Journal of Asia-Paciﬁc Studies (Waseda University) No. 12 (March 2009)

Capacity Development and Institutional Change
in International Development Cooperation
Shunji Matsuoka῍Summary: The capacity development approach was proposed by UNDP and European donors as a
new approach based upon the African aid failure in the1980s and the end of the Cold War instead of
conventional aid approach. In this paper, capacity development approach comes into collision withinstitutional studies in social sciences on purpose to accelerate knowledge evolution. This paper
presents a new perspective on the development process and on aid policy. It is named an approach of“capacity development and institutional change”. By using this new approach of “capacity development and institutional change”, capacity development is able to cover not only technical cooperation
but also lending matters. Moreover, the program approach is realized into development strategy andaid policy. The program approach indicates criteria of selectivity and priority of allocation ofdevelopment resources including aid resources. Program approach concentrates more on the policy
making process or on the top down (upstream) approach. Furthermore, this paper shows theimportance of ﬁeld experiences, meaning the advantages of Japanese aid compared to European aid,
especially with regards to making the program approach more e#ective. The micro (ﬁeld experience)and macro (top down) loop is a critical factor for aid e#ectiveness.

1.

Introduction
During the 1990s, it became apparent that the replacement approach, i.e., theone-sided transfer of knowledge and technology from advanced countries to developing
countries was insu$cient to deal with the issues of international development assistance. Moreover, a recent study conducted using the capacity development approach(Fukuda-Parr et al. 2002) revealed that the self-e#orts of the developing countries arenecessary to improve their social capacity and enable them to achieve sustainable
development performance. Although there has been some progress in the stakeholder
and the institutional analyses (see Morgan and Taschereau 1996; Lopes and Theisohn2003), there still exists a need to further intensify the research and development on
capacity assessment and institutional change.
The historical background of capacity development is the failure of African development assistance in the 1980s and the end of the Cold War in the late 1980s and early
1990s. Moreover, the academic background of capacity development is the emerging
studies of new or modern institutional approach in social sciences in the 1980s and 1990
s. Capacity development discussions and institutional studies are di#erent at a glance,
but these two have the same orientation when they focus on the social context andinstitutions which are formulated historically in developing countries.
This paper aims to accelerate the knowledge exchange between capacity development and institutional change, to make a new approach of “capacity development and῍Professor, Graduate School of Asia-Paciﬁc Studies, Waseda University

ῌ 43 ῌ

Shunji Matsuoka

institutional change” for a new development paradigm.
This paper is divided into seven sections. Section 2 introduces the starting pointand historical background of capacity development discussions. Section 3 assesses theconcept of capacity of UNDP and describes how to conceptualize the social capacity
development process. Section 4 discusses what institutions mean. Section 5 provides adetailed description of the following analytical methods of social capacity assessment:(1) actor-factor Analysis; (2) indicator development; (3) institutional analysis; (4) pathanalysis; and (5) development stage analysis. Section 6 discusses the program design forsocial capacity development and institutional change based on the analytical approaches described in section 5. Finally, section 7 presents the summaries and conclusions of this study.
In this paper, the author comes to the conclusion that we should evolve a new
approach of “capacity development and institutional change” from the “capacity development approach” and this new approach logically needs to be based on a programapproach which stands on a wider scope of operations, bigger budget, more humanresources, and longer time period. Moreover, a clear selection criteria of aid allocation
promoting aid e#ectiveness is needed for a new approach of “capacity development andinstitutional change” as stated in the Paris Declaration in 2005 (OECD 2005).
2.

The Starting Point of Capacity Development
The discussion of capacity development has, roughly speaking, been focused on two
historical events; one is the failure of African development and the other is the end of
the Cold War.
Most Western donors have been mainly implementing their aid activities in Africancountries. However, many African countries recorded minus economic growth ratios interms of GDP per capita in the 1980s and the minus growth also meant the failure of
African aid by European donors. At the same time, the development society paid more
attention to evaluate aid activities from a more comprehensive point of view. Due tothese situations, conventional aid approach was criticized for low e#ectiveness and low
e$ciency. Donors had to change their conventional approach. This has been discussed
extensively in Robert Cassen’s well known book; “Does Aid Work?” (1986).
Moreover, the end of the Cold War meant that the political motivation to assist
developing countries in Western countries decreased, and as a result an era of “aidfatigue” came about in European countries.
African aid failure and the end of the Cold War caused many critiques on European
donors, especially on technical cooperation.
Fukuda-Parr Sakiko wrote about the following in her edited book in 2002.
“Technical cooperation is still frequently criticized for:
ῌUndermining local capacity: Rather than helping to build sustainable institutions
and other capabilities, technical cooperation tends to displace or inhibit local alternatives.
ῌDistorting priorities: The funding for technical cooperation generally bypasses
budgetary processes, escaping the priority-setting disciplines of formal reviews.
ῌChoosing high-proﬁle activities: Donors frequently cherry-pick the more visible
ῌ 44 ῌ

Capacity Development and Institutional Change in International Development Cooperation

activities that appeal to their home constituencies, leaving recipient governments toﬁnance the other routine but necessary functions as best they can.
ῌFragmenting management: Each donor sends its own package of funds and otherresources for individual programmes, and demands that recipients follow distinctive
procedures, formats and standards for reporting, all of which absorb scare time andresources.
ῌUsing expensive methods: Donors often require that projects purchase goods andhire experts from the donor country, although it would be far cheaper to source themelsewhere.
ῌIgnoring local wishes: the donors pay too little attention either to the communities who are supposed to beneﬁt from development activities, to the local authorities, orto NGOs, all of whom should comprise the foundation on which to develop stronger
local capacity.
ῌFixating on targets: Donors prefer activities that display clear proﬁles andtangible outputs. Successful capacity development, on the other hand is only intrinsically included.” (Fukuda-Parr et al. 2002, pp.5῍8.)
According to these kinds of criticism, UNDP and the European donors developed
the discussion of capacity development (Fukuda-Parr 1996, Fukuda-Parr, Lopes, andMalik 2002).
In Japan, JICA has strongly advocated the capacity development approach from the
2000s and has published many materials and documents such as the “Handbook of
Capacity Development” in 2004.
There are several discussion points on the development communities’ discussion of
capacity development.
Firstly, the capacity development approach must not focus on technical cooperation. The capacity development approach should cover not only technical cooperation
but also concessional loans to build infrastructure. The building of economic and social
infrastructure is not only a ﬁscal matter but it heavily depends on the local capacity andinstitutions in developing countries.
Secondly, institutions are critically important for the capacity development
processes. However, the discussion of capacity development in the past did not fully pay
attention to the relationship between the capacity development and the institutionalchange. The capacity depends on institutions, while institutions depend on the capacity
in the society. The development process of the capacity in the society will cause
institutional change that means the change of collective actions in the society. Institutional change will develop social capacity in developing countries.
Thirdly, the historical background of capacity development discussion in Japan isquite di#erent from Europe’s. As I mentioned already, the European discussion is based
upon European donors’ experience of giving aid to Africa and the African aid failure in
the 1980s. However, the main focus of Japanese aid has been on East Asia and most of
East Asian countries developed dramatically in the 1980s and 1990s. The Japanese
discussion on the capacity development reﬂects recent successes of economic development in East Asia. Therefore, it is di$cult to make the limitation of conventional
Japanese aid approach clear. Since JICA has been successful in their development aid
ῌ 45 ῌ

Shunji Matsuoka

approach as can be seen in their projects in East Asia, they have not felt it important tochange their conventional development approach.
For example, JICA aims to transform their operational framework from project
management to program management in the “Management Handbook of JICA Operation” in the end of 2007. However, the program management in this document meansthat a program is based upon a set of several projects in a similar ﬁeld. Project based
program management is a more suitable word for JICA’s program management approach.
3.

