Some Policy Implications and Conclusion
5.1 Implications to Japan’ Aid
Although some JICA staffs are more interested in developing aid cooperation with China, it is notably evident that Japan’s aid strategy has responded to China’s rise as a non-DAC donor.
Although not articulated as the ‘official’ response, there is an on-going formulation of an aid strategy in Japan that seeks to strategically differentiate Japanese aid to Chinese aid in terms of value orientation, modality, and process and to enhance Japan’s competitiveness in the light of China’s cheaper economic assistance. The ODA Review Final Report (2010, p. 3) released by Japan’s Ministry of Foreign Affairs emphasized that the increasing competition from emerging countries (including China, though not specified) and increasing competition for markets and resources have eroded Japan’s international presence. The Report also mentioned that the domestic situation in Japan was not favorable to ODA expansion. Hence, it was recommended that ODA allotments from 2010 should be more ‘strategic and effective’.
5.1.1 Emphasis on ‘green aid’
The launching of the Green Mekong Initiative and the Green Innovation incorporated in the New Growth Strategy gives credence to Tokyo’s image as promoter of environmental sustainability in stark contrast to Chinese firms that evade environmental compliance to achieve maximum profitability. China faces gargantuan tasks of reducing carbon emissions and other pollutants from industries, vehicles and households.
5.1.2 Value-oriented aid strategy
The emphasis on value-oriented diplomacy, first introduced by Taro Aso in 2006, clearly capitalizes on universal values such as human rights, democracy and rule of law where China has difficulty realizing.
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5.1.3 Comprehensive new scheme that combines loan, grants, and technical cooperation
The intense competition that DAC and multilateral aid face from Chinese aid especially over contracts for infrastructure projects in developing countries has led some donors, like Japan, to focus on quality and ‘value for money’, which includes use of superior technology and high- grade materials, as selling point. Against this backdrop, in Japan, the New Growth Strategy recommended a ‘package of infrastructure-related system export’ or the “strategy to expand Japan’s overseas involvement in the infrastructure field that is based on public-private sector collaboration” (JICA Annual Report 2011, p. 11) was launched in 2010. Japan also promotes the deployment of integrated infrastructure systems which combines hard and soft infrastructure and mixes loans, grants and technical cooperation.
5.1.4 Adoption of ‘triangular cooperation’ or Japan’s version of South-South cooperation
Coincidental or not to China’s rise as South-South development partner, Japan’s own version of South-South Cooperation, the so-called Triangular Cooperation, has come to the fore recently as one of JICA’s aid strategy under its Partnership Program (JICA News from the Field 2010). South-South cooperation pertains to ‘sharing of resources, technology, and knowledge between developing nations’. As of November 2009, JICA reported that it has concluded Partnership Programs with twelve countries: Singapore, Thailand, Egypt, Tunisia, Chile, Brazil, Argentina, Philippines, Morocco, Mexico, Indonesia and Jordan.
5.1.5 More favorable terms and conditions for Japanese ODA
In part, developing countries were attracted to borrow from Chinese aid due to its more favorable terms and conditions. Apart from grants and concessional loans, China offers interest-
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free loans which can be used as infrastructure finance. In fiscal 2006, the Government of Japan introduced the Minimal Interest Rate Initiative (MIRAI) for low-income countries which offers nearly zero percent interest rate (at 0.01 percent). MIRAI is intended for the most impoverished countries in Africa, where Chinese aid is geographically concentrated.
5.1.6 Improving the ODA process
It was observed in one study that Chinese assistance “are often made available relatively quickly and easily without the political, economic, social, and environmental conditions and safeguards and bureaucratic procedures that major OECD aid donors, multilateral financial institutions, and multinational corporations typically impose” (Lum, et al. 2009, p. 4). An interview with a researcher from JICA Research Institute reveals that there is a need to shorten the ODA process from conception to implementation due to some complaints about the long period it takes (Shiga 2012 interview).
5.1.7 Establishment of ‘Pro-Japan’ Group
Japan’s aid differentiation strategy is evident in its recent plurilateral diplomacy with Mekong countries in the new millennium. Plurilateralism10 refers to a small group of select countries that cooperate to address specific issues. Since 2004, the Japanese government has sought ways to engage the Mekong countries collectively in a more straightforward manner. The ODA White Paper justifies that such engagements and their subsequent institutionalization were aimed at enhancing Japan’s efforts to contribute more effectively to ASEAN integration by addressing the development gap between its members. Except for Thailand and Vietnam, the economic significance of CLM to Japan’s economic interest in Southeast Asia is much less evident. A BRC Research Report (2010) showed that in 2008 China was the largest trading partner for CLV while Japan came in third behind South Korea. Japan is neither the largest
10 Some scholars like Bayne (2010, p. 205) add a qualifier, ‘like-minded states’ to the definition.
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investor in CLMV. The same report showed that the accumulated Japanese FDI inflow from 1995 to 2008 to Cambodia was nil at 0.6 percent of the total while that of China was 24.5 percent.
For Laos, Japan’s accumulated FDI inflow from 2001 to March 2009 was 4.4 percent compared to China’s 15 percent. Thailand is the largest investor in the country with 34.3 percent of total investments. It is only in Vietnam where Japanese FDI inflow is significant. Up to October 2009, Japan’s accumulated FDI inflow to Vietnam was 10.2 percent of the total compared to the 12.2 percent of total investments from its largest investor, Taiwan.
Thus, it can be said that Japan’s economic cooperation with CLMV has more strategic and diplomatic relevance. As one MOFA official admits, Japan’s Mekong strategy is intended to establish a ‘pro-Japan’ group in the Southeast Asian region (Kuroishi 2012, Interview).