Tokyo asked to keep tabs on poor nations’ policies

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Japan must work with other Group of Seven nations to closely monitor policy development in heavily indebted poor countries since it has decided to waive all outstanding loans for unofficial development assistance, according to an official of the Organization for Economic Cooperation and Development.

“This (debt forgiveness) is important, because it shows that the Japanese government was, in my opinion, trying something very difficult, which was to match other G7 countries in something that is harder in Japan than it is in Western countries,” said Jorge Braga de Macedo, president of the OECD’s Development Center, in an interview with The Japan Times.

Macedo was in Tokyo to attend the 31st plenary meeting of the Trilateral Commission last Saturday through Monday, in which private-sector leaders from Europe, Japan and North America discussed ways to broaden regional cooperation to tackle challenging issues concerning globalization and governance.

Tokyo, which will host this year’s Group of Eight summit in Okinawa in July, announced Monday that it would waive non-ODA loans to HIPCs as part of an international debt-relief initiative that was adopted at last year’s G7 summit in Cologne, Germany.

While hailing the “special effort” of Japan and other G7 economies, however, Macedo questioned the effectiveness of such an initiative in changing the perspective of aid recipients.

“From the perspective of the recipient countries, we must be very cautious because there have been cases where debt relief has not generated better policy.

“You have to monitor very closely the policies to be sure that money is well spent and help is not wasted,” the head of the semiautonomous think tank said.

Macedo said the initiative will be a success only if it induces a large amount of private investment into HIPCs.

To this end, Macedo said the OECD development center is working on a project to study ways for recipient countries to combine assistance with foreign direct investment through sound governance in both the government and private sectors.

As for growing demands from Japanese industry to increase the portion of tied-loans in Japan’s ODA program amid the prolonged recession, Macedo said such requirements would not be so helpful because they may not lead to the implementation of correct policies in the recipient countries.

As for the pending issue of further trade liberalization talks under the auspices of the World Trade Organization, Macedo insisted that developing countries gain much more from trade liberalization than do developed countries.

“Developing countries are many times still very protected. . . . If you liberalize trade for developing countries, they start growing a lot,” Macedo said, citing the case of Mauritius.

He underscored the need to help poor countries build trade capacity to benefit from liberalized trade and allow entrepreneurs there to take advantage of freer exporting and importing.

“This is a project we are also doing: how to help countries to export, perhaps using new technologies such as the Internet,” he said.

To prevent a recurrence of the WTO’s failure at December’s Seattle ministerial summit to set an agenda for the new trade round, Macedo said developed countries must take time to build up multilateral dialogue with developing countries and thus gain their understanding toward the negotiations.