What is meant by Capacity?
In this section, we discuss what capacity is in order to pick up environmental
management capacity cases in developing countries.
According to UNDP and JICA, “Capacity is deﬁned as the ability to performfunctions, solve problems, and set and achieve objectives” (Fukuda-Parr et al. 2002, p.8)
and the capacity consists of three levels; individuals, organizations/institutions, andsociety. However, UNDP’s deﬁnition on the capacity is not e#ective to solve micro/
macro paradox due to its approach from individual to society. As this paper discusses on
institutions in the section 4, UNDP’s deﬁnition is based upon the methodologicalindividualism. We have to understand dual characteristics of the capacity. Therefore,
this paper deﬁnes the capacity from a macro view point.
Determining the target capacity level and obtaining information about the system
factors of capacity development, i.e., socio-economic factors, environmental quality, andexternal factors, are the initial problems faced during the assessment of social capacity.
Since the Social Capacity Assessment (SCA) has to be applied by the developing
countries, it should be inexpensive, simple, and based on scientiﬁc research. Moreover,the development of the self-assessment ability of a developing country must also be
considered, in order to enable the country to assess its own social capacity.
The Social Capacity for Environmental Management (SCEM) is deﬁned as thecapacity to manage environmental problems in a social system composed of three social
actors, i.e., government, ﬁrms, and citizens and their interrelationships (see Figure 1).
The Social Environmental Management System (SEMS) is deﬁned as the system ofinteraction between the SCEM and institutions (see Figure 2).
Figure 2 also shows the interrelationships between the SEMS, the socio-economic
conditions, the environmental qualities, and the external factors in the total system. The
SEMS of a country is constrained by the existing socio-economic conditions and thecondition of the environmental quality. Furthermore, here we observe the interprescribing relations between environmental quality and socio-economic conditions(See, e.g., Matsuoka and Kuchiki 2003, Matsuoka et al. 2004 and Matsuoka ed. 2007).
As evident in Figure 3, the SCA is designed to analyze the interactions between theSEMS, the socio-economic condition, and the environmental quality of the total system.
Apart from this, it is also designed to analyze the social capacity of each actor and theinteractions between all the social actors. Thus, the SCA reveals the current social
capacity and the development path of a particular region and/or a country. The SCA
includes the following ﬁve steps: 1. Actor-Factor Analysis, 2. Indicator Development, 3.
Institutional Analysis, 4. Path Analysis, and 5. Developing Stage Analysis. The section
ῌ 46 ῌ

Capacity Development and Institutional Change in International Development Cooperation

Figure 1 Social capacity for environmental
management
Source: Matsuoka and Kuchiki (2003)

Figure 2 Social environmental management
in total system
Source: Matsuoka (2005)

Figure 3 SCEM and Social Capacity Assessment
Source: Matsuoka (2005)

5 provides a brief introduction to these steps.
4.

What is meant by Institutions?
A debate on traditional capacity development has developed from the following:
conceptualization of capacity development, the relationship between capacity development and development policy, and the methodology to embody the capacity development (Machida & Hayashi 2006). Even though there are various debates on capacity
development, its theorization and embodiment has not necessarily developed because
developing countries did not regard institutional change as an essential factor. The
previous studies by North and Aoki show the importance of institutional approach.
Institutional approach has been studied by not only economics but also political scienceῌ 47 ῌ

Shunji Matsuoka

and sociology. Putnam, a political scientist and Coleman, a sociologist both develop thetheory of social capital, while Rosenau studies institutions related to governance fromthe discipline of international relations (Hodgson 1998, Williamson 2000, and Isoya
2004).
North (1990) deﬁnes institutions as the following. Institutions are the rules of thegame in a society or, more formally, the humanly devised constraints that shape humaninteraction. As a consequence, they structure incentives in human exchange, whether
political, social, or economic (North 1990, p. 3). Whether it is formal institutions such aslaw or informal institutions such as social norm, institutions form the way people
behave in the society.
Aoki (2001) points out the importance of comparative institutional analysis basedon the game-theoretic approach. He deﬁnes institutions as self-managed systems sharedwith groups and analyzes how people play an important role in the game. The economic
entity is deeply related to how people make their strategic choices. Therefore, institutions are formed by strategic interaction by economic entities, but their strategic
choices are always made under ever-changing environment (Aoki 2001, p. 33).
Ostrom (2005), who studies the “commons” phenomenon, broadly deﬁnes institutions as the following: Institutions are the prescriptions that humans use to organize allforms of repetitive and structured interactions including those within families, neighborhoods, markets, ﬁrms, sports leagues, churches, private associations, and governments at all scales. Moreover, she expresses institutions as rule-structured situations(Ostrom 2005, p.3).
Strictly speaking, there are some di#erences in the meanings and deﬁnitions ofinstitutions that North, Aoki, and Ostrom deﬁned, but their deﬁnitions are similar insome respects. Institutions mean that a variety of actors who construct society havetheir own recurrent activities in their interrelationships. If individual action is regulatedby traditional rules or social norms, it will be classiﬁed as informal institution, while if
it is related to legal laws that people must obey, it will be classiﬁed as formal institution.
North regards institutions as patterned objects conducted by social actions ofpeople, while Aoki and Ostrom regard institutions as objects based on methodologicalindividualism, so they insists that these institutions are sometimes re-established,developed, and disappear, in order for people to facilitate their social actions. Institutional change is caused by e$ciency such as social transaction cost reduction and itschange which is connected to some sort of sustainability. Needless to say, institutions
formed throughout history have constructed “a bundle of institutions” which has acharacteristic of durability. Therefore it is not easy for institutions to change. In manycases, institutional change is the gradual process characterized by “path dependency”.
On the other hand, Scott (1994) has di#erent opinions regarding institutions.
According to his deﬁnition, institutions consist of cognitive, normative, and regulative
structures which provide a meaning and stability for social actions. Institutions themselves give a meaning and stability to people’s social actions. Where institutions alreadyexist, they are seen as methodological holism. Therefore, the mechanism of institutionalchange is expressed as the weeding-out or the evolutional process conducted bycollective actions in the society. Scott’s institutions that take the side of methodologicalholism focus more on the process of social development than North’s institutions do.
ῌ 48 ῌ

Capacity Development and Institutional Change in International Development Cooperation

Institutions have two characteristics, one as institutions that regulate people’s
behavior and two, as institutions that expand the possibility of people’s behavior (Isoya
2004). With regards to the relationships between social capacity and institutions,institutions are prescribed by social capacity, and they can also cause institutionalchange by the development of social capacity. For that reason, social capacity andinstitutions have interdependent relationships. Given that institutions have the two
characteristics stated above, the “micro/macro loop” will be formed by adopting social
capacity at the micro level and institutions at the macro level when human action andsocial capacity are transmitted by these institutions (Alexander 1987, Imai & Kaneko
1998, and Shiozawa 1999). To make the micro/macro loop, institutions are criticallyimportant factors to transport information between the micro and the macro, and to set
up the place of knowledge creation.
In order to bring capacity development into place, it is necessary to change people’s
behavior by new institutions. The author concludes that institutional changes should beclearly speciﬁed in the deﬁnitions of capacity development. Therefore the author
suggests that the capacity development approach needs to evolve into a new approach,the “capacity development and institutional change approach”.
5.

Social Capacity Assessment (SCA)
In this section, social capacity assessment (SCA) method is discussed in detail for
realize a new approach “capacity development and institutional change” into international development cooperation.
5.1.

