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Evolution of Japanese Aid

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Evolution of Japanese Aid APPENDIX Evolution of Japanese Aid Japanese aid policy is currently experiencing important changes.A review of the historical context of Japanese foreign aid during the past several decades will help us understand Tokyo’s recent official development aid (ODA) shift toward an increase in soft aid and the incorporation of nongovernmental organizations (NGOs) into aid implementation. The evolution of Japanese aid policy can be divided into three phases, each of which reflects the relationship of aid to the international and domestic environments: (1) Japanese economy-first policy (from the mid-1950s to the mid-1970s); (2) promotion of broader foreign policy objectives (from the mid-1970s to the late 1980s); and (3) further politicization and diversification of aid (from the late 1980s to present). The first period was characterized by the single-minded pursuit of economic growth by both the Japanese government and the corporate sector. Aid was primarily used to pro- mote Japan’s postwar economic recovery and rapid growth and to secure natural resources. In the sec- ond period, politico-strategic objectives of aid emerged under a policy of “burden sharing” with Tokyo’s Western allies. During this phase, Japan’s ODA was used not only to bring economic benefits to Japanese firms but also to consolidate relations with the West.During the last period, ODA is being used to contribute to the maintenance of international stability in the post-Cold War era. Economic interests still exist, but political objectives are more pronounced, and the nature of aid has changed. The nature of Japanese ODA has changed significantly since the 1950s. Initially very business- centered, over the decades Japanese aid has diversified to have multidimensional objectives (Koppel & Plummer, 1989; Koppel & Orr, 1993; Rix, 1989–1990; Rix, 1993; Yasutomo, 1986; Yasutomo, 1989–1990;Yasutomo, 1993) and a diverse array of programs. Contrary to the stereotype of ODA solely representing the economic interests of Japanese firms (Arase, 1993; Arase, 1994; Arase, 1995; Ensign, 1992; Söderberg, 1996; Taylor, 1998), Japanese aid is not monolithic but has complex, multifaceted dimensions see Table A.1). Phase One: ODA and Japan’s Economic Development Japan’s ODA policy from the 1950s to the 1970s was a response to changing international and domestic environments.The main feature of Tokyo’s external relations in the yearly years after World War II was a high degree of dependence on the U.S. The U.S. provided not only a market for Japanese goods but also military protection against threats from the communist bloc. Washington encouraged Tokyo to foster good relations with U.S. allies in Asia by means of trade, investment, and APPENDIX:EVOLUTION OF JAPANESE AID 165 Table A.1 Evolution of Japanese foreign aid Phase Aid characteristics International and Objectives and domestic contexts types of aid Phase I ● War reparations ● Japan’s defeat in ● Predominantly (1950s to ● Aid to promote World War II economic objectives Mid-1970s) Japanese investment ● National efforts for ● Predominantly Japanese and trade in Asia “Income Doubling Plans” infrastructure-based economy-first ● Resource diplomacy and U.S. support for project aid policy Japan’s economic policy in Asia ● Oil crisis Phase II ● Fukuda Doctrine and ● U.S. withdrawal from ● Predominantly (Mid-1970s to rapid increase of ODA Indochina and emerging economic but Late-1980s) ● Strategic aid to Japanese economic power emerging importance Beginning of countries of ● Heightened Cold War of political objectives aid geopolitical importance tensions around the world ● Continued emphasis diversification ● Aid recycling to ● Debt crisis in the on infrastructure- and debtor countries developing world based project aid politicization but emergence of non-traditional aid Phase III (Late-1980s ● Emphasis on ● End of the Cold War ● Strong political to Present) democratization and and dissolution of the objectives and Further marketization Soviet bloc weakened economic diversification ● Use of ODA for U.N. ● Increasing regional objectives and peace-keeping efforts conflicts ● Reduced politicization ● Increasing emphasis ● Emergence of global infrastructure-based of aid on soft aid issues and Japan’s aid and increasing ● Emphasis on least domestic movement grassroots aid less-developed countries for aid reform ● Miyazawa Plan ● Aggravating poverty in ● Japan’s aid fatigue least less-developed countries ● Asian economic crisis and Japan’s own recession ● Japan’s fiscal problem ODA to the region. In return, the Japanese government was attentive to geopolitical interests of the United States and followed its Cold War leadership in Asia. Domestically, the Japanese government, represented