Section 3. Contributions to Settling the North-South Problem


1. The situation of the developing countries underwent marked changes in 1974.

The sudden rise in oil prices, the sharp rise in the prices of industrial products, the unstable demand-supply condition in food, shortage of chemical fertilizers, the slowdown in economic growth of the industrialized countries, among other factors, seriously affected the economic and social development of the developing countries. The global rise in the prices of primary commodities increased the burden of not only the industrialized countries but also of those developing countries that must import such products.

Until 1972, the annual real rate of economic growth of the developing countries as a whole had been slightly above 6 per cent, the target of the Second United Nations Development Decade. However, as a result of the great changes brought to the international economy in 1973 through 1974, it is likely that their economic growth rate during the rest of the 1970s will be much lower than 6 per cent. It is estimated that per capita real income of the poorest nations will hardly increase from current levels due in part to the sharp increase in their populations.

Under these circumstances, there has emerged in recent years a trend toward differentiation among the developing countries. In more concrete terms, the economic gap between the oil-producing countries and those which do not produce oil has become very wide. As for aid, some of the oil-producing countries are no longer developing countries that need assistance but rather have emerged as donor countries capable of extending assistance on a fairly substantial scale. Even among the oil-producing countries, there is a growing tendency toward differentiation. For example, countries with surplus revenues relative to the domestic demand for capital for development investment and other purposes and a high per capita national income, like Kuwait and Saudi Arabia, form one group. Iran, Venezuela and other countries that are making large-scale investments in domestic development but do not require the introduction of foreign capital at the present stage, form another group. Indonesia, Nigeria and other countries that still lack domestic capital despite increased foreign exchange revenues from the sharp rise in crude oil prices belong to still another group.

The sharp increase in prices for oil and other primary commodities is also affecting those developing countries that do not produce oil. In particular the problem of those countries seriously affected by the payment of resultant additional costs (the so-called "most seriously affected countries" - MSAC) is becoming ever more serious. Most of them depend heavily on imports of fertilizers and food, and they are suffering from the double effect of the sharp rise in oil prices and shortages in food and fertilizers. On the other hand, there are countries such as Zaire, Zambia, Thailand and the Philippines, whose international payments positions have improved to some extent due to the increased prices for primary products such as copper and other minerals, wool, grains and sugar. However, since the boom in primary commodities excepting oil is gradually subsiding, the economic outlook of the developing countries is by no means bright. Moreover, the slowdown in the economic growth of the industrialized countries is having a considerable adverse effect on the expansion of exports by the developing countries.

Amid this situation, the Special Session of the U.N. General Assembly on Raw Materials and Development was held in April. It was agreed that measures be taken to strengthen assistance to the most seriously affected countries , such as the " Special Program , " and further aid efforts not only by the industrialized countries but also by oil-producing countries were called for.

The World Food Conference held in Rome in November discussed the world food problem and adopted the Universal Declaration on the Eradication of Hunger and Malnutrition as well as other resolutions on ways to solve the food problem.


2. As described above, the North-South problem has assumed increasingly difficult and complicated dimensions. Japan has made contributions to international efforts for solving the North-South problem to the extent possible through trade and development assistance.

As for cooperation through trade, Japan has contributed to increasing the export revenues of the developing countries by lowering tariffs on primary commodities and manufactured goods, increasing liberalized items, participating in commodity agreements, cooperating in marketing and other activities of the developing countries for the expansion of exports and improving its Generalized System of Preferences. As regards the Generalized System of Preferences, Japan has improved its scheme every year since the system was implemented in August 1971. It has taken measures to improve the system, such as the expansion of the beneficiaries under the system, the enlargement of product coverage for agricultural and marine products, the reduction in preferential tariff rates, improvement in the flexible administration of ceiling quotas, and the enlargement in the number of product groups exempt from quantitative restrictions.

As regards economic cooperation, the total flow of funds to the developing countries was $2 ,962 million (on a net payment basis ; same hereafter), a 50.7 per cent drop from the preceding year. This amounted to 0.65 per cent of GNP, which was a considerable drop from the 1.44 per cent level in 1973. Of the total flow of funds, official development assistance (ODA) was $1,126 million in 1974 compared with $1,011 million in 1973 , showing an increase of 11.4 per cent. The proportion of ODA to GNP was 0.25 per cent, the same as in the preceding year.


3. The developed countries are also faced with many economic difficulties stemming from the current changes in the world economy, and it is not easy far them to increase assistance to the developing countries to any substantial degree. However, in view of the growing interdependence among nations in the international economy, the countries of the world must cooperate to close the gap between the North and the South and achieve a smooth development of the world economy.

As an active member of the international community, Japan should offer its assistance in trade, economic cooperation and other areas commensurate with its position. Japan has strong relations of interdependence with the developing countries because of its economic structure. In this context, it must strengthen its cooperative relations with them in the future and consider new ways to promote effective cooperation in the fluid international economic environment.


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