『Japan Echo』Vol.29 No.1 February 2002、pp.48-52

Reconfiguring Japan’s ODA
OHNO Kenichi
What position should Japan adopt on the war against terrorism the United States haslaunched? There is validity in the American claim that terrorism is the enemy of peace anddemocracy and must be resolutely quashed through global-scale action. Some thus mightassert that Japan should support the United States in any way it can within the constraints of
its laws. But it is also clear that “eye for eye” retaliatory strikes breed animosity without
providing a true solution, which means that efforts must simultaneously be made to deal withthe poverty from which terrorism is bred. Here we find a role for economic cooperation to
play. We should also reflect on the recent tendency to hold the model of American society as
the ideal and to impose it on countries with other cultural backgrounds. A true long-term
answer to terrorism must surely address these points.
Having said this much, however, we in Japan find ourselves at a loss as to what to do
next. Our country simply has not developed sufficient conceptual abilities and communication
channels to present alternative intellectual propositions to the rest of the world. At this crucial
time of worldwide anger and fear, Japan finds itself incapable of acting as an effective voice
for these reasonable points.
Japan is in a unique position as the only major industrial country in Asia, and as suchit has a duty to offer initiatives to the rest of the world. We cannot expect the global trends
that emerge from the West to be perfectly correct all of the time. There will be a greater
chance of building a more balanced world if Japan gives voice to a vision from its Asian
vantage point.
As a country with strict constraints on what it can do militarily, Japan naturally finds
economic cooperation to be an exceedingly important tool in foreign policy. And yet in the
disbursement of official development assistance, it has taken the hardly commendable
approach of following the crowd. Confronting this reality squarely, I will endeavor in thisessay to propose a way to improve our performance.
Mounting Japanese Dissatisfaction
The Japanese government is now under pressure to reassess its program of official
development assistance because of the severe pinch in the budget. In conducting thisreassessment, we need to examine the contribution ODA makes to Japan’s foreign policy. The
course of the flows of development assistance is largely determined by others --specifically,1

by the World Bank (and in part by the United Nations Development Program) at theinternational level and, at the level of individual countries, by members of the Anglo-Saxon
camp, with the United States and Britain in the lead, and the Nordic group of countries. Every
few years they come out with new assistance strategies, which in many cases do not match thesensibilities of the Japanese. We have left the controls to other nations, and Japan’s role is no
more than that of a timid copilot at best.
The policy dialogue between Japan and the World Bank has made great progress inrecent years. The deepening of our mutual understanding, however, appears not to be
narrowing the gap in views but rather to be making the differences more conspicuous. The
approach Western countries and international organizations are taking to aid for developing
countries features farsighted frameworks, convergence toward a single system, and emphasison macroeconomic financial issues. Japan, by contrast, makes past experience its starting
point, perceives value in diversity, and emphasizes issues of the real economy involving thefostering of industry. It is not easy to fuse two development philosophies when they are basedon fundamentally different assumptions. Japan’s aid administrators cooperate with andcontribute to plans drawn up elsewhere, but they can be heard muttering that it does not feelright, that something seems to be missing.
Let me give some examples. When the International Monetary Fund and the WorldBank gave aid to a number of Latin American and other countries facing debt crises in the
1980s, they made their support conditional on severe fiscal and monetary austerity and radical
liberalization and privatization. And when they reached out to help the countries in transitionin the former Soviet bloc in the 1990s, they prescribed an even stiffer dose of basically thesame medicine. Japan cited the dangers of a prescription that imposed a uniform regime ofbelt tightening regardless of the history and national character of each country, and it argued
repeatedly that in places lacking experience with the market economy, markets would notcome to life simply by destroying old systems and introducing new policies. But such protests
have produced little change.
