Japan's Economic Cooperation in the Middle East

Overview

Although Japan depends on the Middle East for approximately 78% of its crude oil imports, for many countries in this area, Japan is an important trading partner and the economic relationship is extremely interdependent. The political and economic stability in this region, which was the site of the Middle East War and numerous other conflicts, is considered to be extremely important to the peace and stability of Japan and the rest of the world. Based on this idea, Japan has been actively providing its support and was the third largest donor to the region next to the U.S. and France in 1995.

The Middle East extends across a wide region from the Pamirs in the east to the Atlantic Ocean in the west, and from Turkey in the north to Sudan in the South. It comprises 21 diverse nations and is in an important position for traffic between East and West. It is also politically and economically diversified. The region is an area where numerous conflicts, such as the Middle East War which recurred four times, the Iran-Iraq War, and the Gulf Crisis took place. In view of this, Japan implements fine-tuned assistance in accordance with the income levels and aid requirements of the recipient countries, all while conforming to the prevailing political and social conditions.

Trends in Japan's Aid to the Middle East

The Middle East is a comparatively new recipient region for aid from Japan. In 1972, the Middle East's share of Japan's bilateral Official Development Assistance (ODA) was 0.8%. However, that figure has grown since the oil crisis of 1973 and reached 24.5% in 1977. After that, the share moved into the 10% range with the structural modifications to Japan's energy requirements and the stabilization of its oil supplies. During the Gulf Crisis in 1991, however, yen loans, principally emergency commodity loans, were made to Egypt, Syria and Jordan. Taking this fact into consideration, bilateral ODA to the region rose to 1.8656 billion dollars, 20.4% of the total, the highest ever in absolute terms.

Since 1992, the share has returned to normal levels of around 6% to 7% and in 1995, the figure was 721.27 million dollars, a 6.8% share. Compared with this, the Middle East ranked after Asia's 54.5%, Africa's 12.6% and 10.8% in Middle and South America.

Aid Tuned to the Prevailing Political Situation

In 1990, when the Gulf Crisis erupted, Japan provided about 2 billion dollars in aid to Egypt, Jordan and Turkey, and about 500 million dollars in aid to Syria. Japan played an important role in achieving domestic and regional stability by stabilizing the economy in the region.

Supporting the Middle East Peace Process
Since the current Middle East peace process began in 1991, ODA has been essential for stability in the region from the perspective of supporting the peace process. Japan has primarily provided aid to countries such as Egypt and Jordan, which are actively involved in promoting peace. Aid to the Palestinians, who are directly involved in the peace process, is also important and Japan, along with the U.S. and the E.U., has become a major donor with aid totaling 250 million dollars as of December 1996. Japan has also been cooperating in support of the peace process from the very beginning by actively participating in multilateral negotiations and presiding over the Environment Working Group.

Aid According to the Level of Economic Development

Under the DAC (Development Assistance Committee) groupings of 1995 of the Middle East, there are four low income countries (Afghanistan, Yemen, Egypt and Sudan), nine lower middle income countries (Algeria, Iraq, Iran, Jordan, Syria, Tunisia, Turkey, Morocco and Lebanon), four upper middle income countries (Bahrain, Libya, Oman and Saudi Arabia) and four high income countries (United Arab Emirates, Israel, Qatar and Kuwait). The comparatively high income countries consist of a diverse range of prolific oil producing nations and non-oil producing nations and, consequently, aid is implemented in accordance with their respective stages of economic development.

Japan's bilateral ODA comes in three forms: Loan aid, grant aid and technical cooperation. In principle, the form is determined by the income level of the recipient country. In fiscal 1996, the level was based on the per-capita GNP of 1994. Grant aid was given to those countries with a per-capita GNP of 1,395 dollars or less, while loan assistance was given to countries with a per-capita GNP of 2,895 dollars or less.

The prolific oil-producing nations in the Gulf (United Arab Emirates, Kuwait, Qatar, Saudi Arabia, Oman and Bahrain) have a high per-capita GNP and, as such, are excluded from Japan's financial aid. However, the technological ranks in these countries are relatively thin and there is still a great need for technological transfer from Japan. Therefore, Japan implements technical cooperation in these countries. (The United Arab Emirates, Qatar and Kuwait from January 1996, and Israel from the end of 1996, have been moved from Part I to Part II of the DAC list.)

Japan provides loan assistance and technical cooperation in comparatively high income nations (over 1,395 dollars per-capita GNP), such as Turkey and Tunisia, with the purpose of enhancing infrastructures to support industrial and social activities. In countries such as Egypt and Morocco, which have lower income levels than countries like Tunisia (less than 1,395 dollars per-capita GNP), Japan provides assistance in all three forms: loan aid, grant aid and technical cooperation. In LLDCs such as Yemen, aid is concentrated in the form of grant aid and technical cooperation.

The Metal Research and Development Center Project by JICA, Egypt photo photo The Kinali-Sakarya Motorway (Second Bosporus Bridge)by OECF, Turky



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