1) Japan’s ODA Policies and Methods of Implementation
(ii) The Period 2: Prelude Stage as ODA Donor (mid 1960s to early 1970s)
① DAC Membership of Japan
Japan’s Active Participation in DAC (1961), IDA (1960), AsDB (1966).
(Inter-American Development Bank in 1974 and African Development Bank in 1964)
② Successful Economic Growth and Japan’s ODA Share
Economic Growth of More than 10% per annum during 1960s (In 1965, International Trade Consolidated Surplus Trend). Accordingly,
Japan’s Burden Sharing Expected.
③ Japan’s ODA Expansion and Asian Bias Gradual Expansion of ODA.
ODA together with Japan’s War Reparation as Japan’s Economic Policy (Export Market and Export Promotion).
(iii) The Period 3: Foundation Stage as ODA Donor (early 1970s to 1977)
① Natural Resources Security
Oil Crisis in 1973 and ODA to Oil Producing Arab Countries. From Asia to the Middle East Countries.
② Quality Upgrading of ODA
Expansion of Grant Aid. Softening of Aid Conditions (Yen Loan in Particular). Diversification of Aid Forms.
The Second Mid-Term Target (1981 to 85): 5 Year Doubling Plan in Net Disbursement and US$ Term. ODA Reached $ 18.1 Billion which was 86% of the Target $ 21.36 Billion.
The Third Mid-Term Target (1986 to 92): 7 Year Doubling Plan in Net Disbursement and US$ Terms. ODA Target of US$ 40 Billion
was Attained in 1987, 5 Year Earlier than the Target Year 1992.
The Fourth Mid-Term Target (1988 to 92): 5 Year Doubling Plan. In 1992, ODA Reached US$ 49.7 Billion, Which Was 99% of the Target.
Japan Became No.1 Donor Nation in the World in 1989.
(iv) The Period 4: Expansionary Stage as ODA Donor (1978 to Late 1980s)
① ODA Mid-Term Target (ODA Policy)
The First Mid-Term Target (1978 to 80): 3 Year Doubling Plan in US$
Term, ODA Reached $ 3.34 Billion in 1980 which was above the Target $ 2.86 Billion.
(v) The Period 5: Japan as No.1 ODA Donor (throughout 1990s)
① The Fifth Mid-Term Target and The Mid-Term Policy on ODA
The Fifth Mid-Term Target (1993 to 97): 5 Year Expansion Plan. The Target was US$ 70.0 Billion to US$ 75.0 Billion, which was Resulted
in only 84% (on the $ 70.0 Billion basis) and 78% (on the $ 75.0 Billion basis).
In Place of the Mid-Term Target, The Mid-Term Policy on ODA was Formulated as the Japan’s ODA Policy without Financial Target
Figures of ODA in 1998.
Japan was No.1 Donor in the World from 1991 to 2000
② ODA Charter
In order to Penetrate Japan’s ODA Philosophy in Japan and in the
World at Large, the (First) ODA Charter was Announced in 1992.
(vi) The Period 6: ODA Review Stage (2000 Onwards)
① Downwards Trend in ODA Volume
The Japan’s ODA Budget Reached its Peak ¥ 2.0 Trillion in 1997 and Continues to Decrease to the Present.
② Japan’s Trinity Documents of ODA: ODA Charter, Mid-Term Policy on ODA and Country Assistance Program
>The ODA Charter: the ODA Philosophy
>The Mid-Term Policy on ODA: The ODA Policy
>The Country Assistance Program: The Specific Programs/Projects in relation to Japan’s Priorities.
③ The Second ODA Charter (2003) and The Second Mid-Term Policy on ODA (2005)
(2) Implementation of Japan’s ODA (i) Japan’s ODA Budget
① Resources
General Account and Bond Issue (in Place of Trust Fund Bureau) Since 2002.
② Trend in General Account for ODA (General Account and Operational Account) (Figure 1)
Downwards trend since 1997 (Peak Year, ¥1.17 trillion).
③ ODA Budget Appropriation and Ministries in Charge
Financial Assistance (Yen Loan): Ministry of Finance (MOF), Ministry of Foreign Affairs (MOFA) and Ministry of Economy, Trade and Industry.
Technical Assistance and Financial Assistance (Grant): MOFA and Other Ministries Concerned (13 Ministries and Agencies).
Subscription and Contribution to International Development Organization:
MOF for MDBs and MOFA for UN & UN Agencies.
(ii) Implementation Methods of Japan’s ODA
① Particular Characteristics
“Request Principle”.