At the 1999 Group of Seven summit in Cologne, the major industrialized countries
approved a debt moratorium for an expanded group of heavily indebted poor countries inAfrica, and again a reform program of the same type was made a precondition. Because Japanis one of the major aid donors to Africa, this means it will not be getting back a considerable
portion of the yen loans it has made to the region. Without doubt it is important to offer asecond chance to countries groaning under a massive load of debts. But are the governing
institutions and industrial strategies of these countries really sufficiently sound? Might we notdiscover that merely canceling debts does nothing toward improving the prospects of thepoorest countries and only tends to make them permanently dependent on foreign aid? Japan
has been asking such questions, but with little effect, and now moves are afoot to draw it into
a common-basket approach to aid for Africa, with all donors pooling money in baskets for2

joint use.
The latest aid strategy devised by the World Bank, which pushes poverty reduction tocenter stage in development aid for poor countries, is clearly based on lofty ideals, but is itreally the best strategy in the light of the realities of developing countries? As I see it, thestrategy lacks the perspective of how to enable industries in the concerned countries to catchup in an age of globalization. If industries cannot be successfully fostered, poverty reduction
will come to nothing. We must also ask whether it is possible or desirable to have all countries
converge to the norms of the West.
The Asian financial crisis of 1997 fueled the dissatisfaction in Japan with the existing
international approach to aid. The response to the crisis, which involved the collapse of aseries of Asian economies with which Japan has close trade and investment ties, was mappedout by the IMF. Japan’s own proposal --that an Asian Monetary Fund be established-- wasquickly brushed aside. On seeing the crisis grow worse because of the conditions the IMF laid
down for assistance --which included high interest rates, fiscal austerity, and hasty bankclosures-- officials in the Japanese government stepped up their criticism of the IMF andbegan looking for countermeasures without Washington’s help. What they came up with was
the “New Miyazawa Initiative,” named after Miyazawa Kiichi, the former prime minister thenserving as finance minister. Japan’s proposal featured large additional infusions of grants andloans to the affected countries, and it served as the basis for the Chiang Mai Initiative, thecurrency-swap scheme advanced by Miyazawa at the annual meeting of the AsianDevelopment Bank in 2000.
It is a sorry state of affairs for the country that is putting up the biggest share of themoney to have to defer to other countries on how that money is to be spent, particularly when
the international organizations directing the overall effort seem to lack balance. Subsequent to
the Asian crisis, attempts to remedy this situation have gained momentum in Japan. As part ofthese efforts, below I will outline a proposal for Japan’s ODA program. My suggestion is toreconfigure the program on the basis of a twin set of principles: those deriving from Japan’s
Asian identity and those arising from its global position.
Torn Between Two Identities
Ever since Japan opened its doors to the world in the second half of the nineteenth century, itsforeign policy has been pulled back and forth between the country’s identity as an Asian
country on the one hand and as a member of the Western community of advanced
industrialized countries on the other. Perplexed by its dual identity, the country has sometimes
selected the wrong options. Today, a century and a half after U.S. Commodore Matthew
Perry’s fleet forced a reluctant Japan to open up and just over half a century after its defeat in
World War II, our country is still torn between Asia and the West and unable to reach maturity.
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It remains confused about what attitude to take toward both sides as an industrially developed
Asian country. When it seeks to force the two vectors into one without a firm set of guiding
principles, it ends up producing unnatural strains, which cause it to veer to an extreme ofeither arrogance or servility. The proof of its immaturity is found in its tendency to swing
toward one side or the other instead of accepting both identities. And in the field of ODA,
Japan cannot manifest its true character as long as it perceives only two passive options topick between --toeing the line of the World Bank’s strategy or complaining about that line.
The dual national identity engraved on Japan by its history will not go away with thepassing years. It is about time we recognized that it lies at the root of our national characterand cannot be eradicated. We should stop turning our back on it and trying to settle on justone of the two alternatives. Would it not be far more preferable to affirm this duality as ahistorical endowment and make constructive use of it in our diplomacy? There are times andoccasions when a skillful combination of the two identities can provide an original characterto Japan’s foreign relations, adding breadth and depth to them and offering the flexibility
needed for dealing with complicated issues. For a non-Western country, this is probably the
key to the successful handling of the dominant systems introduced from abroad without lossof the country’s autonomy or continuity.
