GRIPS Development Forum
Discussion Paper

Development Coordination:
A challenge to Japan’s development assistance for poor countries

TAKAHASHI

April 2005

Motoki© GRIPS Development Forum
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URL: http://www.grips.ac.jp/forum/Development Coordination:
A challenge to Japan’s development assistance for poor countries

TAKAHASHI Motoki

April 2005

The author is professor at the Graduate School of International Cooperation Studies,
Kobe University. This paper is an English version of “Enjo-kyotyo: Nihon no
Tai-Hinkonkoku-Kyoryoku eno Toi,” IDCJ Forum, 23, 2003. But this version has been
substantially abridged and modified in consideration of various recent developments. This
paper was also presented at the ODI workshop on “Aid to Africa and the U.K.’s ‘2005
agenda’: perspectives of European donors and implications for Japan” held in London (March
31, 2005).
The paper was first translated by Ms. HANAKI, Nina without whose assistance itwould not have been completed.

Development Coordination:
A challenge to Japan’s development assistance for poor countries

1. Introduction ......................................................................................................................... 1
2. ‘A traditional Japan’: deviation from the reform trend ....................................................... 2
3. East and West: different backgrounds of foreign aid .......................................................... 6
4. Historical Legacies: Japan’s unique foreign aid background.............................................. 9
5. Japan’s new initiatives and the hurdles ahead................................................................... 16
6. Conclusion......................................................................................................................... 18
References ................................................................................................................................ 19

1.

Introduction

Japanese development assistance is now at a cross-road. Within Japan, the budget forODA (Official Development Assistance) has been rapidly reduced beyond all expectation. In
the international community, a reform is under way that may radically change the role ofdevelopment assistance. The main issue of the current reform is international development
coordination. Facing rapid reduction in the ODA budget, Japan is restructuring her
development assistance by putting more emphasis on the quality of aid than the quantity. But
many hurdles remain in her development coordination efforts. This paper aims to examine
issues related to Japan’s stance toward international development coordination and theirbackground. The following points will be discussed in detail.
・

Why has Japan’s stance toward development coordination been so different from thatof other donors, especially the U.K.?

・

Japan has been slowly and partially changing to catch up with the new trend of aid
reform and development coordination. What are those changes?

・What are the hurdles and stumbling blocks in the way of Japan’s efforts to make ODA
more effective?

“Partnership” has become a key word in the discussion of international aid policies.
The “Millennium Development Goals (MDGs),” resolved in 2000, emphasised theimportance of establishing a global partnership for poverty reduction. If international
development coordination is an effective step toward building such a partnership, there is no
choice but for Japan to participate in it. However, the Japanese response to this international
reform trend toward development coordination has been reactive and slow. As discussed
below, the reasons for such an attitude lie in the historical and structural background ofJapan’s ODA. Yet the situation has been gradually changing. Recently, Japan has taken new
initiatives in development coordination. It is important for us to explore whether these new
initiatives may lead to more substantial reform of Japan’s ODA for poor countries.
Section 2 of this paper summarises the trends toward aid coordination, examining
how reformist donor countries, including the United Kingdom, try to coordinate their aid
activities with others. The various problems that Japan faces, due to the difference of her own
approach to development assistance, are contrasted with the progress made by those reformist
donors.
Section 3 examines the origin of development coordination. The discord between
approaches to development assistance between reformist donors and Japan suggests theexistence of a huge perception gap between Japanese and Westerners. Looking back to theorigin of development coordination, formed by notably European donors, the nature of such a1perception gap is clarified.
Section 4 discusses the background of the perception gap from the Japanese point ofview. In particular, it explores how the unique historical background of Japan’s development
assistance produces such a gap in perception with other donors and makes it difficult toparticipate in the present coordination of development. These difficulties illustrate why Japancannot play an appropriate role in development partnership for poor countries.
Lastly, in section 5, progress in Japan’s initiative in development coordination andaid reform is briefly explained.

2.

‘A traditional Japan’: deviation from the reform trend(1) The new reform trend and country development coordination
Cooperation and coordination among development stakeholders can take place atvarious levels. In addition to the Development Assistance Committee of the Organisation for
Economic Cooperation and Development (OECD-DAC), board meetings of various
international organisations can be for coordination. More importantly perhaps, G8 summit
meetings are increasingly strengthening their function as policy coordination vehicles amongmajor bilateral aid donors. Furthermore, the US-Japan Common Agenda, the Global Issue
Initiative (GII), and the Strategic Partnership with Africa can be listed as initiatives taken by
development stakeholders to cooperate in solving global issues.
The most difficult challenge for Japan is not these rather general initiatives among
donors, but development coordination which influences donors’ concrete activities in the fieldin each recipient country. (Hereafter we call this ‘country development coordination’.) The
present paper focuses on this level of development coordination, namely, the coordination
among stakeholders in a specific recipient country, including the recipient government anddonors1.
In public administration, “coordination” among different administrative organisations
is distinguished from “cooperation”; the former implies more restriction on the independenceof each organisation. Development coordination in a recipient country is to be regarded as
1