② Responsibility and Obligation between Japan and Recipient Country vis-à-vis Project
Co-operation between two Counties: the responsibility and
obligation is stipulated in “Pledge/Prior Notification, Exchange of Notes and Loan Agreement.
Who decides project assistance ? Who implement the project ? Who owns the project ?
Who is responsible for project O & M ?
Who undertakes the post-evaluation of the project ?
(iii) ODA Implementation Processes
① Financial Grant Assistance
Request to Japanese Government
Project Review and Selection
Preliminary Survey
Project Appraisal
Cabinet Decision and
Exchange of Notes
Project Implementation
Detailed Design
Tendering
Tender Document
Selection of Contractor
Construction
Project Completion
Post-Eveluation and Follow-up Figure 2 Implementation Process of Financial Grant Assistance
② Technical Assistance
Basic Survey
Follow-upExtension of R/D
T/ACompletion Continuation of T/A Figure 3 Implementation Process of Technical Assistance
Request for Dispatch of Experts, Acceptance ofTrainees, Supply of Machines/Equipment, etc.
Dispatch of Experts, Acceptance of Trainees, Supply ofMachines/Equipment, etc.
Implementation of T/A Mid-TermReview
Post-Evaluation Request for T/A Project
Pre-Implementation Assessment (PIA)
Specialist/Consultant for PIA
Conclusion of Record of Discussion(R/D)
③ Financial Loan Assistance (Yen Loan/Yen Credit)
Government Mission and/or
JICA Mission
Hearing from Other Ministries
Concerned
Request to Japanese Government
Japanese Embasy in Developing
Country
Project Appraisal by
JICA
Aid Proposal by Foreign Ministry
of Japan
Consultation/Scr utiny of 3 Ministries Concerned
Prior Notification by Foreign Minister
or Ambassador
Post-evaluation of Project
Completion of Project
Disbursement/P ayment to Contractor in
Accordance with Project Progress
Implementation/
Construction of Project
Conclusion of Contract between Successful Bidder and Contractor
Decision of Successful Bidder
International Bidding
Conclusion of Loan Agreement between JICA
and Government of Borrower Country Signing of Exchange of Notes between Foreign Minister/Ambassador and Government of Borrower
Country
Examination of Exchange of Notes by Cabinet Meeting
Cabinet Decision Figure 4 Implementation Process of Financial Assistance (Yen Loan Project)
(iv) Towards More Effective ODA
① Intensive Pre-investment Studies
Technically High Quality as well as Well-Balanced Development Studies (Master Plan, Feasibility Study, etc.).
② Coordination with Related Development Projects
Coordination with Foreign-Assisted Projects and Domestic Projects.
③ Securing Commitment of Recipient Country
Project Implementation Institutions, Staff Allocation, Local Budget Allocation.
④ Flexibility in Implementation on the Part of Donor
Flexible Application of Guidelines and Procedures to Various Problems throughout the Project Cycle.
2) Japan’s ODA Philosophy and Characteristics
(i) Implementing Agencies: Financial Assistance by JBIC (Japan Bank for
International Cooperation until Sept. 2008) and Technical Assistance by JICA (Japan International Cooperation Agency)
(ii) Heavy Bias towards Financial Assistance/Yen Loans (Table1 as Proxy of Gross Disbursement)
Reasons:
① To support “SHE” of LDCs.
② Japanese Government’s tight budgetary conditions.
③ Major recipients are (more capable) Asian countries.
(iii) Heavy Bias towards Economic Infrastructure Development (Fig. 2 & Table 3) Reasons:
① Japan’s own as well as European experiences after World War II.
⇒Yen Loans were mostly spent on economic infrastructure projects.
(1) General Feature of Japan’s ODA
(v) Untied Yen Loans (Highest among Donor Nations) Reasons:
① Sincere adherence to the DAC Resolution of 1970.
② Compensation for relatively low grant aid.
(2) Japan’s Fundamental ODA Philosophy vis-à-vis ODA Charter
(i) Humanitarian Consideration
① To help reduce far more profound sufferings of LDCs, such as poverty, famine, diseases, mal-nutrition and so on.
⇒Social problems and economic problems.
(ii) Interdependence among Nations (between Japan and the Third World)
① Japan can not exist alone, nor prosper alone.
⇒ Cultural exchange, trade, investment, political intercourse and economic cooperation are indispensable.
The North-South Problem needs to be solved by bringing about a sustainable world where we all can live in peace and prosperity.
(iv) Heavy Bias towards Asian Countries (Fig. 3 & Table 2) Reasons:
① Closer relationship: Geographically, Economically and Historically.
② Asian countries share more than 60% of the Third World population.