by the Ministry of International Trade and Industry (MITI), attempted to respond to internal economic needs.Tokyo concentrated on its “eco- nomics above all” policy—a policy launched by Prime Minister Shigeru Yoshida in the 1950s to promote economic growth while under U.S. military protection1—by pursuing overseas markets for Japanese industrial products and acquiring raw materials vital to Japanese economic development. The Japanese government used the term keizai kyoryoku (economic cooperation) rather than ODA in reference to the transfer of a wide range of official and private capital flows from Japan to the 166 Civil Society in Japan developing world.This term blurred the distinction between ODA, other official flows, and private capital flows. ODA coupled economic cooperation with private capital transfer (Loutfi, 1973). It is significant that during the first phase of Japanese aid, two key aid ministries, MITI and the Ministry of Foreign Affairs (MOFA), agreed to use ODA to promote domestic economic prosper- ity, even though they had slightly different interests. MITI’s ultimate goal was the promotion of Japanese trade in Asia. From their perspective, aid was part of a new postwar trade policy in the region, designed to develop markets for the products of Japan’s industry.In contrast, with the emer- gence of the Cold War and the Vietnam War, MOFA was concerned about Tokyo’s role in support- ing U.S. military efforts. The ministry tried to design Japanese aid programs in line with U.S. interests in Asia and support U.S. allies in the region.Yet,the different interests of MITI and MOFA did not affect the overall aid policies during the first phase, because MOFA agreed with MITI in principle that economic aid was necessary for Japan’s own growth and openly acknowledged that Asia was important markets for Japanese exports, as well as sources of raw material (see Orr, 1990). During this first phase of Japanese aid, three policies emerged as the core of Japanese foreign aid: (1) war reparations from the mid-1950s to the mid-1960s, (2) aid to promote the “Income Doubling Plan” by Prime Minister Hayato Ikeda in the 1960s, and (3) “resource diplomacy” in the 1970s. These policies, including war reparations, were designed to promote Japanese economic develop- ment in the post-World War II era. War Reparations Japan’s bilateral aid started with war reparation programs.2 The San Francisco Peace Treaty of 1952, which ended the occupation of Japan by Allied forces, stipulated that the Japanese government pay reparations to the Asian countries that Tokyo had occupied during World War II for the damages and suffering inflicted on them. Reparations were counted as grant aid and were intended to fulfill Japan’s international obligations to wartime indemnities. At the same time, the reparations were designed to promote Japan’s own economic recovery by means of distribution of Japanese goods and services to recipient countries. MOFA established an internal reparations divisions and became the primary agency to manage reparations programs. In the latter half of the 1950s, the Japanese government settled reparations agreements with Southeast Asian countries, specifically,with Burma (1955), the Philippines (1956), Indonesia (1958), and South Vietnam (1960).Tokyo also concluded agreements for quasi-reparations (grants in lieu of formal reparations commitments) from the late 1950s and 1960s with Cambodia (1959), Laos (1959),Thailand (1962), South Korea (1965), Burma (1965), Singapore (1968), and Malaysia (1968) (Rix, 1980).Although the total amount of the reparations and quasi-reparations was relatively small (approximately US$1 billion for the reparations and US$490 million for the quasireparations) (Hasegawa, 1975), they benefited the Japanese economy significantly. Procurement of reparations was tied to Japanese industrial goods, thus helping Japanese firms expand manufactured production. Furthermore, the Japanese products under the reparations brought about further demands for Japanese goods in the recipient countries as local markets became dependent on them. In the 1950s and early 1960s, Japanese private companies, especially consulting firms, expanded their business activities in Southeast Asia, undertaking infrastructure projects funded by the repara- tions. For example, Nippon Koei, a leading Japanese consulting firm that had undertaken develop- ment projects in Korea and Manchuria under the Japanese colonial occupation during World War II, conducted surveys and supervised construction of ODA-funded large-scale hydroelectric infrastruc- ture projects in Southeast Asia; the Da Nhim Dam project in South Vietnam and the Brantas River project in Indonesia are specific instances (Rix, 1980; Nippon Koei, 1994; Nippon Koei, 1996). During the period of reparations aid, the
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