Aid coordination rather than development coordination may be the more common terminology. But in thecurrent movement for coordination in recipient countries, recipient governments are expected to take aleadership role, i.e., to sit in the driver’s seat (Harrold et al., 1995). Also, private stakeholders in recipient
countries are encouraged to participate in the process. Furthermore, the supreme aim of the coordination inquestion is not only to change aid relations and thereby improve aid effectiveness, but also to achieve
higher development and poverty reduction goals through better institutional settings of recipient
governments. In the present paper, development coordination is to be used.
2

“coordination” in the sense that it requires the recipient government and donors tocompromise their own ‘interests’, and it also requires concrete changes in the way aid
activities are carried out2.
In what follows, we describe country development coordination and illustrate how it
is becoming a critical issue for Japan’s practice of aid for poor countries.
(2) The objective of the reformist donors’ approach to country development coordination
The strong international trend toward country development coordination has beencreated and promoted mainly by several northwest European donors (or the so-called
like-minded group). What is the new approach to aid promoted by this reformist trend? How
does it cause difficulties for Japan’s foreign aid?
Among the so-called reformist donor countries, the Department for International
Development (DfID) of the U.K. has been the most vocal in putting forward a typicalframework of thoughts and practices related to country development coordination. Its
understanding of the country development coordination framework can be summarised asfollows (DfID, 2001, pp. 81-83):
1) Development assistance by all donors must be provided in accordance with
development strategies (in most cases, Poverty Reduction Strategies [PRS])
formulated by recipient governments at both macro- and sectoral level.
2) The amount of aid given by all donors must be aligned with the recipient
government’s annual budgets and fiscal frameworks in the medium-term. This
enables the budgeting agency in each country to capture flows from all aid
resources and make them predictable in the long- term.
3) Based on 1) and 2), resources must be allocated selectively to the most importantsectors. Among the priority sectors are direct poverty reduction, such as basic
education and primary healthcare, on which northwest European donors have
conventionally placed high importance. Prioritisation of these sectors is also
currently legitimised by mainstream economics as practiced by economists of the
Bretton Woods institutions.
4) The foreign aid of all donors must be harmonised under the same procedures.
Donors are recommended to contribute funds to sectoral common pools or, moredesirably, directly to the recipient government’s budget.
5) As a prerequisite for financial support for common pools or government budgets,
macroeconomic management of recipient governments must be stable, and their2

See Rogers et al. (1982).
3

financing and procurement systems must be transparent and accountable. The
process of donor budgetary assistance should also improve these systems.
Behind these ideas, there seems to be a strong concern about resource fungibility.
The reformist donors, including the U.K. and the World Bank, have discussed and tried tomake better use of fungibility. Fungibility could encourage the dubious use of financial
resources but, on the other hand, could facilitate flexibility and traceability. Any resources are
fungible. Even if aid is provided in kind, e.g., in the form of equipment or expertise, it could
cause fungibility effects by giving recipients the ability to use the freed-up resources forundesignated purposes. Budgetary supports would be superior to aid in kind since they are
more flexible and support better resource allocation. It would be also superior in a very
different sense. It would enable a donor to have tracing claims on the use of money. Becausemoney is fungible, a donor could claim traceability for every unit of currency, an indivisible
portion of which is originally its contribution. The donor could also potentially claim
accountability for the utilisation of the entire budget in terms of final development outcomes.
This could lead to improvement in the financial and resource management systems ofrecipient governments at the end of the day if it was associated with action on the
procurement side.
If each donor gives aid according to its own aim and motive with its own modalities
and procedures, the recipient government would have to bear great managerial (transaction)
costs. This often causes aid proliferation, discussed later, which undermines ownership byrecipient governments. General budgetary supports can reduce transaction costs, as they are,by definition, supposed to be part of government development strategies and the most flexible
modality of aid.
In contrast, if donors stick to the conventional way of providing aid in kind and aresatisfied with simply verifying the output rather than outcome of projects or procurements, theabove-mentioned positive effects of fungibility cannot be expected.
Only under certain conditions, however, could the positive effects of direct budgetary
support be brought about. Not even the U.K.’s DfID considers that it can function in every
developing country. As stated in 5) above, direct budgetary support must be limited to those
recipient governments with sound macroeconomic, especially fiscal management andappropriate development strategies.
(3) Japan’s traditional approach to development assistance and its uniquenessThe above-mentioned DfID approach to development coordination has been widely
supported. The World Bank and International Monetary Fund (IMF) may have some minor
technical differences due to their organisational mandates, but they now share the same basic
4conceptions of development coordination with DfID and others3. The approach has great
influence on the formation of development coordination and the reform of aid to poor
countries in Africa and elsewhere. We can call this the reformist approach.
Unfortunately, such a reformist approach to development coordination is notcompatible with Japan’s traditional approach to ODA. The following five characteristics ofJapan’s aid are important to understand:1) Japan’s aid is basically project-based and its activities are largely isolated fromothers. Therefore, Japan’s aid projects are self-contained (or output-oriented
rather than outcome-oriented), even though much attention is now being paid tomacroeconomic policies and the budget of recipient countries.
2) Most Japanese assistances are aid in kind. In other words, they are based on thephysical transfer of materials and personnel, namely the construction of facilities,
donation of equipment, seconding of experts, training of invited people fromdeveloping countries, and so on. Japan has rarely provided cash directly torecipient governments, largely because it has believed that aid in kind could
prevent the dubious use of aid resources.
3) Closely related to 2), Japan’s aid has not been aimed at covering recurrent
expenditures, e.g., government officials’ salary, operational costs, or maintenancecosts for facilities. This stance is utterly different from the common poolcontributions or the general budgetary supports that aim to support both recurrent
and capital budgets indiscriminately.
4) Strictly based on the single-year budgeting principle, Japan does not giverecipient governments any projection of concrete financial assistance beyond thecurrent year. Therefore, it is very difficult for recipient governments toincorporate details of Japan’s assistance into the budget for next year and into
medium-term fiscal programs.
5) Although there are some exceptions, Japan’s grant aid and technical assistanceare basically tied to Japanese contractors.
If Japanese aid continues to be provided in this manner while the reformist approach
becomes more prevalent, Japan may not be able to carry on development assistance in poor
countries. There have been some remarkable efforts within Japan to reform this conventional
3

