Section 3. Expansion Efforts on Economic Cooperation
In 1980 Japan successfully achieved its medium-term target to double official development assistance (ODA) in three years from 1978. The amount provided in the final year considerably exceeded the target of $2.8 billion, which is double the $1.4 billion allocated in 1977.
The country tried to make more effective and efficient use of its economic assistance, as seen in the aid given to countries bordering conflicts and to refugees. Efforts will be continued to expand ODA under the Medium-Term Target, which was established in January, to more than double the aggregate amount of such assistance in the next five years.
I. Increased Assistance to Countries Bordering Conflicts
(1) Economic assistance is provided for various purposes. It is generally believed that assistance is conducive to the economic and social development of developing countries, the improvement of their living standards and the promotion of stability in the regions in which the recipient nations are located. Since the Soviet military intervention in Afghanistan, however, greater emphasis has been placed on the political dimension of assistance.
Following the Soviet action, Prime Minister Masayoshi Ohira stated in a policy speech delivered at the 91st session of the Diet on January 25, 1980:
"For the purpose of maintaining the stability of neighboring countries in the area, particularly Pakistan, we would like to give positive consideration, in cooperation with the U.S. and Western European countries, to the requests from those countries for cooperation in the economic field."
(2) In accordance with this statement, Mr. Sunao Sonoda visited Pakistan in March as the Prime Minister's special envoy. On that occasion Mr. Sonoda announced plans to extend \32 billion in economic aid to that country in fiscal 1980. The assistance, consisting of \24 billion in yen loans and \8 billion in grants, was more than double the amount given in the preceding fiscal year (\14.6 billion). These funds, provided in consideration of the situation in which Pakistan was placed, were used partly in the form of commodity loans and partly in the expansion of that country's railway transport system.
In April, the OECD sponsored the second emergency conference to discuss aid to Turkey. There, Japan pledged to provide $100 million ($45 million in yen loans and $55 million in export credits) to that country. The announcement was made in view of the economic difficulties facing Turkey, the strategic position it holds in the Middle East, and Japanese cooperation with the United States and West European nations.
At the end of the same month, Japan also expressed its intention to extend aid worth \57 billion (\50 billion in yen loans and \7 billion in grants) to Thailand. The yen loans were to be used for irrigation projects and in the construction of bridges and the expansion of Bangkok International Airport. The amount of assistance committed for fiscal 1980 considerably exceeds the \47.5 billion provided in fiscal 1979. Aid to Thailand was increased, partly because that nation is a member of ASEAN, which receives a major portion of Japanese assistance, and partly because it was troubled by the influx of Indochinese refugees.
(3) On the subject of assistance to countries bordering conflicts, Prime Minister Ohira stated at a plenary session of the House of Councillors on May 14 that Japanese economic cooperation was designed primarily to promote the economic and social development of developing countries and thereby help improve their living standards. At the same time, however, the Prime Minister made it clear that Japan was prepared to expand assistance under its own policy by taking into account not only diplomatic, political and economic factors but also the international situation in the broader context of national security.
II. International Goal of Raising ODA to 0.7 % of GNP
The United Nations held a special economic session of the General Assembly from August to September 1980 to discuss a New International Development Strategy (new IDS) for the 1980s, or the so-called Third United Nations Development Decade. Virtual agreement was reached on the new IDS, which was officially adopted by the General Assembly in December. This global development strategy sets various goals for the international community to achieve in order to promote the development of developing countries, and it calls for policy measures to attain these goals. These include raising the level of ODA to 0.7 percent of the GNP.
This goal was also envisioned in the development strategy for the 1970s, or the Second U.N. Development Decade. Only Sweden, the Netherlands, Norway and Denmark, however, accomplished the 0.7% of the GNP target by 1979. The new IDS calls for the industrial nations that have not yet achieved this goal to make the utmost efforts to do so by 1985, or during the second half of the 1980s at the latest, and to continue efforts to raise the ratio to 1.0% at the earliest possible time.
While making reservations on a time frame in which to accomplish this, Japan has accepted the international goal and pledged to continue efforts to that end. For the present this country is aiming to raise the ODA/GNP ratio to the level of the average for developed countries at an early date.
III. Publication of "Philosophy on Economic Cooperation"
(1) In the light of the growing volume of aid as well as the renewed necessity of clarifying the motives behind it, the Ministry of Foreign Affairs created a study group within the Ministry with a view to defining Japan's philosophy on economic assistance. The results of the study were published at the end of November 1980 in an unofficial report entitled "Philosophy on Economic Cooperation." The report characterized ODA as a "cost for contributing to the creation of an international order to ensure Japan's comprehensive national security." From this point of view the report stressed the need for this country to make greater efforts than other developed nations to expand ODA, noting that Japan is a major economic power committed to peace.