(iii) Support to Self-Help Efforts vis-à-vis “Request-first Principle”
① The primary responsibility of Development should rest on the part of LDCs. The Japan’s ODA, therefore, plays a supportive role of their development processes.
② Japan avoids, as much as possible, the imposition of its political values or attitudes towards economic development on its ODA activities.
③ Japan provides the recipient country with ODA upon respecting
requests from recipient countries, yet tries to find the best approach to development for each individual country, through extensive dialogue.
(iv) Japan’s Official Development Assistance Charter
① Japan’s Official Development Assistance Charter (of 1992)
>The first ODA Charter of Japan
>Composed of 6 sections: i. Basic Philosophy, ii. Principles, iii. Priority, iv. Measures for the Effective Implementation of ODA, v. Measures to Promote Understanding and Support at Home and Abroad, vi. ODA Implementation System.
In an attempt to garner broader support and understanding for Japan’s ODA both at home and abroad, the government of Japan established, what we call, “ODA Charter”.
② Japan’s Official Development Assistance Charter (of 2003)
>This is the revised ODA Charter.
>Composed of 4 sections: i. Philosophy: Objectives, Policies, and Priorities, ii. Principle of ODA Implementation, iii. Formulation and Implementation of ODA Policy, iv. Reporting on the Status of
Implementation of the ODA Charter.
>The fundamental ODA philosophy deemed the same as ever, yet its message is dispersed widely in the Charter.
>More contemporary developmental issues and values are integrated in the Charter. ➛ Japan’s Development Assistance Charter 2015
>As for the Basic Philosophy, in addition to the three components (i),(ii), (iii) above, “Environmental Conservation” is added as the fourth
component.
(3) Japan’s ODA and How It Has Helped to Develop Asian Countries
(i) World Major Donor Nation (Used to be No.1 for over 10 Years) (Figure 1)
① Japan’s ODA statistics is remarkable, particularly in gross terms.
② Major Asian countries received huge Japan’s ODA over 30 years.
③ Economic Infra. Development by Japan’s ODA in those countries is impressive
(ii) Sequential Processes from Infra-ODA through Economic Growth
① ODA’s indirect contribution to the economic growth as follows:
ODA Infra FDI Economic Growth
where FDI stands for Foreign Direct Investment.
② Evidence: Cases of Thailand and Indonesia
> The Case of Thailand
Over 30 years, ODA loans worth 1.9 trillion yen ($19 billion) were committed and Japan’s ODA loans created 15% of the power
generation facilities, 30% of highway system, 100% of the coin operated public phones.
Over the period between 1993 and 1997, FDI from Japan increased from $0.7 billion to $2.2 billion, sharing 39% of the world total in 1993 and 65% in 1997. (Table 4)
Consequently, Thailand deemed to have enjoyed annual economic growth of 7.5% in 1980s and 4.7% in 1990s.
⇒ What do these black boxes mean? Remains to be seen below in ③.
> The Case of Indonesia
Between 1968 and 1999, ODA loans worth 3.5 trillion yen ($35 billion) were committed and they created 14% of the power generation facilities, 12% of the railroad tracks, and 60% of the total water supply capacity in Jakarta.
Between 1993 and 1997, Japan’s FDI to Indonesia increased from $1.0 billion to $3.1 billion, sharing 48% of the world total in 1993 and 66% in 1997. (Table 4)
Consequently, Indonesia deemed to have enjoyed annual economic growth of 6% in 1980s and 5% in 1990s.
③ Empirically proved? (How to interpret the black boxes above)
> No impacts.
> World Bank Analysis (WRD94)
⇒ 1% increase of Infra. Stock pushes up 1% point of Economic Growth.
> IDC Analysis
⇒ Japan’s ODA contributed to GDP growth in 3 Asian countries:
Thailand 5.4% of annual economic growth rate in 92, Indonesia 2.8% in 92 and Malaysia 1.8% in 92.
> FDI and Growth
⇒ Some evidence shows the strong positive impact of FDI on economic growth through increase of total factor productivity.
(4) New Challenges for Japan’s ODA in Early 21st Century (i) In View of the Japanese Public
① Harmonization of budgetary constraints and the international role of Japan. (Concerns over decreasing trend of ODA)
⇒ Japan should respond to the financial needs of LDCs.
②Accountability of ODA operation to the general public vis-à-vis their performance review including implementing agencies.
⇒ Need to enhance public relations and make ODA information public is indispensable.
(ii) In View of ODA Operations
① Combining the “hard” and the “soft”.
⇒ Intellectual and advisory component based on Japan’s economic development needs to be strengthened.
⇒ For instance, Japan’s ODA can contribute to establish the Market/Capitalism Economy for transitional economies.
