DEVELOPMENT: Japan Urged to Improve Quality of Foreign Aid

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Aug 18 2005 (IPS) - While poverty reduction remains a key focus in Japan’s foreign aid budget, the second largest in the world, analysts contend the government needs to take many more steps to meet the United Nations’ Millennium Development Goals (MDGs) by 2015.

”Attaining U.N. MDGs have prodded the Foreign Ministry to increase aid to poor countries. The next step is making sure the aid is spent wisely in response to the U.N. call that has set a target for equitable development,”explained Masaki Inaba, spokesperson for Japan Africa Development Organisation.

Inaba said Japan must, for a start, work closer with grass-root organisations both in recipient countries as well as in Japan.

Analysts also explained that the U.N. poverty reduction goals that call for boosting financial commitments for humanitarian needs such as education, environment and gender equality, is forcing Japan to take a hard look at its Official Development Assistance (ODA) spending.

Hiroshi Kanda, head of the Kansai ODA Reform Network, explains that the MDGs call for change in the long-standing ODA policy that has traditionally supported building infrastructure in poor countries through infusion of low-interest loans.

One-third of the Japanese ODA budget of 8.9 billion US dollars in 2004 comprised loans extended mostly to build expensive infrastructure necessary to lure private investment and shore up local economies.

Japanese ODA policy makers have supported this strategy believing a strong economy will lead to improvement in the lives of the local people.

”Japanese assistance to South-east Asia is based on this notion,” says Kanda. The Foreign Ministry has touted economic development in countries such as Thailand and China as the result of the success of Japanese ODA.

But Kanda said the new MDG targets called for a ”different kind of spending” which has prompted a debate on how to proceed from now on.

Kanda echoed calls by grass-roots organisations that have long advocated faster increases in grants and the gradual decline and end to low-interest loans that, they point out, has resulted in a high debt burden in developing countries.

They have argued that MDGs cannot be achieved unless the debt burden is eased in poor countries.

While Japan has made the ability to repay development loans an important aspect of its ODA disbursement policy, Tokyo recently changed its attitude and followed the West’s campaign to cancel debt for some countries in Africa that are plagued by perennial poverty.

African nations comprise 34 of the 42 nations officially recognised by the International Monetary Fund as heavily indebted poor countries.

Japan took the initiative in February to double its aid to Africa and during the Group of Eight (G8) summit at Gleneagles, Scotland, in July it pledged to raise Japan’s ODA budget by 10 billion US dollars by 2010.

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.

Shinichi Mizuta, an ODA expert and Africa specialist at the Mitsubishi Research Institute, says Japan’s policy of focusing on strengthening the economy to reduce poverty is not a bad policy in the long run.

He also says increasing grants remained an issue with Japan that relies on its huge postal savings for its ODA – which is one reason why loans continue to comprise a large portion of the budget.

Thus increasing grants that are geared mostly for MDGs such as improving public health delivery, a dire need in many developing countries, will be difficult against this backdrop.

”I also see the country’s huge fiscal deficit that has led to trimming of spending on welfare even at home as another obstacle in Japan’s path to meet MDGs,” he pointed out.

A survey by the think-tank in 2003 reports that only 3.4 percent of Japan’s ODA budget was spent on improving health in poor countries.

The looming issue of privatising postal savings that support ODA is also worrying activists who have long pushed for increasing Japanese assistance to meet the U.N. prescribed goal of 0.7 percent of the country’s gross national income from the current 0.2 percent.

Prime minister Junichiro Koizumi’s plan to privatise the savings that are a hefty 3.5 trillion US dollars, is aimed at cutting spending on wasteful infrastructure projects in Japan, a policy that could also spill over to the overseas ODA budget.

Still, analysts do not expect a major decrease in ODA spending. Daisuke Hiratsuka, expert at the Institute of Developing Economies, said that as Japan responds better to the MDGs, there will be more emphasis on effective spending in poor countries.

”The best response would be to make sure that ODA spent on agriculture also covers the capacity of farmers to be able to improve farm produce trade. Building a cluster network in poverty- reduction projects that cover various aspects of rural development will have far-reaching effects for that purpose,” he explained.

Kanda said a thorough debate is needed to make Japanese ODA effective to reduce poverty and bring global equality.

”I urge the Japanese government to understand that poverty reduction in Africa cannot be handled like its ODA disbursement policy in Asia. Japan must look at the negative aspects of the economies of the recipient countries such as a widening gap between rich and poor and environmental destruction, for the purpose of developing a better aid policy for Africa,” he insisted.