No. 6 — February 11, 2000

Feature Article

JAPAN'S FOREIGN AID PROGRAM IN THE NEW MILLENNIUM:
RETHINKING "DEVELOPMENT"

Marc Castellano

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Summary

Japan, the world's largest provider of official development assistance since 1992, likely will keep its preeminent position this year. The East Asian economic crisis, a regionwide debacle triggered by the devaluation of the Thai baht in mid-1997, prompted Tokyo to launch a major rescue effort worth some $80 billion. In line with traditional policy, funds were pumped into infrastructure and "development" projects. Recently, however, growing fiscal pressures, emerging questions about the impact of this type of aid on the poorest segments of recipient nations and waning domestic support for huge overseas assistance programs have spurred influentials both inside and outside the government to call for a wholesale reform of Japan's ODA policy.

Thus, new priorities and directives for ODA have been established. This year's program emphasizes initiatives that serve Japan's national interest, protect the environment, alleviate social problems and ensure efficient utilization of funds. A host of changes will be made not only in administrative procedures but also in fundamental perspective. Instead of pouring funds into traditional infrastructure projects, Tokyo will carefully spend its money on projects that reach the grass roots. Such improvements are designed to make the development process more humanistic as well as to boost domestic understanding and support for Tokyo's substantial aid program.

The ODA budget for FY 2000 reflects these new priorities and includes provisions for new types of social and environmental programs. For improved efficiency, other initiatives have been introduced to enhance transparency and to expand monitoring activities. If all goes according to plan, Japan's aid program will undergo a major transformation and emerge as a better institution in the new millennium.

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The East Asian Economic Crisis And The Miyazawa Plan

The fallout of the East Asian economic crisis was a watershed in terms of Japan's foreign aid philosophy. After spending billions of dollars on a rescue effort, administrators began questioning not only the success of the aid program but also the fundamental goals of Japan's official development assistance policy.

Tokyo's flagship aid initiative of 1999 was the Miyazawa Plan, a $30 billion fund unveiled by Finance Minister Kiichi Miyazawa at the October 1998 meeting of finance ministers and central bankers from the Group of Seven industrialized nations.1 The plan, separate from ODA but related in purpose and function, was introduced to help key East Asian countries recover from the economic crisis that had struck the region in mid-1997. The enormous aid package was boosted by the December 1998 announcement of an additional ¥600 billion ($5.5 billion at ¥110=$1.00) loan facility, designed to finance infrastructure projects in cash-strapped East Asia. When overwhelming demand ran the Miyazawa Plan dry in the first half of 1999, Tokyo announced that it would launch a supplementary ¥2 trillion ($18.2 billion) bond-guarantee program, the so-called Second Stage, to meet the extraordinary need for funds.

Through July 1999, roughly $20 billion worth of assistance had been allocated under the Miyazawa Plan alone. The Ministry of Foreign Affairs claims that, to date, Japan has contributed more than $80 billion to help restore growth in Asia. Why would Tokyo spend such a tremendous amount of money to help its reeling neighbors? Policymakers hoped to achieve a number of goals — some stated explicitly, some deliberately less so — with the Miyazawa Plan and its associated programs.

The official line identified regional responsibility and economic links as the key factors behind the Herculean effort. Aid administrators trumpeted that Japan, commanding the region's mightiest economy and aspiring to a greater leadership role, had a duty to help friends in need. Economic interests also were a major factor. In 1996, some 5,600 overseas Japanese affiliates registered sales worth just under $300 billion in East Asia.2 According to the Bank for International Settlements, just before the onset of the mid-1997 crisis, Japanese banks had $123.8 billion in credit extended to Asia. The region also serves as an important overseas market. Even in turbulent 1998, it absorbed 34.7 percent of total Japanese exports — more than the United States did.

Other, more understated objectives also motivated the mammoth rescue effort. The Ministry of Finance, for example, had hailed the Miyazawa Plan as an ideal vehicle for promoting its goal of internationalizing the yen.3 Providing Asia with huge yen loans would, at the very least, increase exposure, recognition and use of the currency outside Japan, or so the thinking went.