Actor-Factor Analysis
The actor-factor analysis reveals the level of social capacity by combining theresults of both the actors and factors approaches. This provides us with a concrete
estimation of the social capacity. The results obtained by the actor-factor analysis
enable us to design suitable programs for international development assistance.
In order to appropriately conduct the actor-factor analysis, we propose an actorTable 1 Actor-Factor Analysis: The Actor-Factor Matrix

Source: Matsuoka et al. (2008)ῌ 49 ῌ

Shunji Matsuoka

factor matrix (see Table 1) of 3 actors and 3 factors, i.e., a 3ῌ3 matrix. The data used toconstruct this matrix is obtained from statistical tables and through the interview andsurvey of each social actor. The cells of this matrix indicate the level of social capacity
attained by each social actor. Table 1 displays the information regarding the programs
and projects designed to compensate for the capacity gap, i.e., the di#erence between theactual social capacity and the critical minimum of social capacity established for eachsocial actor’s contribution to the designated factors.
The critical minimum that is obtained for each factor and is assumed to yield goodresults in terms of the environmental performance is distributed among the actors
proportional to the roles they perform in their respective societies. However, this
distribution is not always ﬁxed, and changes in the initial situation might inducechanges in the distribution of the critical minimum. These changes depend on institutions such as a political system and the relationship between the actors, historical pathdependency, and the characteristics of the environmental problem. Moreover, the timerequired for the transition to the next development stage might also induce changes inthe distribution of critical minimum among the social actors. (For details, see section
5.5).
For the purpose of our analysis, we assume the government (G), ﬁrms (F) andcitizens (C) as the social actors. However, it is also possible to consider a collection ofscientists and media as the fourth social actor (Zhang et al. 2004). Furthermore, wedeﬁne the SCEM as the environmental management capacity stipulated by the capacity
levels of the social actors and the correlation between them. Table 2 shows theclassiﬁcation of actors that are targeted for assessment.
Among previous researches that have contributed to our understanding of thefactors of environmental management capacity, the joint work by the UNEP and WHO,
which focused on the air quality management capacities in cities, is worth a mention(UNEP/WHO 1996). The above-mentioned study assumes that the capacity for air
quality management comprises four elements (see Figure 4). However, the targets in thisstudy were limited to the capacity of the government and the local administration for
Table 2 Classiﬁcation of Actors in the Actor-Factor Analysis
Classiﬁcation
G: Gov.

Central government
The government o$ces concerned
The sections concerned
Local government
The government o$ces concerned
The sections concerned

F: Firms

Industry
Industry ﬁelds (Major groups, Medium groups)
Firms (Big business, Small and medium-sized businesses)
Industrial unions

C: Citizens

Civil Society Organization (NGO, NPO, CBO)
Citizens

Source: Matsuoka et al. (2008)ῌ 50 ῌ

Capacity Development and Institutional Change in International Development Cooperation

Figure 4 Air quality management capacity
Source: UNDP/WHO (1996)
Table 3 Actor-Factor Analysis: Air Quality Management in China
P: Policy & Measure
Critical Minimum
Command and control-environmentals law are developed.

G

H: Human & Organizations

K: Knowledge & Technology

Organization-environmental A dministration isdeveloped.

Research, investigation-air pollution monitoring stations
are installed.
-environmental information is disclosed.

1979 Environmental protection law(trial version)
1987 Air pollution control law
1989 Environmental protection law

1988 National Environmental Protection Administration (NEPA)

1995 Environmental protection law
1996 The ninth ﬁve year plan

1990 The China Environmental
Yearbook
1995 Upgrade its quality

1998 State Environmental Protection
In the mid-1990s, Critical Minimum was achieved (System-making)Critical Minimum
F

Command and control-obey the law

Equipment, facilities-install end-of-pipe technology

research, inverstigation-self-monitoring for emission source

Organization-NGO, NPO activity

Research, investigation-recognize air quality

Critical Minimum
C

Command and control-lodge a complaint, make demands,
lobbying

Source: Matsuoka et al. (2008)

managing the air quality. Thus, we focus on extending this parameter of analysis byincluding the capacities of ﬁrms and citizens. Table 3 shows an example of the results ofan assessment using the actor-factor analysis for air quality management in China.
Considering the capacity of the government in China, we ﬁnd that the critical minimum
for the capacity for air quality management had been achieved during the mid 1990s.
ῌ 51 ῌ

Shunji Matsuoka

5.2.

Indicator Development
We develop two SCEM indicators using the following di#erent statistical approaches: (1) Frontier/Tobit approach and (2) Factor Analysis approach. This section
describes the methodology and the empirical applications of both these approaches.
5.2.1. Frontier/Tobit ApproachThis approach is based on the Total System conceptual framework. In this framework, the SCEM as well as socio-economic conditions are included as a single component inﬂuencing the environmental performance (see Figure 2). Our analytical framework is as follows: First, the directional distance function estimates the emission-based
environmental e$ciency as environmental performance (of air quality). The Tobit
model is then applied and the estimated environmental e$ciency is used to identify the
SCEM variables a#ecting the e$ciency scores. Finally, the SCEM indicator is calculated
as the weighted average of the SCEM variables.
We begin our analysis with the measurement of the environmental e$ciency.
Figure 5 illustrates the relationship between production (y) and the corresponding SO2
emissions (b). Suppose that the current level of production of a ﬁrm i is y, while theobserved SO2 emission level is b. However, if this ﬁrm incorporates and operates withthe best practice technology, then the SO2 emission can be reduced to b῍ with the output
remaining constant. The production frontier line indicates the e$cient (i.e., minimum
feasible) SO2 emission at the given output. We deﬁne environmental e$ciency as the
distance between observed and e$cient levels of SO2 (b, b῍); the smaller the distance thegreater is the e$ciency. In this study, the environmental e$ciency is empiricallyestimated by using the directional distance function (Fare et al. 1994).
Once the environmental e$ciency is estimated, the next step is to evaluate the roleof the SCEM using the Tobit model. In this study, the Tobit model selects one SCEM
variable for each of the three actors, The identiﬁed variables are used to construct the

Figure 5 Production frontier and environmental e$ciency
Source: Tanaka and Watanabe (2005)

ῌ 52 ῌ

Capacity Development and Institutional Change in International Development Cooperation

indicator for the SCEM. This is deﬁned as follows:Sit῍(wgGitῌwf FitῌwcCit)(1)

where Sit is the level of SCEM for province i in year t. Git, Fit, Cit represent theenvironmental management capacities of the government, the ﬁrms, and the citizens,
respectively. wg, wf, and wc represent their weights. These are adjusted such that wgῌwf
ῌwc῍1. Thus, our indicator proves to be a convenient measure because it always ranges
between 0 and 1.
An empirical application of this framework is conducted by using the provincelevel data of China’s manufacturing industry from the period 1994῍2002. Using the
Tobit model, we identify the total number of monitoring stations as the government’s
capacity and the ratio of SO2 reduction as the ﬁrms’ capacity. However, due to limited
data, we are unable to include the citizens’ capacity as a part of our model. Thus, the
SCEM in this application refers only to the capacities of the government and the ﬁrms.
Figure 6 depicts the SCEM and the normalized SO2 emissions in China’s manufacturing sector for the period 1994῍2002. The ﬁgure indicates a signiﬁcant increase ofnearly 40῎ in the SCEM-from 0.25 in 1994 to 0.35 in 2002-during the estimation period.
In addition, the SO2 emission is shown to be fairly responsive to the SCEM. Figure 7
illustrates the environmental management capacities for the government and the ﬁrms
during the same estimation period. The ﬁrms’ capacity (SO2 reduction rate) increased
from 0.19 in 1994 to 0.42 in 2002-an increase of more than 120῎. On the other hand thegovernment’s capacity (total number of monitoring stations) development rate improved by a mere 8῎, i.e., from 0.31 in 1994 to 0.34 in 2002. Thus, the SCEM
development in this period is largely due to an improvement in the ﬁrms’ capacity, while
the contribution by the government is rather limited.
In this section, we developed the indicator for the SCEM using the Frontier/Tobit
approach. We observed a rapid increase in the SCEM in China for the period 1994῍2002.
Moreover, the results indicated a signiﬁcant contribution of the ﬁrms in the development of the SCEM, while suggesting a limited contribution of the government. However,in order to provide future suggestions and recommendations, a further interpretation ofthese results is required. Finally, this approach can be extended to conduct an interna-