② Capacity building on “Governance”, “Ownership”, “Transparency” and
“Accountability” on the part of the LDCs.
⇒ Which comes first, capacity building or actual assistance?
⇒ How the donor community sees the relationship between the capacity building and African Development?
③ Diversified issues and needs to be tackled such as “Poverty”, “Human Development & Human Security”, “Environment & Sustainable
Development”, “Energy”, “Food”, “Epidemic Diseases such as HIV and Malaria”, “Population” and so forth.
④ Collaboration and participation of Stakeholders such as bilateral and
multilateral aid organizations, LDCs, CSOs (Civil Society Organizations such as NGOs), private sector businesses and so on is a “must”.
⑤ Innovative Assistance Methods need to be introduced.
⇒ The “business as usual” approach be reviewed and effective and flexible methods of ODA should be applied to emerging needs. For instance, diversified terms and conditions for Yen loans, emergency disaster reconstruction assistance, small-scale ODA, two-step loans to a large variety of fields, cross-countries ODA, ODA to help
develop the private sector projects and so forth.
⑥ More political consideration is to be given in line with the ODA Charter of 2003 (and DA Charter 2015?).
⇒ Democracy and arms build-up must form Japan’s own conditionality of ODA.
0 5000 10000 15000 20000 25000
1983 1985
1987 1989
1991 1993
1995 1997
1999 2001
2003
Japan USA France Germany UK
Italy Canada
Figure 1 ODA of Major Donor Countries
(US$ Million & Net Disbursement)
0% 20% 40% 60% 80% 100%
1998 1999 2000 2001 2002 2003 2004
Social Infra Economic Infra Production Sector Multi-Sector
Program & Others
Figure 2 Japan’s Bilateral ODA and Its Sector-wise Share
(Commitment)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995 1997 1999 2001 2003
Europe Oceania
Latin America Africa
Middle East Asia
Figure 3 Japan’s Bilateral ODA and Its Regional Share
(Net Disbursement)
1989 1990 1991 1992 1995 1996 1997
Grants 711 774 746 903 1,036 819 1,038
of which
T/A 234 243 269 288 356 376 388
Loans 805 826 949 968 977 981 977
ODA
Total 1,515 1,600 1,696 1,699 2,013 1,800 2,015
1998 1999 2000 2001 2002 2003 2004 2005
886 928 920 912 877 807 770 762
376 379 380 376 360 334 313 310
846 958 967 908 781 753 713 701
1,732 1,886 1,886 1,820 1,657 1,560 1,483 1,466
Table 1 Japan’s ODA Volume
(Billions of Yen & Budgetary Appropriation)
65
(Unit: Billions of Yen) Up to FY2001
Thailand 1,885
Korea 596
Indonesia 3,547
The Philippines 1,988
Malaysia 827
China 2,873
Vietnam 753
India 1,717
Table 2 Cumulative Yen Loan Commitments to Major Asian Countries for over 30 Years
n.b. ODA Yen Loan Operation started in 1961 by the Overseas Economic Cooperation Fund of
Power Transport Telecom Irrigation/Agriculture Water
Indonesia 46% of Hydro Power, 9% of Diesel Power
20% of Railway Rehabilitation. 15% of
Toll Road
50% of Micro-wave, 73% of Jakarta Telephone Network
9% of Irrigation Facilities
60% of Jakarta Water Supply
China
3% of Total Power (inc.
Hydro Power and Thermal Power)
38% of Electrification of Railway.13% of Total
Port Berths
2% of Digital Telephone Exchanges, 5% of Fiber-
cables
6 Fertilizer Factories (1.4 million tons)
Philippine s
8% of Total Power (incl.
Geo-thermal). 4% of Total Transmission
Line
13% of Trunk Road Reconstruction, Two International Airports, Metro-Manila Elevated
Highways
15% of Telephone Exchanges
2% of Irrigation Facilities of the Nation
Water Supply Facilities for 21% of Population.
Manila Flood Control (7 Pumping Stations out of
10).
India 10% of Total Power
7 Fertilizer Factories (32% of Urea
Production)
Thailand
15% of Total Power ( Hydro and Thermal).
23% of Rural Electrification
10 Major Bridges out of 14 in Bangkok, 32% of
Bangkok Metro- Highways, Bangkok International Airport,
52% of Diesel Cars Owned by National
Railway
100% of Rural Public Telephone Network
30% of Rural Small- scale Irrigation Facilities
Malaysia 24% of Total Power ( Hydro and Thermal)
19% of National Highways, 52% of
Locomotives
Table 3 Performance of Japan’s ODA in Economic Infra. Development in Asia