In the wake of the Sept. 11 terrorist attacks in the United States, the world’s major donor economies have increased their aid budgets in an effort to address a perceived link between terrorism and poverty.

Tokyo, however, is under unprecedented domestic pressure to cut its overseas aid amid a prolonged economic slump.

Despite having been the world’s leading aid donor for about a decade until it was overtaken by the United States last year, Japan is increasingly losing its voice in the development sphere.

It faces the daunting task of trying to reform its official development assistance practices in a manner that will enable it to regain the support of both domestic taxpayers and the international community.

Development has become a key global issue, as evidenced by a series of international conferences this year. A summit on development financing was held in Mexico in March, the Group of Eight summit was staged in Canada in June, and the world summit on sustainable development just wrapped up in South Africa.

During the Mexico summit, the U.S. pledged to increase its aid budget by $5 billion, or 50 percent, over the next three years. The European Union said it would raise the ratio of its aid budget against its gross national product to 0.39 percent from the current 0.33 percent by 2006.

Japan, on the other hand, cut its ODA budget by 10 percent in fiscal 2002, a third straight annual reduction. The budget will probably take a further hit in fiscal 2003.

Tsuneo Nishida, head of the Foreign Ministry’s Economic Cooperation Bureau, admitted Japan has not had much say in terms of aid diplomacy over the past year due to its budgetary constraints.

“We were very much handicapped in dealing with international conferences in the past year, when other countries were talking about increasing their budgets,” Nishida said.

Private-sector aid experts have warned against further cuts in aid spending, arguing that they would undermine Japan’s diplomatic power.

“ODA is an important diplomatic tool for Japan, which does not have military power,” said Izumi Ohno, professor of development studies at the National Graduate Institute for Policy Studies.

“Japan has built good relations with Asian, African and other countries though ODA disbursement, so we have to think of the negative impact of cutting the budget.

“ODA cannot be discussed in the same manner as cutting back on domestic public works projects.”

Ohno, who previously worked at the World Bank, the Japan International Cooperation Agency and the Japan Bank for International Cooperation, argued that Japan needs to convince other donors of the validity of its growth-oriented and balanced ODA strategy, which mixes both aid grants and loans.

She said the global trend focuses too much on grants aimed at poverty reduction.

About half of Japan’s ODA comes in the form of loans — an approach that often provokes criticism.

Ohno defended this strategy, however, stating that loans can finance large projects and can also bolster recipient countries’ capacity for financial management.

“By extending loans, Japan will be committed to recipient countries’ sustainable development over the long term — for 20 to 30 years,” she said.

Many developing countries in Asia are in fact requesting loans for large infrastructure projects, including roads and power plants, she said.

Ohno added, however, that basic humanitarian aid to least-developed African states should be in the form of grants.

“The important point is to form the best mix of both loans and grants tailor-made to suit the needs of each recipient,” she said. “Japan needs to convince the World Bank and other donors that poverty reduction is not the only goal of development.”

Nishida of the Foreign Ministry said the focus of Japan’s aid program will continue to be Asia. “Japan is an Asian country, and the growth of Asian neighbors is both strategically and economically important,” he said.

Volatility in Asia — such as the tension on the India-Pakistan border, in Afghanistan and in Indonesia — deeply concerns the international community, Nishida said.

“Japan’s ODA can have an important role in stabilizing the region,” he figured.

In Afghanistan, expectations of aid from Japan are very high, especially that earmarked for infrastructure development, according to Japanese Ambassador to Afghanistan Kinichi Komano.

Komano, who returned temporarily to Japan last month, said in a speech in Tokyo that Japan’s aid is cherished by President Hamid Karzai, who told him Japan’s history with Afghanistan is not tarnished in any way.

Karzai also reportedly told Komano that Japan’s postwar reconstruction could be a great nation-building model for Afghanistan.

Afghan approach

While Japan’s initial aid plan for Afghanistan focused on health, education and other humanitarian concerns, Tokyo will also help build infrastructure and improve security, Komano said.

Regarding security matters, the placing of local military cliques under the command of the central government and cutting off their funding sources are essential tactics, the ambassador said.

