Global Policy Forum

By Suvendrini Kakuchi

In a bid to meet international expectations and boost its image as a generous donor, Japan is taking steps to shore-up its falling Official Development Assistance (ODA) budget in fiscal 2005, raising mixed expectations. "We welcome a hike in the falling ODA budget. The issue now is making sure the government takes the opportunity to continue to increase development assistance and becomes a leader in the international efforts to eradicate poverty in recipient countries," said Masaki Inaba, representative of the Japan Africa Network which comprises Africa experts.

Taking the lead in the debate to increase ODA, Prime Minister Junichiro Koizumi, has pledged to increase Japan's ODA budget by 10 billion US dollars over the next five years and also to double aid to Africa to meet the target to increase assistance to the continent set at the Group of Eight (G8) summit in Scotland in July. Japan's ODA budget in 2004 was 8.9 billion dollars and has been falling for the past four years as a result of the long economic recession that has cut away at national revenue drastically at home. A foreign ministry official at the Economic Cooperation Policy section said the new pledge by Koizumi means not only increasing ODA but also the amount of dispersal of assistance this year. "The trend is to increase ODA and negotiations with other ministries are underway to meet new targets," said the official, Hamaki Tsukada.

While analysts welcome the new statement, they point out that the ideal of achieving international ODA rates of 0.7 percent of the gross national income (GNI) set by the United Nations still seems a long way in Japan. From 1992 to 2001, Japan was the world's largest donor until economic pressures led the government to reduce ODA. In 2002, it contributed 9.3 billion dollars but slipped to second place behind the United States. Overall, ODA from the 23-member Organisation for Economic Development and Cooperation (OECD) countries increased in 2004 to 78.6 billion dollars, the highest level so far and in keeping with a rising trend. Even after allowing for a fall in dollar value, the 2004 figure represents a 4.6 percent rise in real terms from 2003 to 2004 and follows a 4.3 percent increase from 2002 to 2003. "It is important that Japan shows the world that as the second richest country in the world, it can give as much assistance as some of the other industrialised countries," said Yoko Fukawa, a member of the ODA Reform Network, a grass-roots organisation.

The United Nations is a strong advocate of meeting the international assistance target by donors to achieve its Millennium Development Goals (MDGs) by 2015 and Secretary General Kofi Annan is urging rich countries not to make excuses. Tsukada, however, says Japan's pledge to increase ODA is a powerful statement of its commitment to poverty reduction, given the economic problems it faces. "Japan does not make promises it cannot keep," he pointed out, stating the newly increased target was made to be achieved. He said Japan's ODA spending will focus heavily on poverty reduction along the MDGs specified by the United Nations.

Asia is the highest recipient of Japanese ODA--almost 60 percent of the budget. Contributions to Africa are around 12 percent, a policy that is not expected to change this year despite the increase in assistance. "Japan also hopes to increase its grant assistance for poor countries," he explained, referring to another bone of contention with activists who have lobbied hard for an increase in financing in this sector. Japanese yen loans now comprise one-third of its ODA budget, with grants making up two-thirds of the total. But activists have called for Japan to only extend grants as done by most other donors, in a bid to reduce the debt burden of poor countries. "That goal, however, seems even more difficult to achieve as Japan's economy continues to struggle," says Fukawa. She points out social security expenses are growing as the population ages, another key concern for the finance ministry that holds the reins of the ODA budget.

The difficulty of convincing the finance ministry to place priority on ODA was referred to in an ODA study by the Liberal Democratic Party study group. A member, who preferred not be named, said the importance of gaining a permanent seat in UN Security Council, a goal pushed ahead by the government, must be viewed by the finance ministry as a national goal and thus a reason for increasing ODA. Along with Brazil, Germany and India, Japan forms the Group of Four (G4) countries that aspire to become members of the Security Council whenever it is expanded as part of proposed reforms. In a June interview with the local media, ahead of the G8 Summit, Mitoji Yabunaka, deputy Foreign Minister, had said "In the short-run, supporting African nations will help Japan's bid for a permanent seat on the U.N. Security Council". Japanese assistance, both yen loans and grants, is expected to help African countries combat AIDS and other diseases, rural development, agriculture and education, rather than expensive infrastructure which is more the case in Asian development projects.

Another priority in the new ODA budget is emergency assistance, such as provided by Japan during the tsunami disaster, said Tsukada. Experts on the other hand, hope the foreign ministry will develop policies that increase efficiency to improve the quality of ODA, through closer links with civil society. "The government has made efforts to improve quality of aid these past few years but we need faster changes, especially in helping non-governmental organisations to play a larger role in the ODA budget," insisted Inaba.

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