Figure 6 SCEM indicator and SO2 emission in China’s manufacturing Sector
Source: Tanaka and Watanabe (2005)

ῌ 53 ῌ

Shunji Matsuoka

Figure 7 Actor-speciﬁc environmental management capacity
Source: Tanaka and Watanabe (2005)

tional comparison using international panel data. In future studies, we will use the same
approach to analyze the SCEM development in Asian countries.
5.2.2. Factor analysis approach
Factor analysis is a statistical analytic technique that is used to uncover the latent
relationships between many observed variables. This approach allows numerous correlated variables of air quality management policy to be summarized by fewer dimensions, i.e., factors. In the context of this research, the factors are interpreted as theelements of capacity for air quality management that contribute to the environmental
performance.
Murakami and Matsuoka (2005) estimate the factors of government capacity for air
quality management in Kitakyushu and Osaka cities by using the factor analysis. In thisstudy, the capacity for air quality management is assumed to be equal to the factor
scores and to the contribution of factor loadings that are estimated by using the data on
air quality management policies in Kitakyushu and Osaka cities from 1970 to 2000.
Tables 4 and 5 show the results of factor analysis for each city. The screen test for factor
analysis reveals four elements of capacity in each city. The four elements are further
arranged into three factors, i.e., Policy & Measure, Human & Organization, and Knowledge & Technology (see Table 6).
By using the factor scores and the contribution of factor loadings, we estimate theweighted average for all the four elements. This is assumed to be an indicator of thecapacity for air quality management in each city. The contribution of factor loadings isassumed to be the weights for capacity elements. The average weights of the factors of
capacity of the two cities are as follows: Knowledge & Technology is 7.5ῌ, Human &Organization is 47.3ῌ, and Policy & Measure is 31.8ῌ.
Figure 8 and 9 show the change in the government’s capacity for air quality
management from 1970 to 2000. It can be observed that the rapid improvement ingovernment capacity in the early 1970s resulted in a dramatic reduction in the SO2
concentration. Additionally, the e#ects of each indicator of capacity on the SO2 concentration are estimated by a simple regression analysis.

ῌ 54 ῌ

Capacity Development and Institutional Change in International Development Cooperation
Table 6 Correlation of the Three Actors and Critical Minimum
Actors
Gov.

Firms

G
ῌ
F

Citizens

Factors

Policy & Measureῌ

Human &
Organizationsῌ
῎Critical Minimum
῍

Knowledge &Technology

G
ῌ
C

F
ῌ
C

G
ῌ
F
ῌ
C

ῌ

Note: The State of correlation of the three actors has an e#ect on the Critical Minimum Level.
Source: Matsuoka et al. (2008)

Figure 8 Trend of government capacity for air
quality management (Kitakyushu-city inJapan)
Source: Murakami and Matsuoka (2005)

Figure 9 Trend of government capacity for air
quality management (Osaka-city inJapan)
Source: Murakami and Matsuoka (2005)

5.3.

Institutional Analysis
The institutional analysis of the SCA investigates a group of institutions (see, e.g.,
Aoki and Okuno 1996) that constrain social actors’ activities and capacities. It also
regulates the current capacity level and a#ects the future formulations of social
capacity. Therefore, this study will focus on the role of the individual institutions andthe group of institutions as well as the processes of transitions among them. For thispurpose, we will classify the institutions into two categories: principal institutions andῌ 57 ῌ

Shunji Matsuoka

secondary institutions, and then, we will classify each category into two subcategories,
i.e., formal and informal institutions.
The method of classifying an institution as a principal or a secondary institution isbased on analyzing them according to the level of their incentive or disincentive, i.e., theupper levels are principal institutions, and the lower levels are secondary institutions.
Further, in order to classify the institutions into the subcategories, i.e., formal andinformal institutions, this study follows North’s study (1990) and deﬁnes formal institutions as public formalized rules, such as state laws, and informal institutions as unspoken rules, such as social norms and customs that inﬂuence the behavior of social actors.
While investigating informal institutions, we pay close attention to the changes in
the relationships between the social actors. Figure 10 indicates the basic concepts foranalyzing the informal institutions. Based on these concepts, we identify three types ofrelationships between the social actors: one-side (or direct) relationships, mutual relationships, and multilateral relationships (partnership). As shown in Table 6, eachrelationship has an e#ect on the critical minimum capacity of each actor. Thus, the next
step is to analyze the impact of each relationship between the actors on their criticalminimum capacities.

Figure 10 The Benchmarks for the social actor’s relationship
Source: Matsuoka et al. (2008)

In order to conduct this analysis, we introduce a case study wherein we haveanalyzed the institutional changes in Ube City. Ube City, often referred to as the “Ube
Model” or the “Ube System” (Nose 1996), is a model Japanese city that has succeeded in
e#ectively managing the problem of air pollution. The most important characteristic of
the Ube model is that the decision-making process is not solely dependent on government regulations; rather, it is a joint exercise carried out by a committee comprising
representatives from industry, government, educational system, and general population. It is therefore believed that the spirit of the Ube model can be replicated byῌ 58 ῌ

Capacity Development and Institutional Change in International Development Cooperation

formally institutionalizing the informal institutions, however, keeping in mind, thespeciﬁc culture and customs of a city (see Table 7).
Table 7 The Benchmarks for The Social Actor’s Relationships in Ube City,Japan
Principal Institution
Formal Institution

Ube Model

Informal Institurion

Institution based on the speciﬁcculture and customs of Ube
CitySecondary InstitutionῌSource: Matsuoka et al. (200)Table 8 indicates the environmental policies and their characteristics in Ube City.
Figure 11 shows the relationship between institutional changes (formal and informal)
and the SCEM of Ube City, while Figure 12 shows the systemic change and theformulation of SCEM in Ube City. Thus, we observe that as compared with the policy fordust pollution, the measures for controlling SO2 in Ube City were delayed until theenactment of the pollution control agreement in 1970. According to this investigation,
we conclude that (1) the knowledge and technology were not su$cient to control SO2
pollution in Ube City, and (2) the characteristics of the Ube Model. Thus, these conclusions highlight the following:(1) The institutions needed for controlling pollution di#er on a case by case basis
and depend on the type of pollution;(2) The e$ciency of the performance of the institutions is closely related to the
SCEM in the region.
Therefore, in order to achieve a higher capacity level for a country, it is importantto analyze the nature of the existing institutions, i.e., whether they are principal/
secondary and formal/informal. Moreover, it is also important to ascertain whether theactors’ capacities of environmental management satisfy the e$cient performance requirement of the institution.
5.4.

Path Analysis
The path analysis clariﬁes the information and the conditions that are prerequisites
for setting a rational capacity level target. Moreover, an analysis of the path (strategy or
program) adopted for the current social capacity level helps in identifying the ideal path
toward achieving the set target.
As discussed in the previous section, social capacity is developed through theinteractions between the actors and the institutions. In a broader sense, we can consider
the capacity level as deﬁned by the interrelationship among the capacity level, thesocio-economic levels and the performance levels (environmental quality). First, thepath analysis deals with the development process of the total system, which consists ofῌ 59 ῌ

Shunji Matsuoka
Table 8 Environmental Policy and the Characteristics in Ube City, Japan

Main Events

Dust pollution

SO2 pollution

1949(Dust control measure was initiated)
Ube City Dust Fall Control
Committee
1962῍54
The citizens held large-scale
Anti-dust pep rallies
1956
Ube Pozzoran Cement
1957
The mayor and important businessowners set numerical targets for dust
control measures and each factory
decided to make a plan, includingtime limits and expendirures, in orderto accomplish the goals that were laid
down.

