The Cabinet of Prime Minister Junichiro Koizumi is calling for "reforms without sanctuaries," and the Government announced a plan to reduce its Official Development Assistance (ODA) budget by 10% in the next fiscal year. In light of this reduction, it is essential that ODA become more effective, and that emphasis shift from quantity to quality. This matter is of considerable immediacy, and the Second Consultative Committee on ODA Reform has just been established as an advisory body to the Minister of Foreign Affairs, and discussions are now being conducted on ways to improve Japan's ODA.
For some time, Keidanren has called for the following reforms: (1) the establishment of a unified system of assistance (at present, many ministries and agencies are involved in ODA); (2) the promotion of assistance programs that take advantage of the expertise and technologies developed in Japan since post-war, and (3) the strengthening of collaboration between the public and private sectors, in order to utilize the human resources of the private sector.
Keidanren proposes that the ODA review being undertaken by the Koizumi Cabinet not merely focus on budgetary cuts, but also develop a clear definition of principles for ODA policies, eliminate inefficiencies, and promote transparency. We urge the Government to present far-reaching reform proposals that meet with the understanding and approval of people in Japan and overseas.
Keidanren takes this opportunity to recommend the following measures needed to reform Japan's ODA.
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No one would disagree that Japan has a humanitarian and international obligation to offer ODA that addresses such issues as poverty in developing countries, global warming, and other environmental problems.
However, it is extremely important that Japan, especially because it depends on trade and has few natural resources, promote world peace and maintain mutually advantageous relations with other nations, and promote its own national interests. Fostering worldwide trade and investment is essential to maintaining Japan's presence and prosperity. We should also emphasize that, for a country like Japan whose diplomacy does not involve a military component, ODA is an extremely effective way to ensure mutually advantageous relations with other countries and promoting national interests.
It is important that serious consideration be given to the appropriateness of the guidelines recently issued by the Council on Economic and Fiscal Policy (CEFP), which call for a 10% reduction in Japan's ODA budget. There is also great importance of modifying the budgetary apportioning of funds for yen loans, grants and technical cooperation, in order to reform and modulate Japan's ODA policies in a more strategic manner.
Even at this time of fiscal restraint, Japan should maintain its ODA budget at a certain level in order to ensure harmonious relations with other countries and to promote its national interests by maintaining its presence and prosperity.
It is important that Japan's ODA remain "visible" so that people in recipient countries will be aware that the assistance comes from Japan, and will appreciate that assistance. Keidanren therefore believes that ODA should prioritize fields in which Japan has superior technical skills and know-how. These fields include: (1) the construction and improvement of infrastructure that promotes economic growth, such as electric power generation, telecommunication and transportation; (2) environment technologies; (3) earthquake-resistant construction techniques; and (4) project management techniques that consolidate all aspects of a program.
Under this policy, consideration should be given to modifying the budgetary apportioning of ODA funding as follows:
Japan's ODA is implemented by a number of ministries and government agencies, each of which develops its own assistance programs. The functions of these various ministries and agencies are often similar and even overlap. This has reduced the effectiveness of Japan's ODA as a whole, and made it difficult to ascertain the overall direction of government policies. Japan's ODA is a composite of many programs determined by different ministries and agencies -- it does not reflect a unified and clearly established national policy.
It is necessary to harmonize ODA policies that are currently determined by different government entities, and to clearly determine which entities have final responsibility for ODA implementation. To achieve these goals, an organization within the government is needed to propose and plan comprehensive ODA strategies. To be more specific, an "ODA Strategy Council," similar to the Council on Economic and Fiscal Policy (CEFP), should be established with the Prime Minister at its head, and with relevant cabinet ministers and experts from the private sector serving as members. The Council should be a central organization that administers ODA strategies.
To ensure that Japan's ODA is provided effectively, in accordance with comprehensive policies determined by the central organization, the functions of organizations currently implementing ODA should be reviewed and the various organizations should be coordinated. As a specific example, the functions of the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA) should be carefully examined as part of the ongoing reform of special-purpose public entities. This examination should be carried out with an aim of linking the three main categories of ODA -- grants, technical cooperation and yen loans -- more firmly together, to form an organic whole.
ODA, Other Official Flows (OOF) and trade insurance should be provided in an organic, integrated manner that promotes private loans and investments for infrastructure projects in developing countries. In this regard, it would be advisable to establish stronger ties between JBIC which plays an important role in ODA and OOF and Nippon Export and Investment Insurance (NEXI).
