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Japan and the MDGs

At the Millennium Summit in 2000, world leaders committed themselves to the achievement of 8 Millennium Development Goals (MDGs) by 2015. Both rich and poor countries agreed to work towards the eradication of extreme poverty and hunger, the elimination of gender inequalities, the prevention and treatment of HIV/AIDS, protection of our environment, and the provision of education, healthcare and clean water. Since then the MDGs have had a catalytic effect on global development because of their simplicity, accessibility, and because progress against them is easily monitored.

The MDGs involve a Global Deal between rich and poor countries: poor countries pledged to reform policies, improve governance, and to channel resources to the achievement of the first 7 Goals. Rich countries, for their part, promised to deliver more and more effective aid, faster and deeper debt relief, and fairer trade rules. Rich country commitments are, in particular, outlined in the 8th Goal.

Japan’s Record on Aid

Aid Volume

  • Japan’s Official Development Assistance (ODA) has fallen by 40 percent in the last 10 years. In 2006, Japanese ODA was US$ 11.6 billion, of which $ 3.1 billion was debt relief. Japan is the third largest donor: its ODA is around half of the U.S.’s, lower than the U.K.’s and only slightly above France’s and Germany’s ODA.
  • Despite its longstanding commitment (since 1970) to spend 0.7% of GNI to ODA, in 2006 Japan’s ODA represented only 0.25% of GNI: Japan ranks 18th among the group of 22 OECD donor countries, and its aid effort is far below the average OECD country effort of 0.46% of GNI. According to CGD’s “Commitment to Development Index”, which adjusts gross aid for quality factors, Japans aid is the smallest as a share of income.
  • Japan is one of the few rich countries that was unable to commit to either maintaining or increasing aid levels at the Financing for Development Conference in Monterrey in 2002. In 2005, however, Japan did make a commitment to provide an additional $10 billion in ODA over a five-year period (2005 through 2009). This commitment, even if implemented, would still likely leave Japan behind the vast majority of donors in terms of the share of ODA in GNI.
  • Japan does not show any signs of meeting its commitment to the international target of providing 0.7% of GNI as ODA, despite having committed to this target in 1970. This is unlike the European Union 15 which re-committed to meet this target collectively by 2015 at the latest; several E.U. Members have already achieved this target for years, while others will do so well before 2015.

Aid quality

Aid effectiveness is as important as volume.

  • ODA focus

In 2005 in his report “In Larger Freedom,” Kofi Annan urged donors to de-link aid from their geopolitical agendas. Aid should be focused on countries which need scarce external concessional resources to achieve the Millennium Development Goals.

According to the most recent OECD/DAC Data, over 54.5 % of Japan’s ODA went to Middle Income Countries in ’04-’05: 21% of Japanese ODA went to China and Iraq. In 2005, less than 20% went to the least developed countries and less than 11% to Africa, the region most in need of concessional funding to meet the Millennium Goals. However at the Gleneagles G8 Summit in 2005, Japan pledged to double the amount of its aid going to this region over the following three years.
Japanese ODA seems dominated by its foreign policy and, as a result, there is little practical focus on poverty reduction or the achievement of the Millennium Development Goals. The OECD suggests that Japan could usefully clarify its policy on how it intends to focus on poor countries or the poor populations within countries. Japan’s Medium-Term ODA Policy Framework largely equates poverty reduction with economic growth, mentioning measures to promote enterprises and improve the investment climate. Further, only a small portion of Japanese resources in the social sector is directed towards the basic social services that will be key to achieving the MDGs: only 1.2 % of bilateral ODA goes to basic education and health. Japan’s allocation to social sectors tends to be directed to tertiary levels, such as universities, research institutions, urban water systems or hospitals. In addition, a large part of Japan’s ODA continues to be provided in the form of technical assistance, and this often means expensive expatriate technical advisors.

