Emerging Patterns of Japanese Aid in the new Millennium
2.2 Towards More Balanced Aid Allotments: The Effects of Domestic Politics
From the above discussion, Japan’s ODA policy has been shaped by the debate on international development, western criticisms and more recently, China’s rising economic prominence in East Asia. Nonetheless, this is just half of the story why Japanese aid allocation for social sector and social infrastructure has grown. The other half is explained by changes in the country’s domestic political economy. The move towards a more innovative approach to aid giving was demanded not just by international factors discussed above but also by domestic conditions beginning in the 1980s. In broad terms, there were three political-economic factors that led to ODA policy innovation in Japan: (1) Financial liberalization and postal deregulation have changed the structure governing state-market relations. Traditionally, the Japanese state has been interventionist and developmental. Policy instruments like credit control and administrative guidance have enabled the government to intercede in economic and social affairs. This kind of state structure was instrumental in the success of aid, trade, investment synthesis in Japanese aid giving. However, liberalization reforms since the late-1990s had the effect of weakening the state’s capacity to intervene by removing or limiting the policy instruments available. The finance ministry lost its monopolistic control over credit and firms now have more options for their financing. Because the public sector no longer monopolizes the use of postal savings fund, which is a private fund, financial reform has paved the way for new, innovative ODA financing schemes like public-partnership cost-sharing. (2) The enactment of the Nonprofit Organization
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(NPO) Law in 1998 has led to the emergence of NGOs, like Mekong Watch Japan, which monitor and participate in the implementation of ODA-funded projects. Arguably, this has led to more transparent, more environment-friendly, and socially-sensitive aid disbursements. (3) Japan’s economic decline has affected the ODA budget particularly grant aid and technical assistance. Operating under scarce resources, strategic allocation of grant aid became imperative as the 20th century drew to a close.
All of these have taken place under the backdrop of waning public support for ODA, prolonged domestic economic recession, and problems related to ageing society. Nonetheless, these conditions have contributed to the incorporation of human security concept to Japanese aid
‘philosophy’, making social sector allocation particularly from ODA grants more prominent than ever. Human security as an institutional norm of Japanese aid giving have slowly evolved out of necessity. In the 1990s, the government was struggling to justify to the public why ODA allocation must continue amidst soaring public debts and economic recession. From the public’s view, the credibility of the entire aid practice was compromised after the highly sensationalized Marcos scandal in 1986. The papers that were confiscated from Marcos when he fled to Hawaii following his ouster in the Philippines revealed that the former President systematically received kickbacks from Overseas Economic Cooperation Fund (OECF) projects through a system of bid- rigging, contract fraud, and illegal payments (Arase 1995, p. 114). OECF at that time was the agency in-charge of ODA loans. This incident increased public clamor for more transparency in Japanese aid and brought Japan to international humiliation. Aid scholars also noted the lack of an ‘aid philosophy’ in Japanese ODA and criticized its overwhelmingly commercial nature.
The commercial purpose of Japanese ODA can be traced back to the keizai kyouryoku that was developed in Japan in the 1960s which was intended to openly support the country’s
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drive for economic development. Around this time, the precursor to Japan’s aid allocation model began to take shape. A system of aid giving based on the recipient’s ‘request’ was introduced.
Aid implementation was done by various government agencies and there was no single agency that ultimately decides what priorities ODA should pursue. ODA policy was enmeshed in bureaucratic politics and rivalry, particularly between MOFA and METI, the former promoting diplomatic uses of aid while the latter the commercial uses of aid (Hook and Zhang 1998). As Arase (1995) exposed in great detail, Japan’s economic aid was heavily and explicitly commercial in nature, served well Japan’s growing need for resources and market in the 1970s and supported Japanese local industries and investments abroad. ODA loans were initially invested to projects in the primary sector and extractive industries in recipient countries.
Moreover, the geographical focus of Japan’s aid allocation was mainly Asia.
From the 1960s to 1980s, government officials involved in the aid process did not have an incentive or sense of urgency to reform Japan’s heavily commercial aid practice because a domestic constituency that promotes aid-for-development norm was still lacking (Lancaster, 2006, pp. 140, 220). Development-oriented NGOs and Non-Profit Organizations (NPOs) in Japan were politically weaker than their counterparts in the United States and elsewhere because of their dependence on the ‘parent’ ministry that granted them legal entity. Hence, they were excluded from ODA policy development from the very beginning. The aid process also lacked transparency because the role of Japanese Diet was either absent or ambiguous. Aid priorities were not electoral issues and as such, the public was little informed about it. Moreover, Lancaster (2006, p. 141, 220) also observes that the fragmented aid organization in Japan had led to weak development purpose in government’s aid programs. Policy development was separate from implementation which made coordination a challenge and further reinforced bureaucratic
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‘sectionalism’. Lastly, the media did not pay much attention to aid policy prior to mid-80s (Potter, 1996, pp. 16-17).