1960
Ube City Air Pollution Control
1962
SO2 monitoring devices were set up in
19 area
1968
Enactment of the Air Pollution Control Law
1969
The ﬁrst of o$cial warning wasannounced in Ube City
1970
The ﬁrst air pollution alann in Yamaguchi prefecture was o$cially announced in Ube City1971
Ube city concluded the pollution
control agreement
1972
The full-scale work on SO2 measuresbegan after ﬁnalizing the enforcement
details of the pollution control agreement

Ube Model

Pollution Control

Principal Institution
Charactenistics

The dust control measures were aopted The institutions of the Ube model did
promptly and social capacity was form- not function e$ciently for the SO2
ed.
control measures. Social capacity did
not improve and su$cient pollution
control measures were not adopted.
Eventually, institutional change in Ube
City accelerated under the externalpressure of the increased restrictions
that were instituted at the national
level. The improvement of social
capacity was achieved through theinstitutional change that was instituted
after the ﬁnalization and implementation of t he pollution control agreementin 1971. This resulted in an improvement in the e$ciency of the SO2 control
measures.

Source. Matsuoka et al.(2004)

three components.
Figure 13 informs us about the indicators pertain to SO2 in Japan. We adopted theSO2 general monitoring stations as the capacity level, per capita GDP as the socioeconomic level, and the performance level as the average monitoring data at thestations; although, due to limited information, this data was compiled after the peak of
the observed SO2 value. According to the ﬁgure, we observe that until the mid 1980s allῌ 60 ῌ

Capacity Development and Institutional Change in International Development Cooperation

Figure 11 Institutional change and social capacity for environmental management in Ube City,
Japan
Source: Matsuoka et al. (2004)

Figure 12 Social capacity for environmental management in Ube City, Japan
Source: Matsuoka et al. (2004)

the three components improved (capacity and socio-economic level increased, while theperformance level decreased). However, post the 1980s the socio-economic level continued to improve, while the capacity level remained almost constant and the performancelevel stabilized at a low level. Based on this information, it can be said that until the mid
1980s the system operated e$ciently resulting in an improvement in the environmental
performance. However, since then the system continues to operate at a necessary
minimum capacity, irrespective of any improvement in the socio-economic level.
By conducting a thorough analysis of the cases of di#erent countries and theirenvironmental issues, we can identify the characteristics responsible for the improvement of the environmental performance in each case. For example, Figure 14 clearly
demonstrates the di#erences between the cases wherein the adopted path changes fromῌ 61 ῌ

Shunji Matsuoka

Figure 13 Transition of SCEM, socio-economic conditions, and environmental performance: Thecase of SO2 in Japan
Source: Ministry of Environment, Japan (2005)

SCEM-led to socio-economic conditions-led and vice versa. Moreover, such a pathanalysis enables us to identify the course that we must adopt for improving environmental performance in the future.

Figure 14 Path analysis
Source: Matsuoka et al. (2008)

Thus far, we have focused on the change in the level of the three components of thetotal system. However, in order to understand the development process of the system, it
is necessary to bear in mind that these changes do not occur independently; rather, they
undergo a transition in the context of the interrelationship between the three components.
Honda et al. (2004) analyzed the relationship between these three components for 47
prefectures in Japan. From among these analyses related to several environmental
issues, let us present the case of SO2. The analysis is carried out using the Granger
Causality Test and is based on the data for the period ranging from 1982 to 2000. Figure
15 conﬁrms the existence of interrelationships between the three components for 23 outof 47 prefectures. In order to complete the path analysis, we need to verify the
hypothesis that the change would occur from a state of weak or partial interrelationshipῌ 62 ῌ

Capacity Development and Institutional Change in International Development Cooperation

at an early stage to that of a strong interrelationship with an interactive impact on all
the three components (we do not exclude the possibility of plural paths to achieve thetarget). Thus, we shall now investigate the methodology and pursue these analyses.

Figure 15 Interrelationship between SCEM, socio-economic conditions, and environmental
performance
Source: Honda et al. (2004)

In addition, the development processes of the capacities of social actors and theirrelationships also form a part of the path analysis’ targets. In this case, we assume acertain level of substitutability among the actors; for instance, part of the government’s
role can be borne by a ﬁrm or a citizen. Future e$cient capacity development paths are
di#erent for cases with di#erent paths, such as government-led and citizen-led; however, they have the same level of social capacity as a whole. Regarding aid policy, this
proposition implies that there should be cases wherein ﬁrms or citizens would not relyon the government to government approach and would be the direct beneﬁciaries of the
aid.
5.5.

Development Stage Analysis
The development stage analysis that is conducted on the basis of the actor/factor
analysis, the indicator development, the institutional analysis, and the path analysis,
aims at specifying the development stage based on the benchmarks and then presenting
the development process and the direction for further development. The analyticalresults highlight certain preconditions that clarify appropriate quantity, quality, andtiming of input in order to enable development and aid policies to be implemented asprograms.
Matsuoka and Kuchiki (2003), bearing in mind industrial pollution, assumed thefollowing three development stages for the SEMS: system-making stage, systemworking stage, and self-management stage. Table 9 indicates the stages and the benchmarks of SEMS.
The system-making stage focuses on the development of the fundamental functions
ῌ 63 ῌ

Shunji Matsuoka
Table 9 The Stages and Benchmarks of Social Environmental Management System
System-making stage

System-working stage

Self-management stage

Deﬁnition

Period in which the bases of Period in which the regulations Period in which a comprehenSEMS, especially governmental between the government and sive environmental policy is
ﬁrm sectors become stronger needed, since new types of
institutions, are developed.
through the setting the incen- environmental issues emerge,
tives for pollution abatement and the ﬁrms and citizens
take leading roles
and industrial pollution im- sectors
through voluntary approaches
proves after reaching its peak.
for environmental management.
Harmonious relations between
government, ﬁrms, and citizens
accelerate the e$cient social
environmental management.

Environmental
IssuesPoverty related issues and issues related
issues related to industrial pollution.
pollution.

Issues related to Degradation
Industrial Pollution

toIndustrial Consumption-related issures.

Turning point (peak of the Improvement.
Environmental Kuznets Curve)-Government (pollution control -Government (proposal of compThe Role of the -Government (system-making)rehensive policy)
Three Actors-Firms (e#orts for pollution regulation)-Firms (voluntary approach)-Firms (pollution reduction)
reduction)(pressureonthe -Citizens (voluntary approach)-VCitizens (pressure on the -Citizens
government and ﬁrms and government and ﬁrms and research cooperation)
research cooperation)
The
Relationship Government -Firms
between the Three Government-Citizens
ActorsFirms-Citizens
Government -Firms
Government-Firms
Government-Citizens
Firms-Citizens (through govern- Government-Citizens
ment)

Benchmarks(Essential)-Environmental Law-Environmental Administration-Environmental Information(Monitoring Data)ῌFirst phase῍ (In the case of-Regulation-Reaching the peak of pollution developing countries)-Graduation/Independence fromlevel and improvement
ODA
ῌSecond phase῍-Comprehensive Environmental
Management

Benchmarks(Important)-Negotiations between
Government-Firms,
Government-Citizen-Mass media-Negotiation, adjustment, and Voluntary approach of Firms
cooperation between Firms and and Citizens (Environmental
Accounting, Environmental ReCitizens
porting, Green Consumption,
and Advocacy Planning)