The World Bank and the IMF are officially supposed to request and assist governments of poor

developing countries to formulate Poverty Reduction Strategy Papers (PRSP) and related fiscal programs
such as Medium-term Expenditure Frameworks (MTEF) as conditions for debt forgiveness under the
HIPCs scheme and for the provision of fresh financial assistance.
5

position that will be discussed below. Yet those efforts are still patchy and partial and, overall,
progress has been slow. The reasons for this lie in the historical and structural background ofJapanese foreign aid, which is very different from that of Western donors. A comparison
between Japan and Western donors would be valuable for our further discussion and follows
in Section 3 and 4.

3.

East and West: different backgrounds of foreign aid(1) Origins of the reformist trend in aid approaches
To build mutually beneficial relationships between Japan and Western donors, anunderstanding of each other’s different backgrounds is essential. It is difficult for Japanese tounderstand what motivates and facilitates Western donors’ current approach of development
coordination. We can cite at least five factors behind the rapid progress of reformist
development coordination in some poor countries in recent years:• The rise of post-neoclassical thought: the New Public Management andoutcome-oriented resource management• Aid policy coordination: partly facilitated by Europe’s political and economic
integration• Enhanced HIPCs Initiative: heavy debt crises and debt forgiveness for poor countries• Democratisation in Africa and other poor countries: more accommodativeenvironment for accountable and transparent governance• Failures of aid: including the disappointing results of Structural Adjustment
Programmes (SAP)In addition, it is important to mention the long history of discussion of the need forprogram aid and aid coordination in the West. This dates back as early as the 1960s, when
Chenery and Strout, the founding fathers of the two-gap theory, stressed the importance of all
donors agreeing on the direction of macroeconomic policy and coordinating their aid
activities. They also indicated the need for a program approach tightly coupled withmacroeconomic policy conditions, such as increased savings. (Chenery and Strout, 1966,
pp.726-728). Their idea was materialised as SAP in the 1980s, when other donors gathered tosupport the World Bank and International Monetary Fund (IMF) in implementing neo-liberal
reform policies, though SAP might be a little different from what the two scholars had
expected.

6

(2) Failures of aid and the crisis of the 1990s
Among above-listed origins of contemporary development coordination, failures ofaid are most relevant to the comparison of Japan and the reformist donors. The important
issue here is that Western donors, especially Europeans, experienced aid fatigue since the1970s. In the case of Japan, such aid fatigue has not taken place or has been far less serious.
This difference is due mainly to the identity of the respective recipient countries. The
Europeans’ major recipients are Sub-Saharan African countries, while Japan has been
concentrating substantial amounts of ODA on East Asian recipients (see Table 1).
From the 1970s to the 1990s, Africa had been in a state of grave stagnation. To save
Africa, the international community had tried numerous aid approaches, from assistance forgovernment-led industrialisation to a focus on basic human needs (BHN) to SAP. In the 1980s,
every effort was largely futile. This triggered a strong suspicion about the effectiveness offoreign aid itself, which was the beginning of aid fatigue.
Let us refer to the argument on development assistance by Hyden. Hyden discussed
problems of African aid in the early 1980s in a comprehensive manner. He witnessed manydifficulties and failures of development activities in Africa. He criticised both donors andrecipients for their failures which made the latter’s aid dependencies deeper and undermined
aid effectiveness.
According to Hyden, there were four major failures on the donors’ side. Firstly, theiractivities were based on an inappropriate development plan that ignored the peculiar situationin Africa.
Secondly, foreign aid had grown so much that it covered the majority of the recipient
countries’ development (capital) budget. In order to make effective use of the aid, recipient
countries needed to provide sufficient recurrent expenditure. However, because of theimbalance between the development budget and the recurrent expenditure, development
assistance did not have much effect. If aid covered recurrent expenditures in order to avoid
this situation, the aid dependency of recipient countries would become even higher and resultin donors’ deeper intervention in the domestic policies of the recipient countries.
Thirdly, there was heavy procedural burden on recipient country who received aid
from numerous donors.
Fourthly, there was inconsistency in standards or specification of equipment andfacilities because donors with tied aid execute their development assistances in a mutually
exclusive manner without coordination among themselves (Hyden, 1983, pp.165-167,
pp.172-179).
Moreover, according to Hyden, there were problems on the side of the recipient
countries in Africa. African society was pre-capitalistic, a situation in which the influence ofeach social group was based on ethnicity, blood relations or birth place. The mechanisms of7