Skeptics suggested that the aid package actually represented a scaled-down version of the ill-fated Asian Monetary Fund proposal that had been introduced in 1997 but was quickly shelved due to resistance from Washington and the International Monetary Fund.4 Tokyo may have been keen to prove the utility of the Miyazawa Plan as an alternative bailout fund — one most distinguished by the lack of stringent conditions that often accompanied IMF support. In view of developing an aid plan for next year and considering the more than $80 billion already spent on the East Asian recovery effort, policymakers are taking a hard look at the fruits of their labor and asking the simple question: Did it work?

According to a report compiled by the Mission for Revitalization of the Asian Economy, a task force commissioned in June 1999 by Prime Minister Keizo Obuchi, Japan's aid programs in East Asia were not only effective, they also were well received.5 Specifically, Bangkok, Hanoi and Seoul expressed gratitude for Tokyo's assistance, naming successful projects and identifying significant positive results. The report praised the Miyazawa Plan's quick disbursement of funds, suggesting that expediency was key in providing badly needed relief to the reeling economies of East Asia.

The task force balanced the mostly complimentary review with a few critical remarks, none of which suggested that basic objectives had gone unfulfilled. Instead, the authors made general recommendations for improving various aspects of Japan's aid program in East Asia. For example, they suggested that better publicity would increase understanding and appreciation of Japan's contributions, and greater transparency and more rigorous accounting would help ensure that aid money was used effectively and efficiently. However, barring these relatively minor criticisms, the report's authors essentially concluded that the Miyazawa Plan was a success.

Evidence suggests that Tokyo's aid effort was popular in East Asia, a phenomena largely driven by the fact that, in contrast to IMF support, the bulk of Japanese funds came without conditions pertaining to financial system reform. The availability of an alternative source of financial aid prompted a movement in East Asia that advocated the establishment of a permanent support facility for the region. Although the AMF scheme had been shot down by Western critics, similar ideas began to resurface as confidence was restored to the battered East Asian economies. At the December 1999 summit of the Association of Southeast Asian Nations, leaders from its 10 member nations, the People's Republic of China, Japan and South Korea, agreed to work toward establishing a regional emergency fund. Ideally, according to Asean, it would be financed largely by China, Japan and South Korea and would be used to guarantee bond issues in times of financial crisis.

Asean summit participants also called for a continuation of the Miyazawa Plan, suggesting that it had played an important role in the recovery effort. In the meantime, Tokyo has indicated a willingness to consider establishing a long-term fund geared toward securing currency stability in Asia. However, continuing resistance from the West may throw cold water on any such proposal. The IMF, in fact, confirmed its opposition to the establishment of a Japan-backed Asian fund following the 1999 Asean summit. The international lending body's official position is that having two institutions that perform the same function would not be efficient. Some observers suggest, though, that Washington, the heavyweight shareholder in the IMF, primarily is concerned with maintaining its influence over the global economic system.

Tokyo, therefore, has been careful to qualify its ambitions, suggesting that while Japan would shoulder the "larger share of responsibility" for any Asian financial facility, the United States also should play a role.6 Clearly, the realization of such a fund is a long way off, but the fact that it is even being discussed is significant. Its advocates can claim a victory — unofficially at least — in that the Miyazawa Plan validated the usefulness of an alternative aid fund.

Perhaps the most important testament to the efficacy of the Miyazawa Plan is its contribution to the restoration of economic health in Asia. The plan was introduced chiefly to help the five hardest-hit countries — Indonesia, Malaysia, the Philippines, Thailand and South Korea — and all registered positive growth rates in 1999 (see Table 1). The sense of crisis has lifted, stock markets are humming again and Japanese affiliates in Asia are planning for future expansion.7 Of course, Tokyo's rescue effort is not solely responsible for East Asia's stunning turnaround, but it certainly played a role in facilitating the process.