Source: Matsuoka and Kuchiki (2003)of the SEMS. Since this stage particularly focuses on the capacity development in thegovernment sector, the benchmarks in this stage should be the development of theenvironmental law (basic law and acts for speciﬁc pollution control mechanisms),
environmental administration, and environmental information. With regard to theenvironmental information benchmark, it is important to arrange the data by networking, understanding the environmental status, and then presenting the policy measures.
Thus, we use not only the number of monitoring stations but also the ﬁrst publicationof the State of the Environment and the like as speciﬁc evaluation indicators.
In the system-working stage, the system actually starts functioning to improve theῌ 64 ῌ

Capacity Development and Institutional Change in International Development Cooperation

environmental quality. This occurs in response to the improvement of the basic environmental administrative institutions. As the pollution trend changesῌfrom increasing todecreasingῌa turning point of the so-called environmental Kuznets curve is observed.
With reference to this, we focus upon the results of the implementation of government
regulation (reduction of pollution by ﬁrms) and the consequent change to a decrease inpollution levels. In order to evaluate the achievement of pollution reduction measures,the standard achievement ratio of SOxῌa typical industrial pollutantῌwill be observed
as the indicator. If the achievement ratio for all the monitoring stations in the country
is higher than 90ῌ, then it is considered to be an indication of the end of SOx pollution.
In developed countries, the Command and Control (CAC) has played a signiﬁcant role inpollution reduction at the system-working stage. The CAC requires the government toutilize its administrative capacity in order to understand the state of pollution, setregulation standards, and ensure that those responsible for pollution are complying
with the regulations. It is observed that as compared to the governments of developed
countries, the governments of developing countries lack this administrative capacity
and are therefore ine#ective in implementing the CAC. However, pollution reduction
can be realized e$ciently by e#ectively introducing the market based instruments(MBIs) for environmental regulation and utilizing the market mechanism (Matsuoka
2000).
The self-management stage is the stage wherein the system develops in a sustainable manner through the strong interrelations between the government, ﬁrms, andcitizens, and a comprehensive environmental policy is enforced. At this stage, ﬁrms andcitizens voluntarily adopt and participate in initiatives for environmental management.
For instance, ﬁrms voluntarily upgrade their facilities in order to obtain the ISO 14000
certiﬁcation as an in-house environmental management program, and in order toincrease the e$ciency of environmental management, they adopt environmental accounting. Moreover, they highlight their environmental management achievements inorder to court consumer appreciation and thus gain a competitive advantage in themarket. With regard to international cooperation, at this stage, a developing country
becomes less dependent on donor’s assistance and utilizes its own ﬁnancial and humanresources.
As a country experiences the development of SEMS, the roles and relationships ofthe three actors also evolve. The government sector plays an important role in managing and coordinating issues at the system-making and system-working stages; however,at the self-management stage, its responsibility evolves to supporting the ﬁrms and thecitizens by designing a framework for comprehensive environmental management.
Figure 16 shows the development of SCEM with the stages and benchmarks
mentioned above (China’s case). Considering economic indicators or passage of time as
the horizontal principal and SCEM index (a group of indicators) as the vertical principal,
it can be presumed that, by and large, China adopted the capacity development processthat is shown in the ﬁgure. After the enactment of the Environmental Protection Law as
the starting point of system-making, China entered a full-scale system-working stage
during the 9th Five Year Plan (1996῍2000). The 10th Five Year Plan (2001῍2005)
further accelerated this process. It is expected that China will be able to lay thefoundation for initiating the self-management stage between the period of the Beijingῌ 65 ῌ

Shunji Matsuoka

Figure 16 Development stages of SCEM: The case of China
Source: Honda et al. (2004)

Olympic Games in 2008 and the Shanghai Expo in 2010.
In terms of relationship between the three actors, the SEMS in China has changed
drastically. As shown in ﬁgure 16, the government had exclusively performed all thefunctions and roles at the system-making stage. However, during the system-working
stage, although the government continued to institute vigorous steps, the ﬁrms did
render some important tangible contributions to curtail pollution. In addition, therelationships between the actors, particularly between the government and the ﬁrms
grew stronger. Based on this, we can expect that during the self-management stage, amore balanced relationship, entailing the promotion of environmental industry andself-sustained growth of an environment-oriented market will be developed.
Moreover, we have also begun to apply the development stage analysis beyond theﬁeld of environmental management. Figure 17 describes the development stage analysis
of social capacity development for trade (particularly export promotion) in Malaysia.
The research is conducted for the JICA evaluation project (Thematic Evaluation:
Economic Partnership). We observe that it is possible to conduct the analysis based ona similar format of benchmarks and stage setting; nevertheless, the trade capacity has
its peculiar characteristics, such as the limited role of citizens and the vulnerability of
performance level to external conditions.
This section introduced and discussed the basic designs of speciﬁc analyticalmethods that form the components of the SCA. The methodology enabled developing
countries themselves to understand the current state of pollution and the problem ofsocial capacity. Adopting the analytical method mentioned here as a precondition, theﬁnal section deals with the following question: How to transform development and aid
policies into e#ective programs for attaining the capacity level that developing countries regard as their target.

ῌ 66 ῌ

Capacity Development and Institutional Change in International Development Cooperation

Figure 17 Social capacity development in trade: Malaysian case
Source: Hiroshima University - Mitsubishi Research Institute Inc. Joint Venture (2005)

6.

Designing the Program for Social Capacity Development and Institutional
ChangeThis section describes the program design for social capacity development andinstitutional change. Based on the SCA framework, the author develops the programapproach to identify the target level of capacity, and to provide speciﬁc strategies toachieve the target. The program presents an overall package consisting of: (1) the
relationship between social actors, (2) the input resources῍their quantity and timing,and (3) the institutional changes.
The program approach di#ers from the conventional stand-alone projects in many
respects. This approach considers the following: (a) wide and systematic approach; (b)recognition of mutual dependence of society, economy, and culture; (c) long-term project
implementation; (d) the harmonization of system development and its process; (e) focus
on the capacity of the recipient countries; and (f) cost reduction by avoiding redundant
aid projects (Bolger 2000). Table 10 shows a detailed comparison between stand-alone
projects and the program for social capacity development.
Sector-wide approaches (SWAPs) for social capacity development can be classiﬁed
as one of the approaches of the program. The SWAPs are primarily carried out in basic
education and healthcare sectors in the African countries. Jones and Lawson (2000)
characterize the SWAPs as follows: (i) the harmonization of policies between the donor
and recipient countries (policy alignment), (ii) e$ciency improvement in internal andexternal resource allocations, (iii) developing partnerships with local stakeholders, and(iv) emphasis on ownership. This characterization, however, is insu$cient. According to
the new deﬁnition discussed in this paper, the program is deﬁned as a program
involving three actors (government, ﬁrms, and citizens) and three factors (policy andmeasure, human and organizations, and knowledge and technology). Thus, the newsocial capacity development approach always takes the form of the program.
The program design begins with social capacity assessment based on the actorfactor matrix presented in Figure 18. When analyzing the pollution problem, the matrix
ῌ 67 ῌ

Shunji Matsuoka
Table 10 Programs and Stand-alone Projects
Principles

Stand-Alone Projects

Programs

Local Ownershup

Projects are often supply-led.

Based on locally owned programs,
involving a community of stakeholders.

Donor Coordination

Limited donor collaboration, leading
to ine$ciency.

A high level of donor coordination,ideally involving all of the donor
community, under national feaddership

Partnerships

Projects are often managed directly
by executing agencies of project
implementation units.

Programs are intended to involve
moverment towards the use of local
procedures and controls.

Attention to institutional development, governance issues, and eivilsociety participation

Projects attempt to ensure success by
establishing project-speciﬁc control
mechanisms. They thus attempt to
bypass, rather than solve, certain
institutional weakness.

Attention is brought to bear on
institutional, governance, and participation issues necessary to ensure
success and the accountability of local
institutions to their constituents.