capitalism and the market were immature, and governments’ capacity was feeble. As thesegovernments could not allocate resources, including foreign aid, according to economic
rationality, the large amount of aid for the BHN encouraged society to demand various kindsof undue resource distribution from their governments (Hyden, 1983, pp.165-167).
Among Hyden’s criticisms of donors mentioned above, the last three were not the
failures of individual donors, but were caused inadvertently and indicated the need for somekind of coordination among stakeholders. In a comprehensive research on the effectiveness offoreign aid initiated in the 1980s, Cassen and associates analysed the problems that occurred
when numerous donors executed activities without coordination. In Tanzania and elsewhere,
there were numerous on-going aid projects, and competition among donors and projects wasobserved. There was competition for talented local personnel and for the recurrent budget ofthe recipient government. Compared to the resources available for using and absorbing
foreign aid in the recipient countries, too much and too fragmented foreign aid was flowing in.
Cassen et al. called this situation ‘project proliferation’, and called for coordination among
donors in order to solve it (Cassen et al, 1994, pp. 174-190). Hyden and Cassen observed thesame situation of aid proliferation or aid bombardment.
As careful readers must already have noticed, the reformist approach to development
coordination promoted by the DfID corresponds to the aid failures or aid proliferation that
Hyden and Cassen described. An origin of development coordination can be found in thesuspicions and criticisms of aid to Africa raised in the midst of the aid fatigue of the 1980s.
Although aid failures in Africa had already become visible in the 1980s, a large
amount of aid still flowed into poor countries and was accelerated by the strategic
considerations of the Cold War. This only aggravated the situation of aid proliferation. As aresult of the sudden decline of strategic importance of aid to poor countries after the Cold War,
however, many criticisms and suspicions about aid rose to the surface, especially when donor
governments found themselves in acute fiscal situations. In the 1990s, many developed
countries like U.S. started to restrain and even to reduce the ODA budget. As the effectivenessand raison d’être of aid were heavily debated; the situation became grave to the extent that the
U.S. Congress seriously discussed the abolition of the U.S. Agency for International
Development (USAID).
OECD-DAC enunciated a ‘New Development Strategy’ 4 in 1996. This was adeclaration of restructuring of aid by the donors themselves in response to the aid crisis. The
document stressed the importance of various kinds of partnership and ownership in aid
recipient countries. In the New Development Strategy, aid coordination among donors was
mentioned as an important part of partnership. It aimed at obtaining clear results ofdevelopment through aid. Many goals stated in the ‘Millennium Development Goals’ (such as
4

The official title is ‘Shaping the 21st Century: The Contribution of Development Co-operation’.
8reducing the ratio of the people living under the poverty line by half by 2015) were alreadydeclared in this document. The New Development Strategy demonstrated bilateral donors’
determination to restore the raison d’être of development assistance by raising thedevelopment effectiveness of aid through partnership among donors. Behind thedetermination, there was grave reflection on the past situation of aid wherein fragmented
projects were implemented in a mutually exclusive manner. On the other hand, thedocument’s emphasis on the responsibility of developing countries implied that donors
regarded many governments in poor countries as excessively dependent on aid and notequipped with a very strong will for development.
In the latter half of the 1990s, development coordination developed at the sectorallevel, such as basic education and primary health care. Since its publication of a monumental
research paper on Sector Investment Programs (SIPS) in 19955, the World Bank strengthened
its support for development coordination in each sector. Development coordination among
donors, which had been limited to the macro-level (i.e., support for SAP) in the 1980s was
raison d’être then extended down to the sectoral level. This implies that aid coordination
started to regulate the concrete activities of donors. One could say that country development
coordination was born at this time.

4.