“It is our job, as a large donor, to compensate them with active assistance,” he said.

Atsushi Kusano, professor of international relations at Keio University and an aid specialist, noted that the likes of Afghanistan and East Timor, which require nation-building assistance, will be increasingly important in terms of Japan’s ODA strategy. Japan has thus far avoided using ODA as a tool for establishing peace in recipient nations.

Kusano said that Japan should build a comprehensive system aimed at providing “seamless” assistance from the peacekeeping stage to reconstruction.

He also argued that structural reform of the ODA system is essential.

“The Foreign Ministry is intent on maintaining the overall ODA budget amount, regardless of what’s in that budget,” Kusano said, noting the ministry should start focusing more on each project.

The ministry revised China ODA last year, terminating the practice of making multiyear pledges in favor of offering aid on a project-by-project basis each year. The result was a 25 percent cut in aid pledged to China in fiscal 2001.

Kusano, a member of an ODA panel serving Foreign Minister Yoriko Kawaguchi, said the comprehensive aid policy toward China needs a further review, as China-bound aid is the focus of public criticism in light of the sharp increase in Beijing’s military spending.

About 35 percent of Japan’s aid to China went to environmental projects in fiscal 2001, although Kusano said more aid should be directed toward projects of this kind.

“Environment-related ODA projects in China succeeded beyond my expectations,” said Kusano, who visited industrial cities in China this summer to review the impact of Japan’s ODA.

For example, he said, a natural gas pipeline project in Chongqing helped to reduce air pollution from coal power generation.

“The air was so much cleaner than when I went there five years ago,” he noted.

Getting NGOs on board

Strengthening ODA partnerships between the government and nongovernmental organizations is also seen as an essential reform step, especially after the Foreign Ministry came under fire for barring two major Japanese NGOs from a global Afghan aid parley in Tokyo in January, highlighting the state’s scant regard for NGOs.

Japan Platform and Peace Winds Japan were both initially denied entry in the NGO session at the conference, only because scandal-tainted lawmaker Muneo Suzuki, who exerted strong influence over the Foreign Ministry, did not like the groups.

Kensuke Onishi, a representative of both groups, became the focus of media attention when then Foreign Minister Makiko Tanaka clashed with Suzuki while intervening to allow the NGOs into the parley.

The clash resulted in Tanaka’s sacking later in the month. And Suzuki, who came under fire for meddling in ministry affairs, was arrested months later on separate bribery charges.

Onishi said he does not perceive a fundamental change in the government’s stance toward NGOs after the incident, but he believes things will change as NGOs build up their stature to a point where the government can no longer ignore them.

In general, Japanese NGOs are still weak because the government monopolizes the use of ODA funds, according to Onishi. The public regards NGO members as mere volunteer workers rather than professionals who should be paid for their work, he said.

NGOs can have a greater say in matters if they join hands and cooperate with business and government sectors to raise their credibility and bolster their financial backing, he said.

Onishi established Japan Platform for exactly this purpose by forming a coalition of 17 NGOs that use funding from the state and the private sector to provide emergency humanitarian assistance.

“NGOs are weak if one group acts alone, but if we build a network, we may have more clout in talking with the government,” he said. “In the Afghan conference, we could win over the pressure (and gain entry to part of the parley) because we had support from other NGOs and businesses.”

Currently, only some 0.5 percent of Japan’s ODA budget goes toward NGOs in the form of subsidies, whereas some 30 percent of the U.S. aid budget goes to NGOs.

Onishi said if more of the ODA cash that goes to domestic consulting firms and contractors is redirected to NGOs, total ODA costs could be cut substantially without reducing the quality of aid to recipient countries.

“By involving NGOs, the government can also gain more public support for ODA,” he said.

He also argued that Japan could raise its international profile by providing humanitarian aid during conflicts, in addition to postconflict help.

“European countries are very good at gaining ‘brand power’ by extending aid during conflicts with much smaller aid budgets than Japan,” he said. “If Japan forms an alliance with other donors in carrying out that kind of aid, Japan’s image as a big aid donor will be much more recognized internationally.”

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