Section 3. Positive Enhancement of Economic Cooperation


1. Japan's Assistance Responsibility as an International State


Possessing the second-largest economy in the Free World and being itself an important free and democratic society, Japan has a natural responsibility as an international state to cooperate as positively as possible for the building of an international society of peace and stability. Contributing to the resolution of the North-South problem through support for the social and economic development of those developing countries beset with continuing economic crisis is both the most important and most appropriate responsible role for Japan, a nation which has passed through the horror of war and been reborn as a nation of peace.

In line with this basic awareness, Prime Minister Nakasone stated in his Policy Speech to the One Hundredth Session of the National Diet that, "International hopes and expectations of Japan are growing rapidly. It is becoming increasingly difficult for Japan to attain a stable place in the international community if we ignore such trends" and that "In our relations with the developing countries, . . . we have an important international responsibility to work to further enhance our economic and technical cooperation under the New Medium-Term Target."

This determination to expand and enhance Japan's assistance despite our tight fiscal situation was also stated at the OECD Ministerial Conference in May, the Williamsburg Summit in May, the Sixth Session of the UNCTAD in June and July, and other international forums. At the Williamsburg Summit, for example, Prime Minister Nakasone drew agreement from the other leaders there for his emphasis that there can be no prosperity for the North unless there is also prosperity for the South and his advocacy of the need for North-South cooperation.


2. Assistance for Peace and Stability


Given that economic disruption in the developing countries can lead to political instability and social anxiety and trigger international conflicts and heightened tension, the political, economic, and social stability of the developing countries is essential to the maintenance of world peace and stability. Assistance to support the developing countries' economic and social development and to contribute to the improvement of their living standards thus also contributes to the alleviation of international tensions in the broader sense even as it fosters political and social stability in these countries.

It is in this realization that Japan has been stepping up its assistance to those regions which are important for the maintenance of world peace and stability. Although the specific decision on which countries fall into this category at any given time is made at Japan's own initiative taking into account the prevailing international situation, Japanese thinking is reflected both in the traditional priority emphasis on the ASEAN countries, China, the Republic of Korea, and other Asian countries and in the recent increases in assistance to such countries as Pakistan, Egypt, Kenya, the Sudan, Somalia, and Jamaica.


3. 1983 ODA Performance and Budget for Fiscal 1984


(1) Japanese ODA in 1983 was $3,761 million (disbursement basis), a major 24.4% increase over the $3,023 million in 1982. In yen terms, this was an 18.6% increase from 1982's \752.9 billion to 1983's \893.3 billion, bringing the percentage of ODA to GNP up from 0.29% in 1982 to 0.33% in 1983 (close to the Development Assistance Committee (DAC) average of 0.36%). Bilateral ODA was up 2.4% in dollar terms from $2,367 million in 1982 to $2,425 million in 1983 yet down marginally in yen terms from \589.6 billion in 1982 to \576.0 billion in 1983.

Japanese ODA to multilateral agencies showed a drastic 103.6% increase from $656 million in 1982 to $1,336 million in 1983. In yen terms, this was a 94.3% increase from \163.3 billion in 1982 to \317.3 billion in 1983.


Increase of Japan's ODA (Official Development Assistance)


(2) Despite Japan's harsh fiscal circumstances, special consideration has been given to the New Medium-Term Target in the budget for fiscal 1984, and the general-account budget allocates \528.1 billion, an increase of 9.7% from the previous year, for ODA. The fact that this austerity budget allowed a 9.7% increase in ODA even as ordinary expenditures were being trimmed 0.1% is indicative of Japan's positive stance on such assistance.

The total for all ODA activities is up 33.8% from the previous fiscal year to \1,295.2 billion (0.44% of GNP). Within that, the general-account ODA disbursed by the Ministry of Foreign Affairs is \251.2 billion (up 8.1%) or approximately half of the general-account ODA. In addition to seeking to expand and improve ODA overall in both qualitative and quantitative terms, the fiscal 1984 budget seeks to enlarge technical cooperation through the Japan International Cooperation Agency (JICA) and grant aid assistance as well as to expand its aid appropriations with special emphasis on (a) expanding basic human needs assistance, (b) expanding assistance for human resources development, and (c) making Japanese assistance more effective.



