Chapter II.
Sectoral Analysis of the International Situation and Japan's Foreign Policy

Section 2.
Securing global economic prosperity and development issues for developing countries

B. Development issues of developing countries and Japan's Official Development Assistance (ODA)

a) Circumstances surrounding Japan's ODA

  • Top ODA donor for seven years

    Japan disbursed US$9.358 billion in ODA for 1997 (excluding aid to Eastern Europe and countries no longer dependent on aid), making it the world's largest donor for seven years since 1991. Comparing this with Japan's 1996 performance (yen basis), while bilateral ODA declined 11.2 percent, contributions and subscriptions to international institutions increased by 153.2% due to coincidence with the capital increase cycle of the World Bank and other international financial institutions, boosting the overall figure by 10.2 percent. However, on a dollar basis, factors such as the fall in the yen rate pushed the total down to a 0.9% decrease. ODA made up 0.22% of GNP, placing Japan 19th among the 21 member countries of the OECD Development Assistance Committee.

  • ODA reforms and the domestic and international ODA situation

    Continuing on from the previous year, 1998 also saw vigorous discussion on ODA reforms. In January, the Council on ODA Reforms for the 21st Century, an advisory body to the Foreign Minister, presented its final report, which included recommendations on formulation of country-specific development programs, clarification of aid priority, promotion of public participation and information disclosure, fostering and securing of human resources and strengthening of implementation mechanisms. In addition, in June, the House of Councillors Investigation Committee on International Problems made 20 recommendations on ODA in its final report, while the Council on External Economic Cooperation presented to Prime Minister Hashimoto its opinion about how to further promote economic cooperation in the future.

    Further, the need to promote more effective and efficient ODA has been recognized even in the Government's administrative reform process, which included reorganization of the central ministries and agencies. As a result, the Basic Law on the Administrative Reform of the Central Government, enacted in April, included a provision that the Ministry of Foreign Affairs should execute a coordinating function over ODA across the government as a whole. Prime Minister Obuchi also instructed his first Cabinet meeting at the end of July that a review should be undertaken toward more transparent and efficient ODA, in response to which the relevant ministries reached an agreement in November on the formulation of Country Assistance Programs and ODA mid-term policy (provisional title), as well as the improvement of ODA transparency and efficiency through further information disclosure, etc.

    Behind these moves have been major changes in the domestic and external situation regarding ODA. While international conflict based on East-West confrontation began to fade with the end of the Cold War, regional conflicts have since become frequent, creating outflows of refugees and a variety of other problems. Countries such as Cambodia which are engaged in post-conflict reconstruction and development are facing difficult issues such as the destruction of infrastructure and shortage of human resources caused by the conflict, as well as post-conflict devastation. Further, new needs for assistance are arising in the former socialist countries now looking to democracy and the market economy. Globalization is also producing a growing disparity between the rich and the poor. Poverty still remains a serious issue, with more than 1.3 billion people living in conditions of extreme poverty. In implementing development assistance, attention is paid not just to economic indicators such as economic growth rates and the rate of increase of GNP per capita, but a wider perspective is taken into consideration, including human-centered development, environment, local participation, gender equality, NGO participation and South-South cooperation. At the same time, Japan faces severe domestic economic and fiscal circumstances, resulting in a 10.4% cut in the general account ODA budget for FY1998.

    While both the domestic and external circumstances which ODA is facing may be undergoing major change, there is no change in Japan's position of supporting the stability and development of developing countries through ODA, addressing global-scale issues such as environment and population issues and poverty, etc., and also contributing to the peace and stability of the international community. Contributions through ODA also enhance confidence in and appreciation toward Japan and the Japanese, fostering an international environment favorable to Japan and thus contributing to the promotion of Japan's safety and prosperity. Based on this consideration, it is important that Japan view this difficult period as, conversely, a good opportunity for ODA reform, implementing higher-quality and more efficient and effective assistance which is thoroughly grounded in the ODA Charter, garnering the understanding of the people of Japan in the process.

b) 1998 trends

In light of the impact that the Asian economic crisis has on the world economy as a whole, Japan has been in close coordination with other countries and international organizations concerned, actively making use of ODA in addressing the Asian economic crisis. (Chapter I, B.3). Specific examples where ODA is used in a bilateral context are structural adjustment assistance, inter alia assistance to social safety nets, which makes use of yen loans and grant aid, human resources development through such means as "the Japan-ASEAN Program for Comprehensive Human Resources Development," and emergency grant aid to provide assistance to foreign students studying in Japan and assistance in the form of pharmaceuticals. While some countries of the world have succeeded in economic growth and democratic nation-building, the African countries and many other regions are still faced with the harsh realities of severe poverty, conflict and terrorism. In October, Japan co-hosted the Second Tokyo International Conference on African Development (TICAD II) in Tokyo together with the United Nations and the Global Coalition for Africa. Based on the Development Partnership Strategy (Chapter I, D), Japan took the opportunity of the conference to make clear its commitment to active engagement in African development issues using ODA and other modalities (Chapter I, B.5). Japan played a leading role in the creation and promotion of the Development Partnership Strategy (DPS), which was adopted in the DAC in May 1996, and the significance of which was reaffirmed at the May 1998 Birmingham G8 Summit. The DPS has become firmly entrenched as a long-term development strategy toward the 21st century, and is currently in the process of concrete implementation.

In view of the principles of its ODA Charter, Japan took a number of stringent measures in response to the series of nuclear tests by India and Pakistan in May, such as the suspension of new grant assistance except for aid of an emergency and humanitarian nature and grassroots assistance, the suspension of new yen loans and the cautious examination of loans through international financial institutions such as the World Bank.

A number of natural disasters also occurred worldwide in 1998, and Japan actively extended help to the disaster-hit countries through the supply of emergency aid supplies and capital and dispatching Japan Disaster Relief Teams. In particular, when Hurricane Mitch inflicted massive damage on Honduras in November, the Self-Defense Forces engaged in emergency assistance operations abroad for the first time based on the Law Concerning the Dispatch of Japan Disaster Relief Teams, with its efforts winning high praise from the government and people of Honduras.

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