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SPEAKING
FREELY
Japan to reverse decline in development
aid
By Hussain Khan
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
Please click here if you are
interested in contributing.
TOKYO -
Japan, increasingly concerned about continuing political
and economic stability in the world and particularly in
Asia, is reversing a six-year trend of reducing its
official development assistance The foreign ministry has
asked the Diet (parliament) for substantially increased
funds to aid poorer nations.
Tsunedo Nishida,
deputy vice minister for foreign policy in the Foreign
Ministry, said the focus of Japan's official development
assistance (ODA) program would continue to be Asia.
"Japan is an Asian country, and the growth of Asian
neighbors is both strategically and economically
important. Volatility in Asia - such as the tension on
the India-Pakistan border, in Afghanistan and in
Indonesia - deeply concerns the international
community," Nishida said. "Japan's ODA can have an
important role in stabilizing the region."
For
the fiscal year beginning in April 2004, the Foreign
Ministry's request for budgetary allocations on official
development assistance reached 593 billion yen, up 14.9
percent from fiscal 2003. Grant aid accounts, which
cover 250 billion yen of the total, are up 31.9 percent
from the current year.
In the face of a
persistently weakening economy, Japan, once the world's
biggest ODA donor, since 1997 has continued to cut its
aid budget. In the current fiscal year its budget for
the foreign ministry fell by 4.2 percent to 516 billion
yen, after it was cut by 3.2 percent from the previous
year. The development assistance budget for the Japanese
government as a whole was slashed by 10 percent in
fiscal 2002 and by another 5.8 percent in the current
fiscal year, to 858 billion yen. Japanese Foreign
Minister Yuriko Kawaguchi said the country's aid for
developing assistance has been cut by some 27 percent
over the past six years even though other industrialized
nations are increasing their aid.
The ministry
is asking for 65 billion yen to pay for emergency grant
aid to war-torn countries - mainly Iraq and Afghanistan.
The request is six times larger than for the current
year. In April, Japan pledged to provide up to US$100
million, or about 1.2 billion yen, worth of financial
support to help rebuild Iraq. In January 2002, Japan
vowed to offer 6.5 billion yen in aid to Afghanistan
over two-and-a-half years following the US-led military
operation in the country.
In the fiscal 2004
budget request, the ministry is also asking for 29
billion yen for grants aid to prevent regional conflicts
and promote peace.
In Afghanistan, expectations
of aid from Japan are very high, especially that
earmarked for infrastructure development, according to
the Japanese ambassador to Afghanistan, Kinichi Komano.
While Japan's initial aid plan for Afghanistan focused
on health, education and other humanitarian concerns,
Tokyo will also help build infrastructure and improve
security, Komano said.
Japan donated $15.32
billion in official development assistance to developing
nations in 1999, then the world's largest contributor
for the ninth year in a row. The 44.0 percent
year-on-year increase was the highest since 1969, and
attributable to both the rising yen and Tokyo's massive
fund injection to quell the 1997-98 Asian financial
crisis.
Japan started special yen loans in
fiscal 1998 to support the East Asian economies after a
series of financial-system crises hit the region. At the
time, its plans were to extend loans of up to 600
billion yen over three years. But less than half the
projected amount was actually lent out, and the period
of the special yen loans has been extended from July.
In 2002, Japan had to give up its title as top
ODA spender for the first time in 11 years after having
been the top ODA donor since 1991. After the September
11, 2001, terrorist attacks on the United States, both
the US and the European Union announced they would
increase their budgets for ODA, citing the importance of
financial support for developing countries to prevent
terrorism.
According to a report compiled by a
committee of the Organization for Economic Cooperation
and Development on May 13, Japan's economic aid to
developing countries fell 28.4 percent year-on-year to
$9.67 billion, while the U.S. increased ODA by 9.3
percent to $10.88 billion, reclaiming the No 1 position.
Germany ranked third with $4.87 billion, while the
United Kingdom, France and the Netherlands followed.
Developing countries have been pointing to a
1980 United Nations resolution that requires developed
countries to allocate the equivalent of 0.7 percent of
gross domestic product (GDP) to ODA programs. The
percentage for Japan was a mere 0.35 percent in 1999.