Table 1: Annual Change in GDP of Countries Hardest-Hit
by East Asian Financial Crisis

1996

1997

1998

1999[1]

2000[2]

Indonesia

7.8%

4.9%

-13.2%

2.0%

4.0%

Malaysia

8.6

7.7

-7.5

2.0

3.9

Philippines

5.8

5.2

-0.5

3.0

4.5

Thailand

5.5

-1.3

-9.4

3.0

5.0

South Korea

7.1

5.5

-5.8

8.0

6.0

[1]Estimate
[2]Forecast

Source: Asian Development Bank

The Miyazawa Plan was not a success in every respect, however. It did little, if anything, to boost the internationalization of the yen. Moreover, the plan was not universally welcomed in Asia. A not-insignificant number of critics charged that Tokyo's aid program was largely self-serving and was geared toward saving overseas Japanese businesses. Furthermore, the fund distribution process was asserted to be slow, unfair and secretive. Certainly, Japan received little credit from the West for its contribution to the region.

More importantly, critics inside and outside Japan began to challenge the fundamentals of Japan's ODA policy. Fallout from the economic crisis threw millions of people in East Asia — a region that typically offers little in the way of social safety nets — into a desperate state of poverty. Soft financing for infrastructure projects would not help the growing masses of unemployed, who were struggling to survive on a daily basis. Indeed, much of the Japanese aid did not reach the grass roots, nor did it help combat the structural deficiencies that had led to a host of social problems. Japan's foreign aid philosophy, shaped from its own postwar experience, traditionally viewed infrastructure and industry as the keys to fostering sustainable growth and development.

This thinking began to change, however, as a result of the East Asian economic crisis. A Foreign Ministry report issued in 1998 — the worst year of the crash — confirmed the evolution at hand:

aaa

This backdrop of change has fostered a fundamental shift in perceptions and ideas about "development," from simple concepts such as per capita [gross national product] or the dichotomy between developing and industrialized countries to broad, multifaceted frameworks with an emphasis on human-centered development, environmental protection, local participation, respect for diverse social and cultural values, gender equality, [nongovernmental organization] participation, and South-South cooperation.8

Thus, the fallout from the East Asian financial crisis prompted aid administrators to view development issues in more humanistic terms. The Miyazawa Plan and its associated assistance programs may have been successful in helping to restore growth to Asia — but only by a macroeconomic yardstick. Although conditions certainly have improved, many of the region's people remain jobless, homeless or hungry. The rescue effort may have brought political triumphs for Tokyo, but whether it helped to "ensure the efficient and fair distribution of resources" or met "basic human needs," goals outlined in Japan's 1992 ODA charter, remains an open question. Indeed, a rethinking about how to best implement the basic philosophy began with the new idea, which stemmed largely from the fallout of the crisis, that traditional approaches to aid may not be appropriate.

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Other Factors Prompted Calls For Reform

The 1990s have been called Japan's "lost decade." The country posted dismal growth rates for most of the 10-year period, even though in an effort to combat chronically weak economic performance, the government increased spending throughout the decade. A series of massive fiscal stimulus packages that have grown larger and more frequent in recent years has pushed the budget deep into the red. Pressure for fiscal retrenchment has affected every area of government operations, including foreign aid. The general account allocation for Japan's ODA program was slashed by 10.4 percent in FY 1998 — the first cut since the Finance Ministry began issuing comprehensive ODA allocations in FY 1976.9 Budgetary concerns have only intensified as the deficit has ballooned to historic levels in recent years. New funding limitations have forced the aid establishment to look for new ways to do more with less.

A major transformation is underway. For the first half of the 1990s, the annual allocation for ODA was increased by a greater percentage than such other budget elements as defense, public works and social security. However, Japan was much less prosperous in the later half of the decade. In an effort to adapt to leaner times, MOFA introduced a new perspective. Effectively summarized in a 1998 Foreign Ministry report, the idea was simply to shift the emphasis to quality from quantity.10

Budgetary constraints remain an important concern and have forced aid administrators to completely reexamine ODA policy. Nihon Keizai Shimbun, Japan's leading business daily, recently editorialized that "the growing clamor for a review of the amount and nature of [Japan's foreign aid] requires a major conceptual shift in the face of tougher financial budgets."11

Waning domestic support, an interrelated factor, also has amplified the calls for fundamental reform. According to a government opinion poll taken in 1998, a record-low 28 percent of respondents favored expanding foreign aid.12 Those calling for cutbacks in aid reached a record high of 18.5 percent, up 10.5 percent from 1991. Of this group, 75.3 percent cited poor domestic economic performance as the reason for their sentiments.

