Promotion of the "Japan ODA Model"; The Successful Experience of Japan's Economic Cooperation Part 1.

(From Journal of Japanese Trade & Industry (JJTI))

Byline: Trade Finance and Economic Cooperation Division, Trade and Economic Cooperation Bureau, METI

A half century has passed since Japan started to implement official development assistance (ODA). The situations of developing countries vary from one country to another. The Subcommittee on Economic Cooperation, Trade and Economic Cooperation Committee, Industrial Structure Council of the Ministry of Economy, Trade and Industry (METI) reviewed the experience of 50 years and considered the ways that Japanese economic cooperation may operate in the future. The outline of the report is the following. Achievements of Japanese Economic Cooperation in the Last 50 Years The situations of developing countries have changed in the last 50 years. Asia has achieved rapid growth, while Africa is still struggling. Even though Asia and Africa have received almost the same amount of ODA from the world, there is a big difference in the amount of foreign direct investment. (See fig.1 and 2) Japan has mainly focused its economic cooperation on East Asian countries that have relatively good governance with the goal of establishing foundations for the development of hard infrastructure, legal and institutional infrastructure, and industrial human resources, by utilizing yen loans and technical cooperation as its main instruments. As a result, with a substantial amount of private investment, Japan's economic cooperation has become one of the major factors in the remarkable economic and social development of the East Asian region. Such an economic cooperation model can be called the "Japan ODA model."

Recent Changes Surrounding Japanese Economic Cooperation I.Increase and diversification of needs Enhanced efforts toward development have became hot issues for achieving the Millennium Development Goals, to eliminate terrorism, and to create a peaceful society. With these goals in mind, the United States and European countries have been increasing the amount of ODA. The needs of developing countries for economic corporation are diversified depending on their stages of growth. The needs to develop legal and institutional infrastructure, to enhance governance and to support Operation and Maintenance have also been increased. At the same time, it has became more important to cope with global issues such as the tightening supply of natural resources and energy and global warming.

II.Deepening trade and investment relations with East Asia Trade and investment between Japan and the East Asian region have further increased. Along with the progress in negotiations for economic partnership agreements (EPAs), requests for economic cooperation have increased.

III.Changes in domestic environments Although Japan had established its status as the top aid donating country in the world in the first half of the 1990s, its ODA budget has been decreasing due to severe financial conditions from FY 1997. The Basic Policies for Economic and Fiscal Management and Structural Reform 2005 (the Basic Policies 2005) states that the government shall attain a sufficient level of ODA and realize a strategic expansion of the ODA volume in order to raise its ODA to 0.7% of gross national income (GNI).

Focuses of Japanese Economic Cooperation in Future I.Three priority areas Promoting the "Japan ODA Model" will contribute to the stability and prosperity of developing countries, and will help to ensure Japan's security and benefit. This, in ...