Results-based Approach

Attention is focused on the success ofthe projects themselves, even thoughother conditions necessary to theachievement of development results
may not be met.

The focus is on results at the programlevel such as those identiﬁed in theMillennium Development Goals or in
the PRSs.

Source: Lavergne and Alba (2003)

is used to evaluate: (1) the current capacity for pollution abatement, (2) the criticalminimum capacity during the system-working stage, and (3) the gap between current
and critical minimum capacities.
It should be noted that in this paper, it is assumed that capacities are substitutablebetween the actors, but not between the factors, i.e., the capacities are complements
between the factors. For instance, suppose that the critical minimums for policy andmeasure, human and organizations, and knowledge and technology are 30, 50, and 10,
respectively. Then, the critical minimum of policy and measure (30) can either be
accepted solely by the government or it can also be accepted by the government and theﬁrms jointly. Any combination of actors is possible in order to achieve the criticalminimum; however, this is not true in the case of factors. Thus, the “Substitutability ofactors” and “complementarities of factors” are equally important in our framework. The
capacity gaps identiﬁed through the actor-factor matrix are expected to be ﬁlled by the
projects. These projects are the ones based on the program (referred to as programbased projects) and are di#erent from the conventional stand-alone projects.
Entry and exit points of the program and the projects themselves can be determined through the development stage analysis of social capacity. Figure 19 illustrates
the brown issue example. The ﬁgure shows the following institutional milestones
during the system-making stage: (1) enacting environmental law, (2) the establishmentof environmental administration, and (3) environmental information disclosure. Technical aids, such as the environmental center, are commonly provided by the JICA and canbe e#ective in the latter half of the system-making stage (i.e., developing the system ofenvironmental information disclosure).
In the system-working stage, it is important to focus on environmental businessῌ 68 ῌ

Capacity Development and Institutional Change in International Development Cooperation

Figure 18 SCA and Program Design
Source: Matsuoka et al. (2008)

planning, resource allocation and organizational development, and research and development pertaining to pollution reduction. In addition to these, the pollution control
management certiﬁcation system, compliance with regulations, and ﬁnancial assistancefor developing environmental technologies are also important. Aid programs/projects
can generally reach their exit point when the level of pollution decreases as per thetarget. In this stage, the environmental cooperation is horizontal, such as technology
exchange, research exchange, and civil exchange. At the same time, the environmental
policy measures take the form of economic instruments and self-regulation. Once this isachieved, the recipient countries will gradually move toward the self-management
stage.
Based on the basic design of the SCA studies, Figure 19 shows an entry and exit
point of aid in the case of social capacity and institutional change of environmental
management in developing countries.
7.

Conclusions
Considering the previous sections, what does a new approach to “capacity development and institutional change” mean as a development aid policy? Considering that the
new JICA will embody the aid approach, what does it mean? From Oct. 1st, 2008, yenῌ 69 ῌ

Shunji Matsuoka

Figure 19 Entry, Exit Point and the Development Stages
Source: Matsuoka et al. (2007)

loans by JBIC and grant aids by the Ministry of Foreign A#airs were integrated into the
new JICA. Therefore, this paper will focus on this point in conclusion.
According to a new approach of “capacity development and institutional change”,
and considering what the new JICA should do and how integration (synergy) e#ect isgenerated, the need and inevitability to convert to the “program approach” as a newparadigm of development aid is evident.
The embodiment of a new approach of “capacity development and institutionalchange” logically requires a target which development aid should keep in mind andfurther, the enlargement of a scope which includes relationships with social actors,
relevance among capacities, and a time frame as shown in Fig. 18 should also be kept inmind. This logic clearly shows how the “project approach” can be converted to the“program approach”. The author deﬁnes the program approach as a target and scope offramework as introduced in Figure 18. Based on the program approach in Figure 18,
individual projects, even though they are the developing countries’ own projects or
donor-supported projects, will be allocated in Figure 18. These projects based on the
program generally have large dimensions and long-term performances.
The new JICA (Japan) should be a leading donor, which aggressively moves ahead
to e#ective aid in accordance with the Paris Declaration in 2005, promoting not only
public private partnerships (PPP) with comprehensive operation of grant, technicalcooperation and yen loans but also public sectors like CSOs/NGOs or private ﬁrms, andit should furthermore cooperate with developing countries and/or donors.
However, these suggestions should be simultaneously considered while a new
approach of “capacity development and institutional change” is converted to the program approach. In order to expand the input scale within the range of constraints ofﬁnancial or human aid resources from the donor’s side, it is important to select programs(including the selection of aid allocation to recipient countries) based on certain priority.
It is imperative that the criteria and methods for these evaluations be established.
According to the Paris Declaration, it is obvious that a conversion to the “programapproach” by donors (new JICA) demands a program based approach (PBA) as adevelopment plan (including budgetary plan) in developing countries. However, theῌ 70 ῌ

Capacity Development and Institutional Change in International Development Cooperation

problem is that there are some shortcomings in the planning capacity of developing
countries. The planning capacity is divided into four factors: plan-making capacity, plan
implementing capacity, plan evaluating capacity, knowledge of plans, and planningtechniques. Those are important points that developing countries should engage in, inorder to improve their planning capacity. In this regard, the “program approach” hascharacteristics to expand input scale, time frame and emphasize upstream (on the topside).
In order to e#ectively work the program approach based on a new approach of“capacity development and institutional change” as a top-oriented and a upper oriented
approach, it is indispensable for not only the top-down approach (macro level) as
planning oriented, but also for the bottom-up approach (micro level) to make a full useof the plan based on information from the ﬁeld.
Institutions for the “macro/micro loop” connected to the macro and micro play animportant role and fulﬁll important functions. Utilizing an advantage of the Japanesestyle of aid, a new approach of “capacity development and institutional change” can beconsidered as an approach which makes the new JICA produce integrative e#ects. The
new JICA includes grant aid, technical cooperation, and yen loans.
Conversion to the “program approach” as an embodiment of a new approach of“capacity development and institutional change” has a characteristic which focuses on
total managed plan by a top-down approach, while information in the ﬁeld is also
important to carry out the program and increase the e#ectiveness with which institutions work.
The “feedback systems of macro and micro”, the so-called institutions of the“macro/micro loop”, is considered as a decisively important factor for e#ective program
implementation and e#ective aid as stated in the Paris Declaration. Information fromthe ﬁeld, which has been considered as one of JICA’s strongest points, should be utilized
in the process of the program in the future.
Acknowledgements
This paper was presented at the Seminar on Capacity Development and Institutional Change as a keynote speech on July 17 & 18, 2008 at JICA-IFIC in Tokyo. This
paper is mainly based upon Matsuoka ed. 2007 and Matsuoka et al. 2008. Japaneseversion of this paper published in this journal (Journal of Asia-Paciﬁc Studies), No. 11,
but the contents are di#erent from this English paper. Some of discussion points in thispaper also are based on Research Group on International Development Cooperation at
Waseda University. This Research Group is organized by not only academic community
but also aid community like JICA and JBIC. Mr. Hidekazu Iwamoto and Ms. Ragnheidur
Reynisdottir at Waseda University assisted me to make this English paper.
This study is supported Waseda by University Global COE Program, “Global
Institute for Asian Regional Integration” (FY2007῍FY2011).
References
Alexander, J. C. et al. eds. (1987), the Micro-Macro Link, Univ. of California Press, Berkley
Aoki, M. and Okuno, M. eds. (1996), Comparative Institutional Analysis of Economic Systems, Tokyo University
Press, (in Japanese).