Although Japan has not set a deadline to achieve the 0.7
percent goal, it cannot easily ignore the resolution
because the country approved it.
During the
Mexico summit, the US pledged to increase its aid budget
by $5 billion, or 50 percent, over the next three years.
The European Union said it would raise the ratio of its
aid budget against its gross national product to 0.39
percent from the current 0.33 percent by 2006.
The economies of the East Asian countries have
grown dramatically, partly fueled by aid from Japan. ODA
is an important diplomatic tool for Japan, which does
not have military power. Japan has built good relations
with Asian, African and other countries though ODA
disbursement.
However, Indonesia, which receives
the largest amount of aid from Japan, turned down for
more than two years special yen loans for a natural gas
pipeline project. Although Indonesia recently agreed to
the "tied loans", which require giving Japanese
companies orders for the project, the loans will give
only scant benefit to local companies.
Petrochemical, powerplant and other projects in
Indonesia that were carried out after receiving loans
from Japan have been in the red. During the reign of
now-deposed president Suharto, Japanese companies
working on these projects charged more than twice the
international standard. President Megawati
Sukarnoputri's administration argues that Japanese
companies charge unreasonably high fees for construction
and consultation, although interest rates on yen loans
are set relatively low.
Japan extended more than
$1.22 billion in aid to China in 1999, making that
nation the second-largest recipient of Japanese aid
after Indonesia, In contrast with Indonesia, China is
using loans actively to expand its presence in the world
community. But the panel, composed of economists and
other academics, urged the government to rethink its ODA
policy in light of the fact that China is spending a
large amount to fortify its already powerful military.
Cutting off the aid should be an option if China
continues to expand its military, the report also said.
Then-finance minister Masajuro Shiokawa said Japan plans
to reduce ODA to China and other nations with nuclear
weapons. "It makes no sense to extend assistance to a
country that might attack Japan with atomic weapons," he
said. But these fears have now evaporated, as China has
recently embarked upon a policy of reducing the number
of its military personnel over the year.
Japan
is Sri Lanka's largest ODA donor, accounting for 45
percent of the country's development assistance,
according to a Sri Lankan government dignitary, who
recently visited Japan.
"Central to our future
is Japan," Philippine President Gloria Macapagal-Arroyo
stressed during her last visit to Japan, in reference to
her country's No 1 source of ODA, its second-largest
trading partner and a major source of its tourism.
To promote peace and prosperity on the Korean
Peninsula, Japan should provide a comprehensive package
of official development assistance that covers the
entire peninsula, says Kim Young-ho, economist and
former minister of commerce, industry and energy of
South Korea. Japan should compile an official
development assistance plan for the Korean Peninsula
like the US Marshall Plan for Europe after World War II.
Japan suspended yen loans for new projects in
Pakistan and India after they conducted a series of
nuclear tests in May 1998. Japan had frozen such ODA as
new yen loans and fresh grants-in-aid other than those
for humanitarian purposes. As of the end of fiscal 1999,
aid to India totaled 2.11 trillion yen and the amount to
Pakistan stood at 1.08 trillion yen.
In a
meeting in New York last year, Japanese Prime Minister
Junichiro Koizumi told Pakistani President General
Pervez Musharraf that Japan is ready to increase
billions of yen in economic aid to Pakistan while urging
the Pakistani leader to promote democracy in the
country, a Japanese official said.
Apart from
the yen loan, Koizumi also told Musharraf that Japan
will keep a promise made last year to provide a total of
$300 million in financial aid to Pakistan by October
2003. Tokyo announced the plan in November 2001 in a bid
to help boost Pakistan's economy as part of its
cooperation with the United States to fight terrorism.
Hussain Khan holds a master's degree
in economics from Tokyo University, and worked for a
German bank subsidiary selling Japanese stocks to
institutional buyers in Japan, the Middle East, Europe
and the United States. He is an analyst on current
affairs and economic issues for various newspapers and
magazines. E-mail: hk@ourquran.com
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
Please click here if you are
interested in contributing.
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