Historical Legacies: Japan’s unique foreign aid background(1) Uniqueness of Japan’s ODA
As we confirmed above, Japan is faced with difficulties in taking part in development
coordination. This is because Japan’s conventional approach to foreign aid does not accord
with what development coordination requires. To understand the reasons for Japan’s different
stance in international society, we need to review the background of Japan’s ODA.
There are various points on which Japan’s ODA history clearly differs from other
donors, especially northwest Europeans, including the U.K. Among them are the following:
・・・・The fragmented decision-making about ODA
The reactive nature of Japanese foreign policy, as inherited from the past
The large role of the private sector and its vested interests
Suffering little of aid fatigue

It might be beneficial for us to explain each of the four points. Firstly, we will brief theformer three points hereinafter.
5

See Harrold et al. (1995).
9

Fragmented decision-making about ODA.
Up to the 1990s, there was increasing reflection inside Japan about the fragmented
decision-making of national policies. Foreign policy in general and ODA in particular were no
exception.
The origin of fragmentation of national policy-making dates back to the 19th century.
The Imperial Constitution proclaimed in 1889 gave each ministry strong autonomy. Ministers(virtually ministries themselves) were supposed to be responsible directly to the Emperor, notthe premier or the Diet. It is understood that this ministerial autonomy led to theuncontrollable invasion of the Asian continent by the army.
Even after the dismantling of the militarist state after the Second World War, theministerial autonomy syndrome persisted. It was said, in a bit of caricature, that Japan was acountry of ‘ministries without government.’ In the latter half of the 1990s, this was the mostimportant problem to be solved in the process of administrative reforms. One solution was for
the Cabinet Office to absorb various inter-ministerial coordinating functions. For ODA,
individual ministries still hold decision-making power in each sector, while the Ministry ofForeign Affairs (MOFA) has struggled to gain superior power. It has not been very successful,partly because its position within the government structure has been undermined by recent
scandals.
Inside the ODA machinery, we can point to another kind of fragmentation. MOFA’s
ODA administrative systems and implementation agencies (like JICA and JBIC) were set up,
so to say, by modality-wise. Organisation on the basis of modality tended to deprive staff ofregional or national concerns. It was not incorrect to say that serious incompetence of a partof the ODA machinery was caused by its structure.
The reactive nature of ODA policy.
As Calder pointed out, Japan’s foreign economic policies have been largely reactive,
although there have been various efforts to overcome this recently. Japan’s ODA has been all
the more reactive and thus the country has been very conservative in its involvement in thepolicy issues of recipient countries. This also has a historical basis.
Japan’s ODA originated in reparations and related compensation to neighbouring
countries for the invasion and colonial rule before and during the Second World War. In otherwords, Japan’s aid started with the country’s ethical debts to the main recipient countries, such
as Indonesia and China.
This is a very important point in thinking about the difference between Japan andWestern donors. It is not unusual for Western donors to express their opinions about domestic
policies in the recipient countries. In some cases, they require that a recipient country change
its domestic policies in exchange for aid. These active attitudes have been gradually

10reinforced through trial and error to overcome the failures of development and aid6.
However, for Japan, with grave ethical debts to Asian countries, aid relations withmain recipients in Asia were thoroughly different. In this sense, Japanese aid activities havetended to be limited to purely economic or technical matters that appeared remote frompolitics and comprehensive policy issues. It naturally follows that Japan repeatedlyemphasised the request-based approach for making aid projects, because Tokyo would like toat least pretend to avoid involvement in the decision-making process of aid recipient
countries.
This modest stance in aid relations is not necessarily negative. Ishikawa stressed thatJapan’s peculiar advantage was to place priority on interactive policy dialogues. Yet thecontemporary issue is that the Japanese government lacks readiness and resources to beengaged in in-depth policy dialogue, which is definitely due to the reactive stance toinvolvement in policy issues in the past (Ishikawa, 2005, pp. 17-23).
The large role of the private sector and its vested interests.
If we applied the request-based approach literally, lack of information and an increasein aid transaction costs could occur. It is not unusual for donors to have insufficient
information about domestic affairs in aid recipient countries. The governments of recipient
countries, on the other hand, often do not have the technical abilities needed for finding andcompleting aid projects. The procedures for requesting aid from donors are often complicatedand, to make matters worse, they differ from donor to donor. In the conventional style ofJapanese aid giving, the lack of information and the cost of clearing procedures wereaddressed by the activities of Japanese private corporations7. It was because there were highpossibilities that finding and formulating aid projects by private companies led to their profits
after successful bids. As Esho pointed out, the relation between the request-based approachand private companies’ involvement under the system of tied aid was two sides of the same
coin (Esho, 1994, p. 228)8.

6

The term ‘partnership’ perhaps can be regarded as a screen behind which donors become actively
involved in the domestic matters of developing countries.
7
It is unfortunate that the negative side of private companies’ active roles is not yet eliminated; forexample, bribery was recently discovered in a project of grant aid to Mongolia. Private companies have
many advantages in finding and forming aid projects. On the other hand, there is the possibility thatcompetition, which is not based on fair rule, does damage to the potential effectiveness and efficiency of
the aid. It is worse if the governments of development countries have problems of corruption andincompetence.
8
The Japanese preference for project aid to program aid might deeply be connected with the vested
interest structure. To formulate program aid, which involves comprehensive policy in developing countries,
was not an activity private companies could easily undertake, nor did they have any incentives for doing so.
11