ῌ 71 ῌ

Shunji Matsuoka
Aoki, M. (2001), Towards a Comparative Institutional Analysis, MIT.
Bergs, E. and UNDP (1993), Rethinking Technical Cooperation: Reforms for Capacity-Building in Africa, UNDP.
Bolger, J. (2000) Capacity Development: Why, What and How, Capacity Development Occasional Series, No. 1,
Canadian International Development Agency.
Brown, S. ed. (2002), Developing Capacity through Technical Cooperation, Earthscan, London.
Cassen, R. (1986), Does Aid Work?, Oxford University Press, Oxford.
Evaluation Team on Environmental Cooperation, Japan Society for International Development (JASID) (2004)
Thematic Evaluation (Environment) by External Party, Environmental Center Approach: Development ofSocial Capacity for Environmental Management in developing Countries and Japan’s Environmental Cooperation, Japan International Cooperation Agency, (in Japanese).
Fare, R., Grosskopf, S., Norris, M., and Zhang, Z. (1994) Productivity Growth, Technical Progress, and E$ciency
Change in Industrialized Countries, American Economic Review, Vol. 84, Issue 1: 66῍83.
Fukuda-Parr, S. (1996), “Beyond Rethinking Technical Cooperation”, Journal of Technical Cooperation, 2(2), pp.
145῍157.
Fukuda-Parr, S. et al. ed. (2002) Capacity for Development: New Solutions to Old Problems, Earthscan.
Hiroshima University-Mitsubishi Research Institute Inc. Joint Venture (2005), JICA Asia Region Thematic
Evaluation “Economic Partnership”, Brieﬁng Material for 4th Review Meeting, (in Japanese).
Honda, N., Matsuoka, S. and Tanaka, K. (2004) Causal and Structural Analysis on Social Capacity Development for Environmental Management in Japan’s Air Pollution Problems, HICEC Discussion Paper SeriesVol. 2004῍7, (in Japanese).
Jones, S. and A. Lawson (2000), Moving from Projects to Programmatic Aid, OED Working Paper Series, 5.
Lavergne, R. and Alba, A. (2003) CIDA Primer on Program-Based Approaches, Canadian International Development Agency (CIDA).
Lopes, C. and Theisohn, T. (2003), Ownership, Leadership and Transformation: Can We Do Better for Capacity
Development, Earthscan.
Matsuoka, S. (2000) Environmental policy in Developing Countries: Instruments and E$ciency of Regulations. Journal of International Development Studies, 9.2 : 17῍37, (in Japanese).
Matsuoka, S. and Kuchiki, A. eds. (2003), Social Capacity Development for Environmental Management in
Asia: Japan’s Environmental Cooperation after the Johannesburg Summit 2002. IDE Spot Survey,
IDE-JETRO.
Matsuoka, S., ed. (2004), International Development Studies, Toyo-Keizai-Shinpo-sha, (in Japanese).
Matsuoka, S., Okada, S., Kido, K. and Honda, N. (2004), Development of Social Capacity for Environment andInstitutional Change, Journal of International Development Studies, 13(2), 31῍50, (in Japanese).
Matsuoka, S. (2005), Social Capacity Development for Environmental Management and International Cooperation, in the second research report. Incubation Research Project 31 “Total Changes in Environment andbuilding the society for regional environmental cooperation in East Asia”, (in Japanese).
Matsuoka, S. ed. (2007), E#ective Environmental Management in Developing Countries: Assessing Social Capacity
Development, Palgrave-Macmillan, London.
Matsuoka, S. et al. (2008), Capacity Development and Social Capacity Assessment (SCA), Journal of Evaluation
Studies, 8(2), pp. 3῍23.
Ministry of Environment, Japan (2005) Quality of the Environment
Morgan, P. and Taschereau, S. (1996), Capacity and Institutional Assessment; Framework, Methods and Tools forAnalysis, Canadian International Development Agency (CIDA).
Murakami, K. and Matsuoka, S. (2005), Evaluation of Social Capacity for Environmental Management,
Submitted to the Japanese Journal of Evaluation Studies, (in Japanese).
North, D.C. (1990), Institutions, Institutional Change, and Economic Performance, Cambridge University Press.
Nose, Y. (1996) Ecological Community-Roles of Public Health Scholars for the 21st Century. Kindai-bungeisya, (inJapanese).
OECD (2005), the Paris Declaration. http://www.oecd.org/document/18/0,2340,en_2649_3236398_35401554_1_1_1_1,00.html
Ostrom, E. (2005), Understanding Institutional Diversity, Princeton U. P., Princeton
Scott, W. R. (1995), Institutions and Organizations, Sage Publications, Thousand Oaks
Tanaka, K. and Watanabe, M. (2005), Social Capacity for Environmental Management and its Indicatorῌ 72 ῌ

Capacity Development and Institutional Change in International Development Cooperation
Development: Environmental E$ciency Approach, Presented at the Japan Society for International
Development, 16th Conference, November 26῍27, 2005, Kobe, Japan, (in Japanese).
Taylor, p. and P. Clarke (2008), Capacity for Change, IDS http://content.undp.org/go/cms-service/stream/
asset/?asset_id1531706 (2008/5/7)
UNDP (1994), Capacity Development: Lessons of Experience and Guiding Principles, UNDP
UNDP (1998), Capacity Assessment and Development in a Systems and Strategic Management Context, UNDP
UNDP (2006), Institutional Reform and Change Management: Managing Change in Public Sector Organizations,
UNDP
UNEP /WHO (1996), Air Quality Management and Assessment Capabilities in 20 Major Cities, MARC, London
UNDP/WHO (1996), Air Quality Management and Assessment Capabilities in 20 Major Cities, the Monitoringand Assessment Research Center.
UNDP (1998), Capacity Assessment and Development in a Systems and Strategic Management Context, UNDP/
BDP/Management Development and Governance Division.
Williamson, O. E. (2000), “the New Institutional Economics: Taking Stock, Looking Ahead”, J. of Economic
Literature, 38(3), pp. 593῍613
World Bank (2007), Capacity Development in the World Bank Group: A Review of Nonlending Approaches,
http://siteresources.worldbank.org/INTCDRC/Resources/CDBrief23.pdf (2008/03/18)
Yeager, T. J. (1999), Institutions, Transition Economies, and Economic Development, Westview Press.
Zhang, J., Fujiwara, A., Tanaka, K., Senbil, M. and Nagashima, K. (2004), Methodology of Developing Social
Capacity Indicators for Environmental Management: State-of-Art and Future Directions, Proceedings of
the Second Expert Meeting on SCEM Capacity Indicators and Development Process Modeling, (in Japanese).
 , Japanese materials (1998),  !"# (2004) $%&'()*+,-./ 0123456789: (2005) ;<&'78=>?@AB JBIChttp://www.jbic.go.jp/japanese/oec/policy/index.php(2008/3/18)
5678CD (2004), EFGH-. I.J+KL, M,NOP JICA Q=)RSTUVWTXYZ[\Z] JICA http://www.jica.go.jp/kokusouken/enterprise/chosakenkyu/cd/200403_b.html (2008/6/
18)
5678CD (2006), ^_5)`aT]bcdefghijkl8)m_Xnopq / EFGH-. I.J+
KL, (CD)rCD Ustu JICA v CD Xwxyz JICA Q=){|]wx}u~ur JICA http://
www.jica.go.jp/kokusouken/enterprise/chosakenkyu/cd/200603_aid.html (2008/6/18)
5678CD (2007), Q=L, M,NO JICA http://www.jica.go.jp/kokusouken/enterprise/chosakenkyu/ﬁeld/200712_aid.html (2008/02/13)  (2006), 56C]5C][EFGH-. I.J+KL,)
m  17 %EFGH-. I.J+KL, FASID
  (2002) ] [l8Ustu¡ 56 56(¢ 11(2), pp. 149῍
172£¤¥¦ (1999), 0+ + 1K]§¨q¡ &'© 164(5), pp. 1῍73.

ῌ 73 ῌ