With their constituencies complaining about generous foreign aid, politicians also have put the pressure on. Members of the ruling coalition — the Liberal Democratic Party, the Liberal Party and the New Komeito — eager to boost Japan's image as a good global citizen, had been ardent supporters of efforts to help the developing world. But, their enthusiasm, too, has tapered off as controlling spending has taken on a greater urgency. Aid officials must deal with "what looks like growing popular indifference, or even outright hostility, toward foreign aid as the deteriorating state of the nation's treasury mandates long-term fiscal retrenchment."13

Adding fuel to the fire, a MOFA report released last June found that roughly 40 percent of its aid projects were poorly managed.14 The report was compiled from data from FY 1997 MOFA sources, outside research institutes and other experts. Surprisingly, problems were identified in 42 of the 107 projects reviewed. One water-pipe construction project in Thailand even was declared a virtual failure. The report concluded that poor maintenance or management stemmed from shortfalls in engineering expertise and budget contributions by governments or agencies receiving Japanese funds. Deficient internal distribution systems, which led to a lack of necessary materials and spare parts, also posed significant problems. Such equipment shortages affected hospital, farm and sanitation projects.

Sources outside of the Japanese government also have been catalysts in reform efforts. A recent report by the Development Assistance Committee, the foreign aid coordinating agency for the Paris-based Organization for Economic Cooperation and Development pinned hopes on a new overall strategy to "provide a basis for the reorientation of Japan's aid policies and management."15 The DAC recommended a new set of priorities, many of which actually were adopted by Tokyo, including strengthening the administration, prioritizing crosscutting issues and implementing monitoring procedures.

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Future Directions And New Priorities

With the East Asian financial crisis fresh in their minds, MOFA policymakers have spelled out a number of new priorities and directives to guide the formulation of Japan's future ODA policy. Most significantly, efforts will focus on serving Japan's national interest, protecting the environment, alleviating social problems in recipient nations and ensuring efficient utilization of funds. Such goals were specified first in the "Midterm Policy for ODA," a major periodic review released in August 1999, which outlines a five-year aid plan for government administrators.16 The report highlighted the need to use Japan's assistance programs to promote national and diplomatic interests — an implicit objective that rarely had been stated so bluntly in an official publication. Because Japan is resource-poor and dependent on foreign suppliers for energy and food, the report's authors explained, assisting developing countries contributes to domestic security and prosperity. Such a view of ODA provides an official underpinning for greater focus on regional concerns and return on investment, without excluding direct payback to the Japanese economy through tied-aid programs that require that assistance funds be used to procure services and equipment from Japanese suppliers.

In accordance with this line of thinking, the report recommended that more funds be channeled to East Asia, a region of tremendous importance to Japan, both in political and economic terms. Notably, because Asia has been the main focal point for Japanese aid for the last three decades, this "new" strategy would not represent a strong break from the past (see Figure 1). Moreover, as a result of the economic crisis, Japanese aid to East Asia already had increased dramatically in 1998, jumping a whopping 71 percent from 1997. Continuing the trend last year, the Miyazawa Plan and its associated programs siphoned billions of dollars into the region via soft loans and other facilities. Predictably, Mr. Obuchi's recent task force on aid echoed the importance of such focus in its September 1999 report, which concluded that a steady stream of financial assistance to East Asia would be necessary to ensure a solid recovery.17 Clearly, the region has been and will remain a priority for Japan's aid program.

In an effort to serve Japan's national interest, Tokyo also may continue to provide significant financial assistance on a tied basis. This requirement boosts domestic business and helps win support at home for foreign aid in a time of economic difficulty. Internationally, however, the consensus against tied-aid programs has been growing. The OECD's DAC has been trying to build support for new regulations that would prohibit attaching strings to aid, at least in the cases of the poorest nations.

Ironically, Tokyo until recently had been a major source of momentum for the effort to untie aid, gradually phasing out its own tied aid programs in the 1990s (see Figure 2). However, the introduction of the ¥600 billion ($5.5 billion) loan facility, which requires borrowers to procure equipment and services from Japanese firms, reversed the trend. Domestic pressures, stemming largely from frustrations with sluggish economic performance, drove foreign aid administrators to reintroduce tied-aid programs. With prospects for recovery still uncertain and new aid priorities aimed at better serving the national interest, more tied-aid programs may be in the offing.