As Esho also pointed out, the turning point for Japanese aid came when the country
drastically reduced the tied ratio for yen-denominated development loans in response tocriticism from other donors after the 1980s (Esho, 1994, p. 229). In the 1990s, Japan
introduced ‘the joint project formulation principle’ in place of the request-based principle, andthe necessity of policy dialogue with recipient countries was newly stressed. An assistancestrategy for each main recipient has been laid down, and consistency between individual
activities/projects which had earlier been executed in an isolated manner has been seriously
pursued. Exercises of aid project formulation, which had been undertaken by privatecompanies under the request-based principle, have begun to be carried out mainly by thegovernment’s implementing agencies.
Yet there still remains a vested interest structure underpinned by strong stakeholdersof grant aid and technical assistance who would feel the negative impacts of untying aid.
Overall, the Japanese government at present looks very vulnerable to pressure from them.
(2) No failures of aid?
As explained above, the main recipients of Japan’s aid were the neighboring
countries in Asia. Table 1 is the list of the top five aid recipient countries of Japan and the U.K.
in the past. We take the example of the U.K. as a representative case of reformist donors.

Ranking

Table 1: Top five aid recipient countries of Japan and the U.K.
1970
1980
1990

1999*

Japan
1
2
3
4
5

Indonesia
Korea
Pakistan
India
Philippines

Indonesia
Bangladesh
Thailand
Burma
Egypt

Indonesia
China
Philippines
ThailandBangladeshIndonesia
China
Thailand
Vietnam
India

U.K
1
2
3
4

India
India
Bangladesh
India
Kenya
Bangladesh
India
Bangladesh
Nigeria
Zimbabwe
Kenya
UgandaPakistan
Sri Lanka
Pakistan
GhanaWest Indies
5
Tanzania
MalawiTanzania(British territory)* Latest figures available.
Note: From White paper on official development assistance, by Economic Cooperation Bureau, Ministry ofForeign Affairs, Japan, Various years.

12Compared to Japan, in which many recipients were neighboring countries in East Asia, theformer colonised countries of South Asia and Africa were the majority of U.K. aid recipients9.
This geographical characteristic has a great influence on Japan’s approach to aid and its
perception of development coordination.
Broadly speaking, Japan is located in the same area as her main aid recipients, which
is a unique experience among donor countries. European donors find their major recipients in
Africa. A host of Japanese advanced technologies, such as irrigated agriculture, wereapplicable in recipient countries in East Asia because these technologies were invented in thecommon environment characterised by high population density and monsoon weather. This isan advantage for Japan-East Asian aid relations compared to Europe-Africa aid relations. In
order to assist the technological progress of Africa’s agriculture, for example, Europeans orother donors had to develop new technologies, completely different from their own
technology, which was appropriate for a tropical climate.
Secondly, Japan had been the only industrialised nation and thus almost the only
ODA donor in East Asia for a long time. This situation is far different from that of European
donors. In Europe, all neighboring countries are aid donors and thus are always exerting peerpressure on each other. Among European donors, languages and cultures are so close that theycan easily communicate their ideas with each other. Scandinavian countries in particular,
which share similar policies for both domestic and foreign affairs, have built very close
collaborative relations in activities in developing countries10. Development coordination has
been initiated partly on the basis of such commonalities among European donors.
Japan, however, was practically the only donor in East Asia, except for South Korea,
which set about giving aid on a small scale in recent years, and China, which strategicallysupported other developing countries according to its own logic. There was little competition,
collaboration, or close exchange of ideas among them. The concept of aid which Japanesepeople in general have had for a long time is that, apart from contributions to multilateralorganisations, Japan supported each target country on a one-to-one basis11. On the field of aid
9

As ranking is based on the amount of receipt in this case, it is necessary to consider the possibility thatthe target countries with large domestic economies have higher positions. One must be especially careful inthe case of Japan, because her main recipient countries for loan aid are not always the same as those for
grant aid and technical cooperation.
10
Moreover, among Western donors, there are many cases in which foreign aid experts create strong
personal networks through frequent exchanges. In a situation in which intra-EU international recruitment
by public organisations is encouraged, such personal networks among donors may become stronger, notweaker.
11
Japanese communication with other donors tends to rely on official channels, such as OECD-DAC,
various committees of the World Bank and the IMF, regular consultations with organisations of every kind,or donors’ meetings in the field in developing countries. It should be noted that Japan has a deep
relationship with the U.S., as exemplified by the U.S.-Japan Common Agenda, but it cannot be denied that13

