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My Proposals on Official Development Assistance in Japan

Koichi Takase
Professor, Faculty of Commerce, Waseda University

As the new year starts, I would like to briefly present my opinions and requests about Japan's Official Development Assistance (ODA) as a researcher studying ODA. Recently, news about ODA to China has become commonplace. ODA to China is certainly an important issue as China became the second largest economic power in the world last year in terms of total GDP, and at the same time China has long been the recipient of the largest portion of aid offered by Japan. For Japan, however, China is one of many recipients of Japanese assistance, and therefore I believe that discussions on Japanese ODA policy should target all developing countries. Undeniably, Japan has conducted trade with nearly all countries of the world and been a major aid donor nation for several decades. The consideration, therefore, must not start with shortsighted arguments which are limited to specific countries or regions, or to recent events or phenomena.

From the past to the present, the fundamental problem regarding Japan's ODA has been that too many governmental agencies and their affiliate organizations in charge of assistance have not always had clear objectives, and their objectives have occasionally overlapped. This makes integrated and efficient implementation of national aid policies extremely difficult. Two years ago, departments in the Japan Bank for International Cooperation (JBIC) in charge of ODA loans (yen credit) merged with the previous Japan International Cooperation Agency (JICA)—which had been responsible for the majority of donations and technological aid from Japan—into a new organization, the new JICA. While the new JICA is a veritable giant in terms of the proportion it accounts for in Japan's total ODA, other ODA-related organizations have never been significantly reduced.

The new JICA became one of the world's leading development aid agencies following the World Bank and Asian Development Bank in terms of the total amount of ODA, and its activities have also been evaluated highly both in Japan and overseas. It is imperative, therefore, to enact a basic law on development aid and reorganize JICA into a development aid agency that is responsible for all ODA activities and completely isolated from other government organizations, as similar organizations overseas are. This would totally eliminate unnecessary spending and enable Japan to offer ODA in a way that is perfectly suited to Japan.

Recent studies show that the level of transparency of Japan's ODA as a whole is certainly not higher than those of other developed countries, in that virtually all governmental agencies have disclosed little information on the ODA activities, with the exception of JBIC and the previous JICA, which disclosed significant amounts of information. Likewise, the new JICA does not release all information on expenses and other details of each technological cooperation project. If Japan is to declare to the world that ODA activities are at the core of their international contribution, the new JICA should be modified to bear the responsibility for all ODA activities in the near future and to disclose enough information for external assessment by researchers and the mass media. In addition, I hope that it will develop into an organization that assumes the roles of collecting and disseminating information in a unique way for the benefit of Japan and the international community through networks extending broadly across developing countries.

Recently, conditions have drastically changed in terms of the flow of funds for international cooperation in the world, including ODA, resulting in chaos. For one thing, OPEC countries have offered some funds, albeit infrequently, and for another, South Korea as wells as other new OECD members have begun providing fully fledged ODA. The most important factor, however, would be huge funds that are thought to flow from the BRICs-especially China-and other emerging countries to many developing countries in Africa and other regions. Moreover, financial aid among developing countries called south-south aid has become common in contrast to the so-called south-north aid—the previous style of aid from developed countries to developing ones. For example, Thailand and Malaysia as regional powers offer various forms of financial aid to neighboring countries.

Originally, ODA from OECD members must be provided under the strict condition that the purpose be limited to economic development and welfare improvement of recipients, and that transparency be kept to a certain level. Fund flows recently prevailing in the world, on the other hand, do not seem to meet such conditions but are apparently aimed at acquiring natural resources or promoting trade for aid donors. Japan's ODA policies should also be adapted to this new situation and defined within the largest framework of the entire international cooperation spending, not limited to ODA.

It was recently announced that JBIC will finance the plan for bullet-train railways constructed by a consortium of Japanese enterprises as part of the high-speed rail project in Florida, the United States. Given that Japan's first aid was a yen loan for exporting thermal power plants to India, this can be regarded as a meaningful backward evolution. Financial aid in the future should be adapted to situations of both Japan and recipient countries. Contract agreements should be furnished with functional and flexible terms and conditions elaborated for each case of aid, including interest rate settings such as donation for economically backward countries, low-rate yen credit for less developed countries, and yen credit based on money market interest rates for developing countries with relatively advanced economies and developed countries.

Ultimately, Japan should build international cooperation plans optimal for themselves by combining contributions to international organizations—i.e., multilateral aid, with bilateral aid directly offered to recipients. I strongly hope that Japan as the second largest donor will assert their opinions toward international organizations and adequately fulfill their responsibilities and roles in the international society through internationalization of the yen and diffusion of Japan's advanced technologies.

Koichi Takase
Professor, Faculty of Commerce, Waseda University

[Brief biography]
1988: Graduated from the School of Commerce, Waseda University
1995: Graduated and received a Ph.D. from the doctoral course at the Department of Economics in Boston University.
1996: Started teaching on the Faculty of Economics at Fukuoka University.
2001: Transferred to the School of Commerce at Waseda University.

[Articles]
1. Koichi Takase (1999), "Fiscal and Macro Efficiency of Japanese Economic Cooperation [Nippon no Keizai Kyoryoku no Zaimu-teki oyobi Makuro-teki Koritsusei]," Financial Review, Vol. 52, Institute of Fiscal and Monetary Policy, Ministry of Finance.
2. Toshiro Kikuchi and Koichi Takase (2009), "Attempts for Studies on Development Aid as Interstate Negotiation: Fundamental Consideration with Strategic Analyses [Kokkakan Kosho to shiteno Kaihatsu Enjo ni kansuru Kenkyu eno Shiko: Senryakuteki Bunseki ni yoru Kisoteki Kosatsu]," Kokusai Kaihatsu Kenkyu, Vol. 18, No. 2, Japan Society for International Development.