By Dr Bill Pritchard, Chief Investigator, Building Institutional Capacity in Asia Project, Research Institute for Asia and the Pacific, University of Sydney
There is a robust debate occurring internationally at the present time about the role of official development assistance (ODA) in addressing the unsustainable inequalities of the modern world. In this debate Japan occupies a unique position.
Its ODA philosophy and practices have been markedly different from those of other Organisation for Economic Cooperation and Development (OECD) nations. It is the only OECD donor nation to have
itself been an aid recipient. And its financial commitment to ODA has been second to none: by the end of the 1990s Japan was the world’s largest ODA provider, with most of its funding targeting economic and social development in East and Southeast Asia.
In this Building Institutional Capacity in Asia report for 2005-06, we review the origins and evolution of Japanese ODA, the contribution it has made to the Asian region, and the influence it has had on international thinking about aid and development.
There are compelling reasons why such a review should be attempted now.
First, a steady decline in the scale of Japan’s ODA since the late 1990s was reversed in 2005 when, as part of the G8 deliberations on global development, Japan announced an intention to increase its ODA volume by US$10 billion in aggregate over the next five years and to double its ODA to Africa over the next three years.
Second, these budgetary changes have been complemented by recent reforms to ODA policy and program delivery. In 1999, the Government of Japan conducted a comprehensive mid-term review of its ODA policy and programs, and in 2003 completely revised the ODA Charter. This revised 2003 Charter introduced new policy objectives such as ‘human security’, which focuses on the protection and empowerment of individuals, and ‘fairness’, which addresses gender issues and the gap between the rich and the poor. The 2003 Charter also instigated functional reforms to the roles and responsibilities of the key institutions involved in planning and delivering Japan’s ODA programs.
Third, all these reforms have occurred in the context of widespread domestic debate, both within the bureaucracy responsible for aid and amongst the electorate at large, about the future direction and purpose of Japanese ODA – a debate prompted by ongoing domestic economic problems and ‘aid fatigue’.
Fourth, there have been enormous changes in recent years in the international context of development assistance. Tumultuous global conditions, including the War on Terror and the persistence of economic, social and environmental crises in Africa, have forced the theory and practice of aid into a new era. In short, the times are changing, and it is opportune now to take stock of the past and reconsider the future.
Japan’s unique approach to ODA has been shaped and driven by a combination of historical factors, foreign policy imperatives, humanitarian concerns and commercial interests, as well as some specifically Japanese preferences and characteristics. Above all, Japan has sought to replicate in its role as a donor its own experience after World War II as an aid recipient. The country’s successful – and much celebrated – post-war reconstruction was a product of development assistance loans from the US that were used to fund physical infrastructure and that were punctually repayed. This experience has been reflected in, for example, Japan’s advocacy of a ‘self-help’ approach to development assistance and its preference for infrastructure-based loan funding.
Another major influence on Japanese ODA has been the distinctive institutional culture of the bureaucracy responsible for it. A complex interplay of stakeholders, institutions and local establishments has shaped the direction of ODA policy and programming from the 1960s onwards. Differing priorities leading to conflict over policy objectives has been a consequent and complicating factor – and the focus of much debate in recent years.
The ‘Japanese way’ of delivering ODA has, historically, represented an alternative paradigm for development assistance and has, consequently, been the subject of routine questioning by other OECD nations. This questioning has focused on three main differences. Japanese ODA has typically
favoured economic growth over poverty reduction, ‘untied’ bilateral loans over ‘tied’ loans and grants, and the funding of ‘hard’ physical infrastructure over ‘soft’ infrastructure (social, educational,
environmental, and so on).
This approach to ODA is, according to the Government of Japan, the best way to ensure (i) that development is sustainable (by providing a stable source of funds, encouraging a credit culture, fostering private-sector-led economic growth, and building long-term stable relationships between development partners; and (ii) that the recipient country has ‘ownership’ of ODA (by selecting its own loans projects) and is helped along the path to economic autonomy. According to many others in the
international aid community, the Japanese approach is cause for concern.
The standard criticism is that while the ‘Japanese way’ might succeed in addressing the general context for economic growth, it is insufficient in directly addressing pressing social issues such as poverty reduction, illiteracy and women’s rights; whereas ODA programs favoured by western countries tend to emphasise the provision of direct grants for these purposes.
Interestingly, this historical divergence between Japanese ODA and the rest of the world’s has begun to diminish in recent years. We are now starting to witness in contemporary thinking about aid and development a global convergenceof philosophies and practices. On the one hand, Japan
has been learning from the rest of the world; its reformulation of ODA goals through the 2003 Charter speaks to a new era in Japanese policy that focuses more on ‘soft’ develoment goals. On the other hand, the Millenium Developent Goals and the 2005 Paris agenda, to take just two examples,
embrace positions on ODA that have been traditionally associated with ‘Japanese’ thinking on the subject: that developmental sustainability requires an emphasis on long-term investments in economic infrastructure; that untied loans allow developing countries to select their own priorities; and that a credit-culture can help instil principles of good economic governance at the national level. In this tendency to convergence, we see taking place a mutually-beneficial process that will provide the basis for a more effective set of aid and development policies across the board in the years to come.
Much is still open to debate of course. While some praise Japan’s increased attention to ‘soft’ development goals, others allege that Japanese ODA is still too strongly wedded to strictly economic aspirations.