Another area of growing significance is the environment. In September 1999, the Export-Import Bank of Japan, a quasi-governmental financial institution that played a major role in the implementation of the Miyazawa Plan, compiled environmental guidelines that will be used to qualify support for private investment in developing nations. The guidelines require prospective loan recipients to submit environmental impact assessments for projects located in tropical rain forests, coral reefs and other precious natural areas, and in regions where ethnic minorities with unique cultures reside. The Japan Bank for International Cooperation, the result of an October 1999 merger of the Ex-Im Bank with the Overseas Economic Cooperation Fund, will decide whether or not to extend financial help on the basis of such assessments. The new focus on environmental issues, a priority also highlighted in MOFA's five-year plan, will extend throughout Japan's aid program.

In order to emphasize the human side of development, Tokyo will channel more resources into such sectors as health and education. Less money will allocated for expensive infrastructure projects, leaving more for social needs. In short, instead of funding the construction of new dams, bridges and transportation networks, Tokyo will focus on building social safety nets, such as unemployment insurance, and will contribute to poverty-reduction programs. Future projects will cover basic education, welfare, women's independence, cultural exchanges, democratization efforts and Japanese-language education. Technical assistance also will be boosted in conjunction with these efforts.

In response to growing criticism that aid funds too often are misappropriated or squandered, Tokyo will launch a set of initiatives aimed at improving efficiency and transparency. First, better monitoring procedures will be put in place to ensure that projects remain on track before, during and after completion. This new system will be a marked improvement over the current one, in which aid projects are not evaluated until two to four years after completion. Moreover, evaluation criteria will be based on cost-benefit analyses, such as those used by the Ministry of Construction to select public works projects.

Second, internal administrative reforms will streamline the complex aid bureaucracy, an effort reflective of the broader, governmentwide initiative to slim down that has been underway for some time (see JEI Report No. 27B, July 16, 1999). The Foreign Ministry, a key aid organ, will reorganize its divisions and establish new sections along geographic lines to better meet the developmental needs of the various regions of the world. Another significant change already has occurred in the establishment of the JBIC from the merger of the Ex-Im Bank and the OECF. The newly created JBIC, it is hoped, will combine knowledge, operational expertise and global networks to produce a synergistic effect that will increase efficiency.

Third, Tokyo will strengthen cooperation with nongovernmental organizations. The objective is to promote assistance at the grass roots by increasing subsidies for NGOs, which often are involved in helping citizens on an individual basis. Moreover, such organizations are credited with playing an important role in humanitarian activities.

Tokyo will apply and test these new priorities in FY 2000. Various structural changes and greater focus on specific areas are expected to bring significant improvements, which, in turn, should bolster support and popular interest in Japan's aid programs.

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Aid Budget And New Initiatives

Last December, the cabinet approved an ¥85 trillion ($772.7 billion) general account budget for FY 2000 (see JEI Report No. 1B, January 7, 2000) that included a ¥1.1 trillion ($10 billion) allotment for official development assistance. The new aid figure marks a 0.2 percent decline in yen terms over the previous fiscal year, but, according to Japanese officials, it represents a 14 percent increase in dollar terms because of exchange rate movements. Outlays for FY 1999 were calculated at ¥120=$1.00, whereas ¥105=$1.00 was used for FY 2000. Although such a comparison is not precise, on the whole, poor countries certainly will get more bang for the development yen this year than last. Moreover, against a background of significant fiscal strain and diminishing domestic support for foreign aid programs, it is not surprising that the aid budget sustained a tiny cut. What is perhaps more noteworthy is the fact that the reduction amounted to only 0.2 percent.

