■Co-creation for Common Agenda Initiative

The new Development Cooperation Charter identifies “solidarity to realize co-creation” as one of the evolved approaches to implementing development cooperation more effectively and strategically. It aims to engage a wide range of partners—such as private companies, other countries and international organizations, Japanese NGOs and local governments, universities and research institutions, individuals with deep interest in and understanding of Japan, and people of Japanese descent living abroad. By bringing together their respective strengths through dialogue and collaboration, the Charter seeks to create new solutions jointly (For details on solidarity with diverse partners, see Part V, Section 1).

As the needs of developing countries shift from focusing solely on economic growth to addressing broader social challenges, the problem-solving capabilities of Japanese companies have become increasingly important. For example, when Japanese companies are uncertain about making overseas investments, investment environment improvements through ODA mechanisms, such as grants and technical cooperation, can serve as a catalyst for companies to expand overseas. By leveraging ODA to mobilize private capital and thereby maximize development impact in ways that encourage private sector investment, Japan can help address social challenges in partner countries while advancing its own economic growth.

A key strength of Japan’s ODA lies in its ability to promote autonomous development through dialogue, based on equal partnerships with developing countries. Japan’s approach combines not only structural aspects such as infrastructure and equipment but also on non-structural aspects such as human resource development tailored to local contexts. It carefully integrates loan aid, grants, and technical cooperation in a coordinated manner. Today, as many developing countries have achieved significant economic growth, some countries are now facing challenges common to Japan, such as green transformation (GX) and digital transformation (DX). In this context, the concept of “co-creation” —working together as equal partners to address social challenges, rather than maintaining a giver-receiver relationship—is becoming increasingly important.

The revised Development Cooperation Charter builds on these strengths to promote the “Co-creation for common agenda” initiative. A key feature of this initiative is to propose the cooperation menus that leverage Japan’s strengths, and jointly formulating projects in partnership with the partner countries.

Specifically, Japan publishes the strategy document that identifies priority areas and publicly sets out approaches to achieve goals in each area. This enhances predictability of project implementation, encourages the active participation of various actors such as private companies and international organizations, and combines various forms of cooperation to maximize development impacts.

Starting with the launch of this initiative with Cambodia in December 2023, Japan has agreed to pursue this initiative with Fiji, while also considering the possibility of promoting cooperation under this initiative with Laos (For details on the implementation status of the initiative, see Part V, Section 2 (2))

■Mobilization of Private Financial Resources

From the perspective of developing countries, the composition of external financial flows has been changing over time. In the 1990s, ODA was the dominant source. However, since the 2000s, foreign direct investment (FDI) and remittances from migrant workers have grown substantially, surpassing ODA. In 2022, FDI was approximately 2.5 times the volume of ODA, and remittances about 2.8 times, indicating that private financial flows now exceed ODA by far.Note 8 As private capital accounts for an increasing share of financial inflows to developing countries, the positioning of ODA has become relativized. Many countries are now showing greater interest in attracting businesses rather than aid. This shift underscores the growing need for diverse actors to collaborate in addressing development challenges. In other words, relying on ODA alone is no longer sufficient to tackle the development challenges facing developing countries.

The role of private capital in developing countries is becoming increasingly important. In particular, sustainable finance—investment not only seeking profit but also addressing social challenges, including those related to the environment, society, and governance—is gaining unprecedented significance. In response to this trend, the Advisory Panel on New Financing for Development was established under then Foreign Minister Kamikawa in March 2024, and discussions took place from March to May. In July, then Minister Kamikawa received recommendationsNote 9 outlining the potential catalytic role of ODA in this evolving financial landscape from the panel (see also “Development Cooperation Topics”).

The recommendations state that both ODA and sustainable finance are future-oriented forms of “problem-solving finance.” They share a common purpose: helping address challenges embedded in today’s economic and social systems, with the goal of shaping a more inclusive, sustainable, and resilient economy and society. The panel also points out that by taking risks that cannot be taken in the private sector through ODA and strengthening collaboration between public and private sectors, there is significant potential to foster cooperation toward a better future for the global economy and society. When positioned as a catalytic tool, ODA can help create and expand an “ecosystem” in which diverse stakeholders—including private companies and investors—engage in economically rational investments that ultimately support the growth of developing countries. As concrete proposals, the panel recommends expanding JICA’s risk-taking functions, for example, by providing guarantees for projects in developing countries and purchasing green and social bonds issued by local entities. In response to these proposals, the Government of Japan will continue its review of the ODA mechanism with a view to enhancing its alignment with new development finance approaches.

1. Note 8: “World Development Report (WDR) 2023: Migrants, Refugees, and Societies” https://www.worldbank.org/en/publication/wdr2023
2. Note 9: Recommendation paper “Toward Contributing to a Sustainable Future and Creating a Virtuous Cycle of Growth” https://www.mofa.go.jp/mofaj/gaiko/oda/files/100697332.pdf (in Japanese only)

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