Japan to shift aid focus from China to
India By Purnendra Jain
ADELAIDE - Japan is set to make a historic
economic and political policy decision, shifting its
foreign aid focus away from China - and to India.
For many years China has been the top recipient
of Japan's Official Development Assistance (ODA) that
symbolized Japan's economic commitment and political and
diplomatic closeness to its powerful Asian neighbor. As
recently as 2000, China received some 214 billion yen
(US$2 billion) in loans as part of Japan's ODA, while
India remained on the periphery of Japan's foreign-aid
program; at that time Tokyo had just resumed its yen
loans to New Delhi, which had been suspended to
demonstrate strong disapproval of India's nuclear tests
in 1998.
But this equation is changing fast. If
proposed changes in Japan's ODA budget allocations are
approved at the political level, China is certain to
slip into the No 2 position and India will emerge as the
leading recipient of Japan's ODA loans in 2004. China is
likely to receive only 100 billion yen in 2004, about 20
billion less than last year - the total loan will be
less than half the amount Beijing received in 2000. This
is a steep decline. On the other hand, India is certain
to receive an amount similar to what it received last
year, or even a little more, which will be in excess of
111 billion yen.
An announcement is expected by
the end of the month.
Why this
shift? Criticism of Japan's aid policy as being
devoid of a philosophy, the misappropriation of aid
money in recipient countries, and political scandals
within Japan forced policymakers to address these issues
through policy change. Moreover, cuts in the ODA budget
every year since 2000 - the total budget in fiscal 2002
was $9.1 billion - have also prompted Japan to review
its aid policy and set new priorities both in aid-funded
projects and country focus. To this end, the government
has established several commissions and advisory panels
consisting of politicians, officials, business leaders
and academics that have proposed numerous
recommendations. A better balance between China and
India is one of the aims of Japan's new direction in its
aid policy.
The shift is no doubt an important
milestone in Japan's foreign-aid policy. India was the
first recipient of Japan's yen loans when this policy
was implemented in 1958. But slowly, India's position
declined over the years and countries such as Indonesia
and China became the leading recipients of Japan's ODA
in Asia. Cold War conditions saw Japan's and India's
strategic interests drift apart, and led to a consequent
fall-off in economic and diplomatic relations between
Tokyo and New Delhi. On the other hand, China continued
to rise in prominence in Japan's overall economic,
diplomatic and strategic considerations after Beijing
and Tokyo signed a treaty of friendship and cooperation
in 1978.
With India's recent sustained economic
growth, its technical preeminence globally, especially
in the information-technology sector, and its diplomatic
activism, particularly as a key player in the Group of
20 developing countries, and its push to secure a place
as a permanent member of the United National Security
Council in recent years, many countries are forced to
sit up and take notice of India. Japan is no exception.
One way to win back India's heart, hurt deeply in 1998
by Japan's policy response after the nuclear tests, is
via its aid policy. Policymakers in Tokyo are convinced
it's high time to strengthen diplomatic ties with India.
While China will undoubtedly feel a little
disappointed with the continuous decline in Japan's flow
of yen loans for infrastructure and other national
projects and, more important, because of its status
change from No 1 to No 2, Beijing is aware that it
commands an overwhelming position in the minds of
Tokyo's policymakers. China is a key player in Japan's
recent economic recovery, and it is unlikely that Tokyo
will intentionally make any policy that would upset the
Chinese leadership.
Indeed, Beijing should take
this development as a compliment. Japan's aid reductions
to China are based on the assessment that China no
longer requires Japan's financial assistance as much as
it once did. In Japan's analytical framework, China's
economy has matured and the country is now able to fund
many of its infrastructure projects without support from
Japan. Of course, China is not the first country to have
seen this transition. There are other cases in Asia,
such as South Korea and Singapore, which initially
received development aid from Japan but with the growth
in their economies they no longer required Japan's aid.
Indeed, some of them are now members of the Organization
for Economic Cooperation and Development and aid donors
in their own right.
The ODA priority shift from
China to India does not reflect Japan's policy shift in
other areas. Japanese investment in China continues to
rise and two-way trade is increasing, reaching a level
last year never seen before. India still languishes both
in trade and investment areas. It will be decades before
the level of Japanese investment and trade with India is
as high as with China. Indeed it may not reach that
level at all.
The subnational
factor It is not just the national government and
business leaders who regard China as a key and
influential player for many years to come, Japan's
subnational governments and local leaders have also
realized the importance of China for their industries
and future economic well-being.
In recent years,
a large number of Japanese prefectural and city
governments have opened their offices in Chinese
provinces and cities. Their numbers are ever rising and
some Japanese local governments are even closing their
offices in countries such as Singapore and Thailand and
relocating them to Chinese cities and provinces.
More than just in the area of economic linkages,
subnational governments of Japan and China are forging
strong ties in educational, cultural and scientific
fields through sister-city agreements, whose numbers are
increasing by the year.
While currently there
are some 256 official sister-city agreements between
Japanese and Chinese subnational governments, there is
only one between India and Japan, formed as far back as
in 1965. The first sister-city link between a Japanese
and a Chinese subnational government was formed as late
as 1973, and that number has now gone above 250. The
Council of Local Authorities for International Relations
- a national body in charge of promoting international
linkages at the grassroots level - has offices in
Beijing and Singapore, but none in South Asia. India
appears nowhere on its radar screen.
Moreover,
there are close to 40 offices of Japan's local
governments in different locations in China, seeking
business for their local companies, facilitating
investment and coordinating cooperative projects. But
there are no such activities in India.
The
national government's ODA program should not be regarded
as the only indicator of government aid and assistance
in a bilateral relationship. Japan's subnational
governments now offer a range of assistance to their
Chinese counterparts, what can be easily regarded as a
"local ODA" program. Japan's local governments have
knowledge and expertise in areas such as city planning,
transportation, the curbing of industrial pollution,
environment management, garbage disposal, sewage and
water supply, all of which can be highly useful to
Chinese localities. Japan's localities are willing to
transfer these skills and know-how, and their Chinese
counterparts are embracing them. The Indian side neither
courts such assistance nor do Japanese local officials
have any such proposal for Indian cities.
A
strong bilateral relationship in the future will not
just be based on how much money a country doles out to
another, but long-lasting friendly relations even in
times of stresses and strains will be those whose
foundations are based on solid ties at the grassroots
and popular level. On this measure, China by far leads
others in Asia in its relations with Japan.
While India may take some comfort in becoming
the No 1 destination of Japanese yen loans, this does
not necessarily signal a close and intimate relationship
between the two.
But change, even if small and
symbolic, does matter in international relations.
Purnendra Jain is a professor in the
Center for Asian Studies at Australia's Adelaide
University and president of the Japanese Studies
Association of Australia.
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