4. Enhancing Aid Effectiveness


With the industrialized countries facing severe fiscal difficulties and the impossibility of effecting any major increases in assistance, it is important that assistance be made as effective as possible.


(1) Understanding the Recipient Countries' Needs

The first requirement for effective assistance is that it respond to the real needs of the recipient country. Japan has long made policy dialogue an important means of understanding the developing countries' development needs, and this has entailed regular annual consultations plus the dispatch of various preliminary study missions. This policy dialogue is used not only to discern the developing countries' wishes but also to encourage them to follow appropriate economic policies.

As a result of these policy dialogue consultations, Japan has recently been putting its assistance priority emphasis on areas which have a direct impact upon the people's livelihoods, primarily basic human needs assistance (e.g., rural village and agricultural development, potable water resources, health and medical care, and family planning) and human resources development.


(2) Evaluation

Japan is constantly evaluating such factors as whether or not its assistance is being effective in light of its aims, how it is contributing within the recipient country's overall development plans, and whether or not it is contributing to building friendly relations between Japan and the recipient country. The results of this ongoing evaluation are then incorporated in planning future aid programs and, when necessary, modifying current assistance programs. The Ministry of Foreign Affairs thus intends to continue beefing up the Economic Cooperation Evaluation Council, and the Council, having issued one report in 1982, issued another in November 1983.


(3) Policy Dialogue with the Industrialized Countries

Exchanges of assistance policy information and experiences among the industrialized countries are also important in ensuring that effective use is made of assistance resources and coordinating assistance for greater effectiveness. In addition to the World Bank, DAC, and other multilateral forums, Japan is also promoting policy dialogue with individual industrialized countries.


(4) Coordination with NGO

Non-governmental organizations (NGO) engaging in cooperation at the private-sector level are also an important part of Japan's economic assistance.

This is especially so since NGO activities have an ability to engage in carefully individualized grassroots cooperation unmatched by the government's efforts, and the government intends to strengthen coordination and solidarity with the NGO in order to make total Japanese economic cooperation more effective and more meaningful.



5. Japanese and International Trends in Assistance


(1) Multilateral Assistance and Bilateral Assistance 

Some of the industrialized countries have recently soured on multilateral assistance (e.g., disbursements to international financial and development institutions), and the negotiations on subscriptions and replenishments for these international development financial institutions have not always been easy. Believing that multilateral assistance is advantageous in offering the specialist resources of the international organizations, Japan, as a responsible member of the international community, intends to continue to work for its expansion and enhancement.


(2) Project Assistance and Non-project Assistance

Some people in certain industrialized countries argue that assistance to countries facing severe economic arises should emphasize commodity loans, debt relief, and other quick-acting non-project assistance which will contribute directly to the improvement of their international balances of payments rather than project assistance which requires domestic capital and considerable time before its impact is felt. Believing that assistance should support the self-help efforts of the developing countries themselves, Japan has long emphasized project assistance. However, Japan is not adverse to implementing non-project assistance when appropriate in light of bilateral relations with the recipient country and that country's international balance of payments, its economic situation, and other factors.


(3) Associated Financing

Recognizing that there has recently been a sharp increase in the use of ODA for purposes other than those for which it was originally intended to be used, specifically in the use of ODA to sweeten tender bids by companies from the aid-giving country and other commercial projects which should really be covered by private-sector financing or export credits, DAC and the OECD adopted their guidelines on associated financing in May.

Japan has long responded deliberately to requests for such associated financing, offering associated financing on a case-by-case basis only for projects which are both appropriate as assistance projects and which, because of their scale or other factors, cannot easily be covered adequately by yen loans.



6. Institute for International Cooperation

Technical cooperation is highly significant in contributing to the developing countries' human resources development as technology is transferred from person to person in human encounters. Accordingly, it is most important to have available adequate numbers of Japanese experts with the wealth of experience and technical prowess demanded. The Institute for International Cooperation was established by the JICA in October specifically to provide training and other support for these people.


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