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

Section 2.
Ensuring a more affluent world

B. Development issues of developing countries

a) Circumstances surrounding Japan's ODA at home and abroad

Since the end of the Cold War, the role required of development assistance has continued to grow. The post-Cold War period has witnessed a succession of regional conflicts, sparking refugee outflows and a host of other problems, while new needs for assistance are arising in the former socialist countries now looking to establish democracies and market economies. Further, the forward march of globalization is producing a widening disparity between the rich and the poor. Poverty remains a serious problem, with more than 1.2 billion people living in conditions of extreme poverty on incomes of less than US$1 per day, while the debts of the Heavily Indebted Poor Countries (HIPCs) are also becoming a major cause for concern. Numerous other issues-for example, environmental and population issues-also require international efforts on a global scale.

While expectations for development assistance therefore remain high, Japan faces an extremely tight fiscal situation, and will need to utilize its more limited ODA budget efficiently and effectively, garnering the understanding and support of the people of Japan as to the position of ODA in Japan's foreign policy and Japan's approach to ODA. The Government of Japan intends to make further efforts based on full consideration of the current environment surrounding ODA, deepening discussion at all levels of Japanese society in the process.

b) Announcement of Japan's Medium-Term Policy on Official Development Assistance (ODA)

Based on this awareness, the Government of Japan announced in August 1999 its Medium-Term Policy on Official Development Assistance (hereinafter, Medium-Term Policy) to clarify priority issues for ODA and boost the transparency of the ODA provision process, as well as to ensure effective and efficient ODA implementation based on more clearly delineated plans. The Medium-Term Policy serves as a basic guideline for Japan's ODA implementation over the next five years in line with the basic philosophy and principles of the ODA Charter.

Based on the Development Partnership Strategy (Shaping the 21st Century: The Contribution of Development Cooperation), to which Japan also contributed, and which was adopted in May 1996 by the OECD Development Assistance Committee (DAC), the Medium-Term Policy emphasizes the perspectives of "human-centered development" and "human security," as well as stresses the importance of using Japan's development experience and technology, including the private sector, to enhance "national visibility" and of further heightening local awareness of Japan's assistance in recipient countries.

Focusing on poverty alleviation, social development, human resources development and support to "software," the Medium-Term Policy identifies the following priority issues: (1) support for poverty alleviation and social development (basic education, health and medical care, women in development, etc.); (2) support for economic and social infrastructure considering benefits for the poor, coordination and division of roles with the private sector; (3) human resources development, intellectual support and support for democratization; (4) responding to global issues (environmental conservation, population and AIDS, food, energy, drug abuse); (5) support for economic structural reforms, including overcoming the Asian currency and financial crisis; (6) conflict, disasters and development; and (7) responding to issues of debt relief.

Further, the Medium-Term Policy notes the need for greater coordination with and utilization of a range of development tools and actors to ensure more effective and efficient aid implementation, including Other Official Flows (OOF), NGOs, local governments, and other donor countries and institutions. Points to be followed in the implementation and management of ODA are identified as: the enhancement of policy dialogue; greater transparency and coherence through the formulation of country assistance programs; improvement of preliminary studies, monitoring and ex-post evaluation; further development of evaluation systems; development of human resources for development cooperation; promotion of public participation; and promotion of information disclosure.

c) ODA performance in 1998

Japan disbursed US$10.64 billion in ODA in 1998 (excluding aid to countries in the DAC List Part II), making it the world's largest ODA donor for the eighth consecutive year. Compared with Japan's 1997 performance, this marked a 13.7% increase (US$ basis), primarily due to the provision of quick disburse loans to Asia to combat the recent currency and financial crisis (ODA extended to Asia grew by approximately 70% from around US$3.1 billion in 1997 to US$5.37 billion in 1998). Responses to the Asian economic crisis and coincidence with the capital increase cycle of some international financial institutions boosted the total aid extended by the 21 DAC members to US$51.89 billion, up 7.4% compared to 1997. At the same time, the ongoing stringency of domestic economic and fiscal circumstances are restraining the further growth of Japan's ODA budget, with the general account ODA budget for FY1999 of the Government as a whole increasing a mere 0.2% year-on-year.

d) 1999 trends

In light of the impact which the Asian currency and financial crisis has had on the world economy as a whole, Japan has been in close coordination with other related countries and international organizations, making active use of ODA in working to resolve the problems of the crisis. In 1999, however, the Asian economy began to show signs of recovery, leading Japan to shift its focus to support for structural reforms, human resources development, and other issues essential in mid- to long-term views. In addition, at the ASEAN+3 Summit (ASEAN plus Japan, China and the ROK) in November 1999, Prime Minister Obuchi announced the Plan for Enhancing Human Resources Development and Human Resources Exchanges in East Asia, otherwise known as the "Obuchi Plan," centered around three pillars: the development of highly specialized personnel, people-to-people exchange at the civilian level, and student exchanges.

In response to the on-going severity of HIPC debt problems, the G8 Cologne Summit in June agreed on the Cologne Debt Initiative, later endorsed by the international community as the Enhanced HIPC Initiative. This new initiative improved and enhanced the original HIPC Initiative to extend "faster, broader and deeper" debt relief to HIPCs, including raising the debt reduction ceiling for bilateral ODA to 100%.

A spate of regional conflicts occurred in 1999 in Kosovo, East Timor and elsewhere, while there were also a number of large-scale natural disasters, including earthquakes in Turkey and Taiwan. These incidents reinforced awareness of the importance of the role of NGOs in large-scale emergency humanitarian relief operations, prompting the Government to accelerate measures providing large and swift support for emergency humanitarian relief operations undertaken by Japanese NGOs. In addition to these support measures for Japanese NGOs on a project basis, the Japanese Government has introduced new support systems, such as a "consultant framework" and a "research scheme" for Japanese NGOs' capacity-building and reinforcement of their organizational structures.

In terms of ODA implementation mechanisms, the Basic Law on the Administrative Reform of the Central Government was enacted in June 1998. This legislation provided the basis for the Law for the Establishment of the Ministry of Foreign Affairs enacted in July, which widened the Ministry's jurisdiction in three areas of ODA coordination in addition to economic cooperation-related foreign policy: (1) policy-making by the relevant government agencies in regard to common principles of ODA as a whole; (2) policy-making and formulation by the relevant government agencies in regard to cooperation through the provision of loan assistance; and (3) policy-making and formulation by the relevant government agencies in regard to technical cooperation. As a result of these legislative steps, the Ministry of Foreign Affairs will assume the central role in government-wide ODA coordination in the wake of the 2001 reorganization of the central ministries and agencies. Additionally, on 1 October the Japan Bank for International Cooperation (JBIC) was established, integrating the operations of the Japan Export-Import Bank and the Overseas Economic Cooperation Fund (OECF). By merging the information and expertise of these two institutions while continuing to partition the ODA (OECF) and non-ODA (Export-Import Bank) accounts, JBIC will be able to provide more effective ODA funding in line with the socioeconomic conditions of recipient countries and the particular features of each project.

In August 1999, four Japanese engineers were abducted while engaged in a mineral resource development survey in Kyrgyz. Fortunately, they were safely released two months later, but the incident demonstrated the urgent need for safety measures in the implementation of economic cooperation. Immediately after the abduction occurred, the Ministry of Foreign Affairs established a task force together with aid implementation agencies to strengthen and expand safety measures. The Ministry has been working on the enhancement of information gathering in safety-related fields and analysis capacity, as well as on institution-building. The Ministry has also introduced dispatches of security survey teams and emergency communications mechanisms.

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