  • Tying of aid

Kofi Annan also called on donors to delink aid from their economic interest. The worst example of this is tied aid – i.e. aid that is tied to the purchase of goods and services from the country providing the aid. Tied aid provides poor value for money for the recipient; untying aid could increase its value by up to 25%; moreover it is particularly prone to corruption, an issue donors are concerned about.

Japan continues to tie its aid to Japanese primary contractors, even if they often use foreign sub-contractors. According to the OECD, in 2005 more than 10% of Japan’s aid was (partially) tied. This is above the average for OECD donor countries.

  • The Paris Declaration

The most important aid reform is to realize that donors do not develop developing countries, but that they develop themselves. This implies that the role of donors is to enable developing countries to take full responsibility.

At best, traditional donor managed projects have been islands of perfection in the midst of oceans of misery, which collapsed back into the ocean once the donor left, as governments could not afford to continue to pay doctors or teachers, or even the electricity bills. Moreover, each project – of which there might be thousands – burdened the government with a host of rules and reporting requirements, draining weak local capacity, leaving governments unable to run their own countries and to be accountable to their own citizens.

The good news is that for the first time ever, donors have agreed they are part of the problem – and agreed to become part of the solution and allow recipient countries to take their responsibilities. In the Paris Declaration in 2005 the donor community signed concrete commitments with indicators and deadlines for their achievement: to respect home-grown strategies; to align donor support to these; to work together to coordinate and harmonize procedures; and to do away with individual projects, evaluations and missions. (brochure on aid effectiveness).

Though traditionally Japan seemed reluctant to transfer administrative and financial responsibility for its aid to beneficiary governments it positively engaged in the Paris Agenda; Japan is joining common funding arrangements, harmonizing procedures, particularly with the MDB’s and some other G 8 Members, and improving predictability of its aid. JBIS translated the Paris Declaration in Japanese. However JICA seems much less publicly engaged in this: its website does not make any reference to the Paris Declaration nor its content, which is of concern: In October ‘08 JICA will complete a merger with the ODA part of the Japan Bank for International Cooperation, JBIC, which currently extends soft loans to developing countries. It will also oversee major portions of the grant aid which is currently disbursed by the Ministry of Foreign Affairs. This consolidation of formally dispersed ODA programs within one agency is as such a very positive development, particularly given the commitment of JICA’s leadership to he MDG’s; however, it is pivotal for the “new” JICA to implement the internationally agreed aid effectiveness agenda.

Japan’s record on debt relief

While Japan has traditionally been one of the more reluctant countries, it has become more involved in debt relief through its involvement in the Heavily Indebted Poor Country Initiative (HIPC).
Further, traditionally a large share of Japanese bilateral aid has been provided in the form of loans. The OECD suggests that Japan should pay more attention to debt sustainability for beneficiary countries as it continues to disburse ODA loans to low-income highly-indebted countries.

Japan’s record on trade

More than two-thirds of the world’s poor live in rural areas and are dependent upon agriculture and agriculture-related activities for their livelihoods. Japan imports the majority of its food, and is the largest net food importer from developing countries. Nevertheless, Japan’s barriers to exports from developing countries are the highest in the OECD, driven mainly by rice tariffs.
Like many rich countries it also has higher tariffs on processed goods from developing countries than it does on raw products. There are also important non-tariff restrictions to food imports, including sanitary and phyto-sanitary procedures. These restrictions make access to the Japanese market difficult for developing countries.

Unlike the European Union, Japan does not have a scheme to provide comprehensive duty- and tariff-free access to exports of the least developed countries. Japan agreed to extend such access for 97% of product lines from LDCs. However, exempting even 3% of product lines for any given country would allow the exclusion of exactly those products in which the country is competitive.

Principal sources: OECD DAC peer review (2003). OECD (2005) “Agricultural Policies in OECD Countries: Monitoring and Evaluation.” OECD (2006) “Agricultural policies in OECD countries: At A Glance 2006.” WTO 2006 World Trade Report; websites JICA and JBIC; Ministry of Foreign Affairs of Japan “Japan’s Official Development Assistance: White Paper 2005.”; CGD, Commitment for Development Index.