The new government plan channels money into several of the designated priority areas. Under the plan, the World Bank and the Asian Development Bank will each get ¥10 billion ($90.9 million) to finance social development and poverty-alleviation projects, mainly in East Asia. The budget also earmarked ¥500 million ($4.5 million) for grants to support NGOs working in countries hit by war or natural disaster. The budget allocated ¥1.8 billion ($16.4 million) for a new form of grant-in-aid assistance to promote clean energy, raised environment and social development outlays to ¥12 billion ($109.1 million), expanded forestation grants to ¥2.4 billion ($21.8 million), boosted aid for land-mine removal to ¥2.7 billion ($24.5 million) and increased grants for child welfare to ¥6 billion ($54.5 million). In addition, Tokyo prioritized a host of so-called tangible initiatives, expanding allocations for the development of human resources, helping foreign students in Japan and sending senior volunteers overseas. More generally, the budget plan called for improved efficiency by formally introducing a system for assessing ODA projects before and during completion.

The Foreign Ministry's allocation actually increased roughly ¥2 billion ($18.2 million) in FY 1999 to ¥560 billion ($5.1 billion) (see Table 2). Two priority areas, senior volunteers and grant-aid scholarship programs, received a significant boost while the budget for food-related assistance sustained the largest percentage cut.

Table 2: Ministry of Foreign Affairs Official Development Assistance,
Budget for FY 1999-FY 2000

(in billions of yen)

FY 1999

FY 2000

Change

Japan International Cooperation Agency

¥177.0

¥179.2

1.2%

aaaTechnical Training

25.0

24.8

-0.7

aaa Youth Invitation

2.5

2.5

-0.3

aaa Dispatch of JICA Experts

18.6

18.4

-1.2

aaa Dispatch of Japan Overseas Cooperation Volunteers

19.5

21.5

10.1

aaa aaa Senior Volunteers

0.6

2.7

337.0

aaa Other

111.3

112.0

0.6

aaa aaa Safety Measures

0.7

1.2

68.0

Grant Aid

237.9

240.5

1.1

aaa Budget for Economic Development Assistance

199.8

207.9

4.1

aaa aaa General Grant Aid

178.6

180.3

1.0

aaa aaa aaa General Projects

114.2

112.3

-1.6

aaa aaa aaa Child Welfare

5.2

6.0

15.4

aaa aaa aaa Land-Mine Removal and Victim Assistance

2.2

2.7

22.7

aaa aaa aaa Environmentally Friendly Energy

--

1.8

n.a.

aaa aaa aaa Soft Component Support

--

8.0

n.a.

aaa aaa Grant Aid for Debt Relief

33.0

36.0

9.0

aaa aaa Nonproject Grant Aid for Structural Adjustment

24.2

22.7

-6.2

aaa aaa aaa Environment and Social Development Programs

9.0

12.0

33.3

aaa aaa Grant Assistance for Grass-Roots Projects

7.0

8.5

21.4

aaa aaa Grant Aid for Scholarship Programs

0.3

0.8

220.0

aaa Grant Aid for Fisheries

9.2

9.6

4.3

aaa Cultural Grant Aid

2.3

2.8

21.7

aaa Emergency Grant Aid

9.7

15.2

56.7

aaa aaa Assistance for NGO Emergency Relief Activities

--

0.5

n.a.

aaa Budget for Food-Related Assistance

38.1

32.6

-14.5

aaa aaa Food Aid

12.7

11.2

-11.9

aaa aaa Grant Aid for Food-Production projects

25.4

21.4

-15.8

Contributions to Multilateral Organizations

72.6

71.6

-1.4

Other

70.8

69.0

-2.5

Total MOFA Budget

558.2

560.2

0.4

Note: Figures may not add up to totals due to rounding.

Source: Ministry of Foreign Affairs

Other important aid initiatives, not associated with the budget plan, also are being discussed. Last November, for example, a senior member of the ruling Liberal Democratic Party proposed that Asian nations create a $100 billion fund that would be available to stabilize regional currencies in times of financial crisis. He argued that Japan should provide half the financial backing because the stabilization of Asian currencies would help increase the use of the yen in international business transactions without invoking resistance from other countries in the region. In January, a special economic and financial recovery task force commissioned by Mr. Miyazawa met for the third time to discuss the possibility of creating an alternative to the IMF. Discussions centered on the establishment of a regional fund that would disburse emergency loans quickly and unconditionally. Insiders say that the task force, which will release a final report by June, may recommend that the AMF idea be revived.