activities in East Asian countries, there are only the World Bank and the Asian Development
Bank contributing amounts comparable to Japan. Japan did not have any chance to have close
peer collaboration with and criticism from other bilateral donors.
Thirdly, the fact that most of Japan’s main recipient countries were East Asian
countries means that they were at the same time the ‘successful’ countries in development.
They experienced high levels of economic growth. Table 2 shows the average growth rate of
GDP per capita over 34 years in the main recipient countries of Japanese and U.K. aid (thesame countries shown in Table 1), as well as their gross national income per capita in 1999
and, as an indicator of aid dependency, the ratio of the amount of the aid received to grosscapital formation (investment). As a benchmark, a weighted average (a simple average in thecase of aid dependency) of each index is also shown. From Table 2, we can see that Japan’s
aid recipient countries are richer, and their past growth rates are higher, than those of U.K.12.
One can easily imagine that this disparity of economic performance of major
recipient countries made a great difference in the two donors’ perception of development
assistance. The U.K., whose major recipient countries are poor and stagnant, came to doubt
many aspects of conventional aid. Japan, on the other hand, had been optimistic about aid
because its major recipient countries, like South Korea, China and Thailand, have remarkably
reduced poverty.
East Asian countries had been successful in realising a high growth rate, and also inmaintaining macroeconomic stability, compared to other developing countries. In addition,
one could say that East Asian governments originally had greater capacities of administrationand fiscal management (or simply aid-absorbing capacity) than those in Africa. Aid absorbing
capacity in East Asian countries had been enhanced year after year as the bases ofgovernments’ domestic revenue expanded due to high economic growth and industrial
development. Overall, Japan had been endowed with an advantageous environment in making
individual aid activities successful and provision of development loans possible. This gave
rise to Japan’s peculiar inclination to find the main role of foreign aid in supporting industrial
development through large-scale loans for infrastructure construction projects.
At the same time, the high economic growth and widening domestic revenue bases in
East Asia increasingly mitigated their aid dependencies. As we can see from Table 2, there is a
big disparity in aid dependence between the main recipient countries of Japan and the U.K.
there exist large gaps between their commitments to the Agenda. It is desirable to make use of such official
channels more effectively and also to make unofficial networks among persons concerned about aid more
intimate.
12
There is a 2% difference between the main aid target countries of Japan and those of the U.K. in terms ofweighted average of growth rate of GDP per capita. This difference means that two countries with the same
GDP per capita will diverge dramatically over the long run; one of them will have twice the level of GDP
per capita than the other after 34 years.
14

Table 2: Aid dependency ratio in main recipient countries of Japan and the U.K.
GDP growth of top fiveAid dependency ratio
GNI per capita
aid recipient countries(aid/gross capital(US$, 1999)(%, 1965-1999)
formation, %, 2000)
Japan
Korea

8,490

6.6

-0.2

China

780

6.4

0.4

Thailand

2,010

5.1

2.3

Indonesia

600

4.8

6.3

Egypt

1,380

3.3

5.6

Sri Lanka

820

3.0

6.1

Pakistan

470

2.7

7.3

India

440

2.4

1.4

Myanmar

..

1.5

..

Bangladesh

370

1.3

10.8

Philippines

1,050

0.9

4.3

Vietnam

370

..

19.8

Average

1,188.5

3.3

5.8

U.K.
Sri Lanka

820

3.0

6.1

Pakistan

470

2.7

7.3

Uganda

320

2.5

73.0

India

440

2.4

1.4

Bangladesh

370

1.3

10.8

Kenya

360

1.2

39.0

Zimbabwe

530

0.9

19.1

Malawi

180

0.6

200.5

Nigeria

260

0.0

2.0

Ghana

400

-0.7

49.5

Tanzania

260

..

65.3

Average
377.2
1.3
43.1
Note: Data for West Indies (British territory) are not available.
GNI per capita and GDP growth per capita use the weighted average by population in 1999, and aid
dependency ratio uses arithmetic average. For calculating the weighted average of these two, China andIndia, whose populations are particularly large, are excluded.
From World Development Indicators, by World Bank, 2001 & 2002.

15

Japan, which dealt with countries whose economic performances were so good, had
no chance of suffering the serious aid fatigue European countries did. Being free from aid
fatigue, Japan did not notice the full-scale aid failures which motivated aid reforms andcommitment to development coordination.

5.

Japan’s new initiatives and the hurdles ahead(1) New initiatives
Despite the above-mentioned limitations, Japan has been undertaking several
initiatives to catch up with the reformist trend toward development coordination.
Since the latter half of the 1990s, the Japanese government lost self-confidence. The
dream of the East Asian Miracle suddenly ceased to attract attention from all over the world
after the 1997 financial crises. Japan itself, due largely to the persistent recession, suffered ashrinking of interest in foreign and global issues. Advocates of the ‘transfer of experiences ofJapan and East Asia’ became quiet. Rather than the smaller aid-dependent recipients, China
has become a headache for policy makers by being a major aid recipient and a competitor
with a certain level of technology (including nuclear weapons) at the same time. ODA is now
a political issue in Japan, probably for the first time. Under these circumstances, the ODA
budget has been drastically reduced. Given these changes, however, aid fatigue was not an
issue in Japan since its main recipients had already reduced their poverty.
Rather, there have been several positive efforts from our point of view.
In 2003, the Cabinet renewed the ODA Charter. It first stressed collaboration withother actors in the international community. Also, it heralded a commitment to ‘Human
Security’, suggesting deeper involvement in the domestic affairs of developing countries incase individuals’ livelihood is in danger. In addition, the formulation of Japan’s own Country
Assistance Programmes was required to overcome modality-wise fragmentation. In March
2005, Japan agreed to the Paris Declaration on Aid Harmonisation.
Also, various initiatives in individual poor recipient countries have been undertaken.
In 2004, Japan started to contribute grant money directly to Tanzania’s Poverty Reduction
Budget Support (PRBS). This is the very first case of ‘pure’ general budgetary support,though it was provided on trial (or exceptional) basis. In 2005, the second contribution wasapproved. In 2004, the government decided to co-finance the World Bank’s PRSC to Vietnam,
which was the first direct budgetary support loan.
In Tanzania, Japan has been taking the position of lead donor in the formulation andimplementation of the agricultural SWAP. It has been involved in the formulation of PRS andvarious SWAPs or in the monitoring and evaluation process in various countries.
16