In addition, the organization administering ODA should have a clear understanding of the technical cooperation offered by many government ministries and organizations in Japan, and should develop a system that can provide technical cooperation and humanitarian assistance in a unified, effective manner that prevents redundancy.
ODA policies should be adapted to meet the needs of each recipient country at its own level of development, and to deal with situations as they change. It should also be realized that the needs of developing countries are becoming more diversified -- some countries continue to require assistance to construct such infrastructure as electric power plants and bridges, while other countries need assistance to develop their human resources.
To better meet these various needs, Japan's public and private sectors should collaborate in drawing up detailed country assistance programs for each recipient country. These programs should set out the level of priority for projects to be carried out in each country. In addition, a system should be established to review the programs periodically.
Developing countries are now promoting the privatization of public infrastructure such as electric power plants, telecommunications systems, railways and airports, and Japan's private sector is receiving strong calls for cooperation in these privatization schemes. Privatization is essential for economic vitalization, and more ODA -- involving both the dispatch of personnel and funding -- should be provided to transfer Japanese management methods, including corporate management know-how and efficient factory management methods.
There is a strong demand among developing countries, especially the least among less developed countries (LLDC), for assistance in constructing fairly large infrastructure. In light of the financial difficulties facing these LLDC, a system should be established to promote grant aid for the economic infrastructure needed to support fairly large infrastructure.
Japanese Government at the Kyushu/Okinawa G-8 Summit made a commitment to work to eliminate the digital divide, providing US$15 billion over five years to promote Information & Communication Technology (ICT) policy measures in developing countries. This commitment should be promoted vigorously. However, some developing countries lack even basic telecommunication infrastructure, so-called access divide. This is why Japan should place priority on projects to meet such needs.
ICT is evolving at a rapid pace, yet it often takes three or four years from the time a project is identified until the time a yen-loan agreement is signed. This time lapse reduces the effectiveness of any ICT project. Yen loan approval procedures should be expedited, and a system providing for the prompt approval of ICT-sector loans should be developed.
There is a possibility that any telecommunication project will extend across international borders. In addition, these projects can offer diverse applications, such as distance education programs and remote-access medical treatment systems.
Ministry of Foreign Affairs should seize the initiative and establish ties with other ministries and agencies, to promote this type of assistance for developing countries.
The needs of developing countries are becoming more diverse and complex. To deal effectively with this changing situation, the government should work with the private sector, to utilize its knowledge and experience. In order to raise the effectiveness of Japan's assistance programs as a whole, it is important to expand the expertise of human resources and specialists who have experience in ODA project implementation. For this purpose, the international network of private companies with project-related experience (consulting firms, trading companies, manufacturers, engineering firms, etc.) should be used to full advantage and relevant ministries and agencies in Japan (such as the Ministries of Foreign Affairs, Finance, and Economy, Trade and Industry) should establish ties with the private sector.
In this regard, Keidanren recommends that experts from the private sector be appointed to fill some official positions in the overseas offices of government entities implementing ODA programs such as JICA.
Through their trade and investment activities, private companies are well aware of the assistance needs of the developing countries, and have a wealth of information that can compliment the function of Japanese embassies and JICA offices. These private companies also have considerable knowledge and experience in all aspects of projects.
It would therefore be advisable for Japan's public and private sectors to collaborate in many areas, such as drawing up country assistance programs, establishing projects, and combining private initiative projects with ODA projects.
Generally speaking, information on Japan's ODA is still not readily available. This is true, for example, in the case of various surveys and researches, whether development surveys conducted by JICA or researches performed on behalf of government ministries by government related organizations and other institutes. Because of this lack of openness, some surveys may duplicate previous ones.
It is essential to ensure ready access to information so as to promote understanding among Japanese taxpayers, eliminate inefficiencies and increase transparency.
To foster correct understanding of ODA among the Japanese people, public relations of Japan's ODA should be expanded further. For example, more emphasis should be placed on regularly scheduled television programs featuring ODA. This would lead to more accurate awareness of the activities of ODA organizations and NGOs and private companies promoting development projects. It would also create positive impression of international assistance among Japanese and encourage them to participate in some way.
We also suggest that more public relations be promoted in recipient countries, to ensure that the people there accurately understand Japan's assistance programs and appreciate them.