Overview of Japan's ODA Policy

February, 2003
Michiko Yamashita
(Economic and Social Research Institute, Cabinet Office)

The full text is written in Japanese.

(Abstract)

Japan's Official Development Assistance has expanded by four-fold over a period of 15 years, from $3.8 billion in 1985 to its peak of $15.3 billion in 1999. The Japanese government eagerly increased official aid to dampen pressure from abroad to recycle its huge accumulated trade surplus, and to take commensurate responsibilities as an economic global superpower in the international development community. Due to the prolonged recession in Japan, however, the public sector is currently undergoing financial difficulties, and Japan's ODA budget will be reduced substantially over the next few years.

Upon publicizing the ODA mid-year policy in 1999, the Ministry of Foreign Affairs announced that Japan would no longer have the goal of increasing its total ODA, but would instead improve the quality of ODA it provides. To make the process of implementing ODA policies more transparent and accountable to taxpayers, the government intends to promote partnership with a variety of groups, such as of experts, NGOs, private firms, and of citizens, in the planning, execution, and evaluation of ODA projects.

This paper attempts to analyze the historical and institutional features of Japan's ODA from the aspect of public management, while keeping the following questions in mind: 1) Is information on the distribution and appropriation of ODA resources fully disclosed to the public? 2) Does the government properly evaluate the results of ODA based on the targeted goals? 3) Do the government agencies properly monitor ODA projects and their executing parties? 4) Does the ODA budget reflect the preceding evaluation, as well as strategic consideration? 5) Does ODA management facilitate efficiency, effectiveness and transparency throughout the project cycles?

The analysis of this paper, however, falls short to fully answering the above questions, and further research remains to be carried out. Section 1 surveys the capital flows from the donor countries to the developing countries, and empirically tests the transfer paradox by using the CGE model. Section 2 examines the different types of bilateral assistance, and discusses Japan's reaction to the requests of releasing debts and increasing grants. It also demonstrates a strategic feature of ODA by applying the two-party game model. Section 3 studies a recent trend of multilateral assistance to reduce poverty in the heavily indebted poor countries. The agency model is applied to donors (clients) of ODA to demonstrate importance of monitoring executing agencies (agents).

Establishment of the Information Disclosure Law and the Policy Evaluation Guidelines in 2001 in Japan has greatly changed people's perception of the public policies, and motivated them to request the public decision-making processes to be more open. In implementing ODA policies, people's agreement and support are essential along this line. Today, a consensus is being built on the following: Under today's tight budgetary conditions Japan's ODA should be more focused and strategy-oriented to achieve Japan's national interests, as well as the interests of the developing countries and the international society as a whole.

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