Lastly, the Japanese government recently decided to formulate Country Assistance
Programmes for Ethiopia and Ghana. In both cases, the core issue is how to align Japan’s own
programme with recipients’ PRS and other policy frameworks.
At a glance, these recent developments look remarkable. In substance, however,Japanese commitment to development coordination is patchy as it has largely relied on certain
individuals’ pioneering efforts rather than officially organised initiatives.
(2) The hurdles aheadFrankly speaking, the Japanese government has been unable to consolidate a firmorganisational will to cope with development coordination. Inside the Japan’s ODA machinery,
there are several huge perception gaps between: the younger generation exposed to newthinking, including the New Public Management, and the older generation which is not
exposed; people working in Asia and those working in Africa; people working in recipient
nations and officials in Tokyo; officials working with multilateral development banks andthose in charge of bilateral aid (or simply MOF and MOFA); and perhaps JICA people and
MOFA officials.
The new initiatives mentioned above have been materialised due largely to efforts by
the younger generation working in or closely connected with recipient countries. This
demonstrates that Japan has fortunately succeeded in accumulating people keen to correct thelow effectiveness of aid to Africa. Those people have advanced understanding of what thereformist donors have called our attention to. It is they who will overcome the negative
legacies of Japan’s unique historical background.
First of all, we have to construct an internal consensus within the ODA machinery byovercoming these perception gaps. But more importantly, every effort must be made to form anational consensus about the new direction of aid. This will be no easy task since quite a widepart of Japan’s civil society has suffered a loss of interest in affairs in poor countries. Thisaffects the mentality of politicians and government officials who sometimes display theserious syndrome of visibility-philia (or paranoia about ‘aid with a Japanese face’). However
shallow-thinking this is, it is the political reality which we face.
To convince its own civil society, the Japanese government should clarify the merits
and risks of the new direction in aid reform, including general budgetary supports. As thecountry is delayed in engaging in budgetary supports, it is utterly ignorant in discussing them,especially their risks. Japan must become familiar with monitoring and evaluation systems ofbudgetary supports in order to be accountable to taxpayers. The country is also totally
ignorant about the controversy over the effectiveness of budgetary supports in view ofconditionality enforcement. As Hyden warned, budgetary supports risk the perpetuation of aid
dependency. Even though Japanese politicians might not say no to the budgetary support, they17

might demand the exit strategies be clarified, reflecting people’s more suspicious view on aid.
Also, Japanese taxpayers might prefer aid which is ‘easy to perceive’, such as grassroots grant
aid rather than budgetary support for governments.
The government should respond to these possible questions to mobilise thetaxpayers’ money.

6.

Conclusion

Japan is a lonely Eastern donor, which is very different from the U.K., another island
nation situated at the other side of the Eurasian continent. This is certainly a disadvantage. But
it could be a unique asset at the same time. The fact that Japan, as the only non-Western donor,
has many things in common with her aid recipients, East Asian countries, is a uniqueexperience that other donors do not have. Japan is in a unique position as an Asian country
and at the same time an ODA donor. Because of the ethical debts due to history, Japan be able
to interact with her neighboring countries more equally. As emphasised in the old version ofJapan’s Official Development Assistance Charter, the basic approach of Japan’s aid has been
to support self-help. What Japan learned from its own development experience and from its
experience supporting East Asia was that development cannot be realised without self-reliant
endeavours by recipient societies. It is very simple, but is the truth which donors tend to havedifficulty respecting.
Western donors might suppose themselves the paragon of aid recipient countries
because their society is the core of modern civilisation itself. If such thinking is expressed too
straightforwardly, it might lead to strains in donor-recipient relations. This is the very place
where Japan can play a role. However, it is regrettable that Japan has neglected to describe,
analyse, and elaborate the lessons learned from its own experience and from its relations with
East Asia. Therefore, it would be impossible for the country to convince other donors of thehistorical value of its development experience. The key for Japan in contributing to thedevelopment partnership is to dig up the experiences of self-help in Japan and East Asia,
digest them, and despatch them as understandable messages to other donors andcontemporary poor countries in Africa. The last point is very important. Past arguments forthe transfer of experience from Japan and East Asia neglected differences on the side of Africa.
The said transfer of experience would be meaningless if Africa had no interest in absorbing it.
In this context, we should learn a lot from European struggles in the past.
Finally, the most valuable lesson Japan could learn from the U.K. and other European
countries would perhaps be how to change the indifference about development and aid thatrooted in the depth of their own civil societies.

18

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