In another development, MOFA announced in January, as part of the effort to increase disclosure and transparency in Tokyo's aid program, the establishment of an advisory panel to review its yen-denominated soft-loan facility, the key component of Japan's ODA program. In FY 1998, Japan provided ¥1.1 trillion ($10 billion) in soft loans for 79 projects; those in Asia accounted for 91.5 percent of disbursements. The panel will conduct a six-month investigation of ways to increase the efficacy of soft loans.

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Conclusion

In the early 1990s, Japan emerged as the world's largest donor country, and, with that distinction, came an inherent obligation to set an example for the community of rich nations. When the East Asian financial crisis struck, Tokyo played its role as the good global citizen and assembled a mammoth rescue package for the region. Recently, however, domestic support for foreign aid has waned in the face of economic difficulties, and reviews and public commentary have highlighted a number of concerns about Japan's aid program. As a result, policymakers have created new set of priorities for the 21st century and are rethinking the meaning of "development."

Because Japan's ODA program is a key instrument of its foreign policy, the reform process and its eventual outcome will be critical. A more effective ODA program not only would benefit recipient countries but also would boost Japan's geopolitical standing. Indeed, foreign aid is, in spirit and in practice, an expression of a nation's character as a member of the international community. This fact is especially true for Japan, a country that relies almost entirely on diplomacy to achieve its foreign policy objectives.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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Notes
aaa

1aa See Marc Castellano "Japanese Foreign Aid: A Lifesaver For East Asia," JEI Report No. 6A, February 12, 1999 and "Two Years On: Evaluating Japan's Response To The East Asian Financial Crisis," JEI Report No. 30A, August 6, 1999. Return to Text

2aa Ministry of International Trade and Industry, White Paper on International Trade 1999, Executive Summary (Tokyo: May 1999), p. 17. Return to Text

3aa See Marc Castellano, "Internationalization Of The Yen: A Ministry Of Finance Pipe Dream?" JEI Report No. 23A, June 18, 1999. Return to Text

4aa See Eric Altbach, "The Asian Monetary Fund Proposal: A Case Study Of Japanese Regional Leadership," JEI Report No. 47A, December 19, 1997. Return to Text

5aa Ministry of Foreign Affairs, "Report of the Mission for Revitalization of Asian Economy: Living in Harmony with Asia in the Twenty-first Century," November 1999. Available at http://www.mofa.go.jp/policy/economy/asia/mission99/index.html. Return to Text

6aa "IMF Says It Opposes Creation Of Asian Monetary Fund," Nikkei Net Interactive, December 9, 1999. Available at http://www.nni.nikkei.co.jp. Return to Text

7aa See Marc Castellano, "Japanese Affiliates in Asia: There To Stay," JEI Report No. 36A, September 24, 1999. Return to Text

8aa Ministry of Foreign Affairs, "Council on ODA Reforms for the 21st Century Final Report," 1998. Available at http://www.mofa.go.jp/policy/oda/reform/report21.html#11. Return to Text

9aa See Eric Altbach, "Japan's Foreign Aid Program In Transition: Leaner, Greener — With More Strings Attached," JEI Report No. 5A, February 6, 1998. Return to Text

10aa MOFA (1998), op. cit. Return to Text

11aa "Japan, World's Top Donor, Must Review Foreign Aid," Nikkei Net Interactive, October 27, 1999. Available at http://www.nni.nikkei.co.jp. Return to Text

12aa Keizo Nabeshima, "ODA helps Japan, the World," The Japan Times, August 31, 1999. Return to Text

13aa Masahiko Ishizuka, "Foreign aid program needs talented staff," The Nikkei Weekly, September 6, 1999. Return to Text

14aa "Problems Found With 40% of ODA Projects," Nikkei Net Interactive, July 23, 1999. Available at http://www.nni.nikkei.co.jp. Return to Text

15aa Development Assistance Committee, Development Cooperation Review Series, Japan, No. 34 (Paris: Organization for Economic Cooperation and Development: 1999). Return to Text

16aa See Ministry of Foreign Affairs, "Japan's Mid-Term Policy on ODA: Explanatory Notes," 1999. Available at http://www.mofa.go.jp. Return to Text

17aa MOFA (1999), op. cit. Return to Text

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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