To reinvigorate public interest to aid and respond to other challenges facing Japanese ODA, the cabinet approved the 1992 ODA charter. The document highlighted four philosophical underpinnings of Japanese aid, namely, (1) humanitarian considerations, (2) Recognition of the interdependent relationships among member nations of the international community, (3) environment conservation and (4) the principle of self-help. Taking into account the various changes in international and domestic environment, the ODA charter was revised in 2003.
Sunaga (2004) identified two domestic reasons that led to its revision: the dwindling domestic support for ODA and the growing public expectation that Japan’s national interest should be promoted in the use of aid. On the former he noted:
While the Japanese government was rather complacent about its status as the world's biggest donor, Japan's ODA has been steadily losing the support of the Japanese public.
According to a poll conducted by Japan's Cabinet Office in 2003, the percentage of people having a positive attitude toward ODA dropped from 43.2% in 1990 to 19.0%, while those who favored a reduction in ODA increased from 10.7 %. to 25.5%. The reasons for this about-face in public opinion were clarified by the poll's respondents:
74.7% of those who responded negatively to ODA referred to Japan's sluggish economic conditions and 44.8% to Japan's dire fiscal situation, 37.5% reported that ODA implementation lacked transparency, and 34.8% said that ODA was not effective enough (Sunaga 2004, pp. 3-4).
Sunaga (2004) also mentions that the process used in the ODA revision was unprecedented because of the intensive dialogue with various stakeholders including political parties, NGOs, business circles, the public, and academics. This nationwide consultation also revealed how divided Japanese society was over major issues concerning ODA. For example, academics and NGOs promoted the idea that ODA must be responsive to international development agenda while the public and the business circles wanted the government to use ODA to ensure the interest and prosperity of Japan (Sunaga 2004). The 2003 ODA charter
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therefore was a document based on compromise of various societal interests in Japan. The concept of human security was incorporated as one of the basic policies of aid giving while the ultimate objective of Japanese aid is to ensure Japan’s own security and prosperity. This is like the tatemae and the honne of Japanese aid policy.
Moreover, the reorganization of aid agencies in Japan following the charter’s revision and the subsequent appointment of Mrs. Sadako Ogata as president in 2008 had brought prestige and clout to the new JICA (Lancaster 2006, p. 131) and had consolidated human security as an institutional norm of Japanese aid philosophy and practice. In 2008, the Overseas Economic Cooperation Operations (OECO) of Japan Bank for International Cooperation (JBIC) was merged with JICA, transforming the latter into an independent administrative body in-charge of implementing Japan’s loan programs and technical assistance. Export credit and other trade and investment promotion activities have been separated from ODA and are now under the supervision of METI, JETRO, and JBIC. Grant aid, on the other hand, is implemented by MOFA for the pursuit of diplomatic goals (Minato 2012, Interview). What is noticeable in spite of the reorganization is that fragmentation in aid implementation, evaluation and policy development has remained. JICA is the main implementing aid agency while aid policy development is vested in MOFA. The finance ministry and the METI share in the ODA loan policy development. Aid evaluation is carried out by either MOFA or JICA or both or by third party (Minato 2012, Interview). Nonetheless, these organizational changes have pushed Japanese ODA closer than ever to OECD standard and definition of developmental aid.
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Figure 3: Reorganization of Japan’s Aid Management System
Source: The Author
Under the new JICA’s management, priorities of ODA allocation have become more and more target-oriented and approximating closely DAC’s established norms that emphasize poverty reduction as an object of aid giving and focus on social infrastructure sector as a priority in the allocation. The four missions stated in its website provides a glimpse of where the future direction of Japanese ODA is heading at least in principle, namely, (1) addressing the global agenda, (2) reducing poverty through equitable growth, (3) improving governance, and (4) achieving human security (JICA website). In addition to these, new, innovative aid programs have also emerged recently. The government, for example, is considering a new type of loan called ‘assistance for democratization’ as a form of support for Myanmar’s recent political and economic reforms. Shiga (2012, Interview) also notes the new programs that recently came out
MoFA EPA MITI MOF
JICA
OECF (1961) Exim Bank
JBIC (1999)
New JICA (2008)
Merged
Overseas Economic Cooperation Operations of JBIC
ODA implementation ODA Policy
and Grants
Other official flows
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such as support for ‘rule of law reform’, support for ethnic conflict resolution, and a recent request of the Vietnamese government for assistance to support the revision of its constitution.
On top of this, the Japanese government has also used aid to help recipient government deal with political instability. A good example of this is the J-BIRD project in Mindanao, Philippines which began in 2006. J-BIRD stands for Japan-Bangsamoro Initiatives for Cooperation and Development. The objective of J-BIRD is to “enable the people and the communities in the target areas to enjoy the ‘dividends of peace’ through the Japanese ODA on the basis of ‘human security’ principles” (Embassy of Japan in the Philippines 2012). The total amount of assistance already disbursed for this project as of March 2012 is approximately ¥12.0 billion (PHP6.54 billion).
2.3 Ensuring Aid Transparency and Environmental Compliance: The Role of Civil Society