(2) Why should Japan increase assistance? In addition to the humanitarian or moralistic incentive which is common to all donor countries, the report gives the following reasons:
(a) Japan is a peace-loving country and, as such, she needs to contribute to the creation of a peaceful international order through economic cooperation.
(b) As the second wealthiest nation in the Free World, Japan should extend economic cooperation commensurate to its economic strength.
(c) Japan needs to reinforce its heavy economic dependence on foreign countries, especially with respect to the procurement of natural resources.
(d) As a non-Western nation that accomplished modernization in less than a century, Japan is ecpected to help developing countries as much as possible.
The points described above, it may be said, represent various aspects of political, economic and social "interdependence" that exists today on a global scale.
IV. ODA Budget for Fiscal 1981
Special consideration is given to ODA in the budget for fiscal 1981. Despite the difficult financial situation in which Japan is placed, ODA in the general-account budget was increased by 12.7% over the previous fiscal year to \396.5 billion. This rate of increase is nearly three times the rate for general-account budget (4.3%).
As for contributions and subscriptions to international development financing institutions, fiscal 1981 happened to be the year in which such payments were scheduled to be reduced. The total ODA budget, however, was expanded by 5.8% over fiscal 1980 to \888.8 billion (0.34% of the GNP).
The ODA budget for fiscal 1981 under the jurisdiction of the Ministry of Foreign Affairs totals \216.8 billion, including \187.1 billion (up 13.5% over fiscal 1980) in the general-account budget.
In formulating these aid budgets for fiscal 1981, the government made efforts not only to expand the volume of ODA but also to improve its quality. This holds true especially of assistance related to the relief of refugees, development of human resources, agricultural and rural development, and development of energy resources. For these purposes, efforts were made to expand technical assistance through the Japan International Cooperation Agency (JICA) and bilateral grants. In the case of the Ministry of Foreign Affairs, \83 billion was appropriated for bilateral grants in fiscal 1981, representing a gain of 10.7% over fiscal 1980; \65.3 billion (up 12.7%) for JICA; and \66.2 billion (up 8.9%) for expenses and contributions to international organizations.
V. 1980 Disbursement and New Medium-Term Target
(1) In 1980, the final year of the medium-term target to double ODA in three years, the total amount of ODA reached $3.304 billion on a net disbursement basis, accounting for 0.32% of the GNP. The volume represents an increase of 25.3% over the preceding year.
(2) On ODA following the completion of the three-year program, the Council on External Economic Cooperation, an advisory body to the Prime Minister, made a recommendation entitled "Future Economic Cooperation" on November 12. In this report the Council, headed by Mr. Shigeo Nagano, expressed hope that a "feasible medium-term target" would be set upon completion of the existing medium-term target. Prime Minister Suzuki stated at the second session of the Ministerial Council on Comprehensive Security, held on December 22, that appropriations for economic cooperation must be increased under some kind of new medium-term target.
On the basis of these statements, the government set a new ODA target in order to improve Japanese assistance in both quantitative and qualitative terms. In an administrative speech delivered in the Diet on January 26, 1981, Prime Minister Suzuki stated that Japan would endeavor to expand ODA and raise its ratio to the GNP, despite a period of severe financial rehabilitation. The Prime Minister then declared that the aggregate total of ODA disbursements would be more than doubled in the next five years from the level of the past five years.
VI. Economic Cooperation with ASEAN
Hitherto, about 70% of Japan's bilateral aid was allocated to the Asian region, particularly to ASEAN, which accounts for 30-35% of the country's bilateral assistance. Prime Minister Suzuki visited ASEAN countries in January 1981 and expressed his view on economic cooperation as follows:
(1) Japan will contribute actively to self-help efforts on the part of ASEAN nations to promote their economic and social development and thereby increase their resilience. Economic cooperation has a vital part to play in these efforts, and it is for this reason that a large portion of Japanese ODA has been allocated to the ASEAN countries. This policy will be continued.
(2) Assistance will be provided with major emphasis on rural and agricultural development, which forms the economic and social foundations of a nation. Secondly, priority will be given to energy resources development, which has become an urgent concern since the second oil crisis. Thirdly, human resources development will be promoted to train personnel who will play a key role in national development. Cooperation will also be extended to facilitate the self-help efforts being made by ASEAN nations to industrialize themselves, including promotion of medium- and small-sized enterprises. Japan is also committed to assistance aimed at improving the infrastructure in the ASEAN nations.
(3) The development of human resources is essential to rural and agricultural development and industrialization. Japan will actively extend technical assistance to the countries in this region. In view of the growing need to train personnel, the Japanese government plans to hold consultations with ASEAN government officials at an early date to bring into operation a program of ASEAN human resources development.