter it is stated that
Japan will make efforts to enhance coordination between Japan’s ODA and
Other Official Flows (OOF) to promote economic growth. This is one part of measures
to tackle issues related to policy coherence. And Japan will carry out sufficient
consultation between ODA-related ministries in the policy decision-making process
and work to adopt coherent policies. Japan believes that when tackling issues
related to the policy coherence, not only coordination between agricultural
issues, trade, and investment, but the relationship between development and
security, etc. must also be studied. (Refer for
details.)
Based on this belief, Japan, taking into account discussions in the WTO, etc.,
as stated earlier, is expanding the tariff-free and quota-free system for certain
products from LDCs and making a big contribution to expanding trade opportunities
for developing countries. (Refer for details.)
And Japan is also actively tackling issues related to policy coherence. For
example, it is leading the initiative in the OECD to raise the synergistic effect
of investment and assistance (The “Investment for Development” project
(Refer for details.)
The problem of the accumulated debt in developing countries has
spread throughout the world due to the effects of the two oil crises in the
1970s, the sharp rise of US interest rates in the first half of the 1980s, and
other factors. The problem of accumulated debt is divided into the debt problems
of the least developed countries such as the countries in sub-Saharan Africa,
of other countries such as Latin America and both have been discussed primarily
in the Paris Club (Refer to Box 6 in Part II.)
Many of the least developed countries are dependent on exports of a limited
range of primary products and have weak economic fundamentals. As a result of
the global economic recession beginning in the second half of the 1970s, they
were affected by falling prices for primary products and came to face their
debt problem. In order to deal with this situation, the developed countries
implemented debt relief for the least developed countries as a measure based
on a resolution adopted in 1978 by the Trade Development Board (TDB) of the
UN Conference on Trade and Development (UNCTAD)23.
At that time, the prevailing belief in the Paris Club was that the debt problem
was a temporary liquidity crisis and so it responded to the problem by extending
the repayment periods, or in other words by rescheduling payments. However as
the debt problem became more serious in the second half of the 1980s, in various
high-level meetings including summits it was pointed out that more substantial
debt relief was necessary because the debt was unsustainable and there was a
problem with the capacity of poor countries to service in the long term, so
the Paris Club also began to take debt relief measures. On the other hand, these
debt relief measures were implemented for bilateral debt only, not for debts
to international financial institutions, which constituted a large part of the
debt of the least developed countries, which was the reason why the debt problem
of the least developed countries was not sufficiently resolved. Under the foresaid,
the “HIPC Initiative” was agreed upon at the Lyon Summit in 1996.
The goal of this initiative was to include not only bilateral creditors, but
also international financial institutions and commercial creditors and to reduce
the debt of the HIPCs to sustainable levels. Subsequently the HIPC Initiative
was expanded at the Cologne Summit in 1999 to become the Enhanced HIPC Initiative
(Cologne Debt Initiative), which is in operation today.
Concerning the debt problem of least developed countries, Japan, as the biggest
contributor in the Enhanced HIPC Initiative, is actively taking measures to
promptly implement the initiative and has relieved approximately $5.4 billion,
about one quarter of the G7 contribution ($23.5 billion), to the 27 countries
to whom it had been decided that the initiative should be applied. Japan believes
that it is important to ensure that debt relief leads to poverty reduction and
sustainable development and to move to prompt and steady implementation of the
initiative. Debt relief cannot be expected to produce sufficient results if
the international community does not carry it out in a unified manner. Japan
will continue to tackle the debt problem taking into account conditions in the
countries that are eligible for debt relief and through bilateral and international
discussions.
Also, Japan previously carried out relief for yen loans through the provision
of grant aid for debt relief. However, it was decided that, rather than providing
grant aid for debt relief, Japan would forgive the debts on yen loans from fiscal
year 2003 in the light of the need for an earlier solution to the debt problems
of developing countries, the need to reduce the burden in a more substantial
manner, and the need to improve transparency and efficiency of ODA.
The other debt problem is the debt problem of countries other than the least
developed countries, primarily middle-income countries in Latin America, etc.
These countries, mostly middle-income countries, have relatively advanced economic
growth but on the other hand, there are significant economic disparities within
regions and countries and in most of these countries there remain serious poverty
issues. Correcting these disparities within regions and countries and alleviating
poverty continue to be important issues for the stable development of these
countries. It is necessary to continuously handle the debt problem appropriately
so that the effort to correct disparities is not obstructed by heavy debt burdens.
In particular, one characteristic of the debt of medium-income countries is
that private funds are a larger proportion of total foreign debt than in the
least developed countries. And since the 1990s, there has been seen a new shift
by private creditors from private bank syndicates to general bond holders. For
this reason, the issue has become how public creditors and private creditors
should cooperate to resolve the debt problem of these countries. Ways to handle
this issue within international frameworks are being studied at various forums
such as the G7, etc.
As a result of the agreement reached at the G8 Finance Ministers Meeting in
Deauville, France in May 2003, the Paris Club agreed to a new approach for countries
other than HIPCs (the Evian Approach)24 in
October 2003. As a result of this, it was agreed to commence dialogue between
private creditors and public creditors concerning the debt problems of these
countries and it was decided that comprehensive debt relief measures would be
taken for countries with a large debt burden and insufficient ability to service
the debt, if the country satisfied certain conditions. Japan has been actively
participating in the discussion about cooperation between public creditors and
private creditors within international frameworks and is cooperating to provide
debt relief for these countries as necessary.
To resolve the debt problem, it is important for the debtor countries themselves
to make great efforts to rebuild their economies. Japan’s basic position
is that it is necessary for medium and long-term growth to be achieved and debt
repayment ability to be restored through the efforts of debtor countries themselves,
and Japan intends to continue to cooperate to reduce the debt repayment burden
of debtor countries as necessary so as to make this growth possible.
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Box 6. The Paris Club (Group of Creditor Governments
from Major Industrialized Countries)
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Note: Non-ODA credits include public debts that are not classified as ODA, such as untied loans from JBIC, insured commercial credits owned by Nippon Export and Investment Insurance (NEXI). |
23. In light of the fact that many poor countries were facing a serious struggle to repay their debts, this resolution determined that the developed donor countries would work to take measures to adjust past ODA conditions or take other equivalent measures.
24. The main features of the Evian Approach include (1) placing the focus on the debt sustainability of debtor countries more than previously; (2) taking measures tailored to the individual conditions in each country rather than establishing standardized debt relief conditions, etc.