A dual approach meets a need in all aspects of external relations, and it can beespecially helpful in the provision of development assistance. It can enable Japan to perceive
areas where its own development strategy will be effective, and it can allow our country toserve as a model for international integration to developing countries with a strong desire toadvance in the world. But even more important is that it can help the Japanese themselves
regain confidence and pride in the activities they are undertaking.
Contributing to Asian Dynamism
Here we need to consider a course guided by the clear recognition that Japan is an industrial
country whose forte is in monozukuri –“making things,” or in other words, skilled
manufacturing-- and that it is the chief architect of the Asian production network. The first of
our ODA principles should thus be that ODA is to be used as a tool for sustaining anddeveloping Asian dynamism.
Drives to promote regional integration have recently been gaining momentum in a
number of places around the world. But in Asia, strong linkages have already been formed
among the industries of countries at different stages of development. These linkages, mediatedby trade and investment, have provided the motive power of the “East Asian miracle” over the
past few decades. Asia has established a position as the factory of the world, especially in thecase of electronic products. The structure of production is not one of simple, vertical
relationships between advanced and developing countries; instead it is a multitiered4configuration of production bases with Japan as the point of origin, and it has led to acomplex intraregional division of labor and brisk intraregional trade and investment. There isno other such configuration in the world. As Asia’s sole economic superpower, Japan bears
considerable responsibility for the region’s development, and its industries depend for theirown vitality on the trends in the production networks extending across the region. When we
confront this reality, we can see the need for a vision that brings prosperity in the rest of Asiaand prosperity in Japan into matching focus.
Some will suggest that it is anachronistic for Japan to try to implement an Asiawide
industrial policy at a time when it is moving away from its own past reliance on excessive
government intervention. This perceived inconsistency is what University of Tokyo Professor
Suehiro Akira has in mind when he speaks of “the double standard of Japan’s Asian
involvement.” But I believe that such concerns are overstated. There are three points that need
to be made in this connection: First, what we are considering here is not bureaucratic directionor the creation of planned economies but merely complementary public measures for market
economies led by private enterprise. Second, it is only natural for there to be differences in therole the government plays depending on the stage of an economy’s development and thedegree of the market’s maturity. Third, there is obviously considerable room for policy
coordination if we consider Asia as a dynamic production network containing countries at allstages from the rich and advanced to the least developed.
Already in Asia today many common issues are being addressed through bilateralassistance and in multilateral groups, such as the Asia-Pacific Economic Cooperation forum
and the Association of Southeast Asian Nations (along with the “ASEAN plus Three”
grouping, in which China, Japan, and South Korea also participate). These issues include
infrastructure, institutional consolidation, human resources, trade and investment policies, andthe intraregional division of labor. Steps are also needed to promote technology transfer,academic and student exchange, and South-South cooperation, and responses are required insuch areas as environmental destruction, trade friction, financial crises, the gap between richand poor, and the ongoing slump in the information-technology sector, along with excessive
level of investment.
What is important here is not the selection and evaluation of specific ODA projects inthe light of narrowly defined assistance objectives but rather the repositioning of the ODA
program as an element playing a key role within the broad design of Japan’s foreign policy.
Enhancing Asian dynamism entails coordinated marshaling of policy measures in all theconcerned countries. Trade and investment policies, financial and currency policies, andmacroeconomic policies must all be implemented coherently, along with social policies andimmigration policies, and ODA should be used where appropriate in connection with theseissues. In a low-income country, for instance, foreign aid is of relevance in the construction of
an industrial foundation, the fostering of small businesses, the provision of public assistance,5and the cultivation of human resources. ODA may also be used to improve the environment
and to provide relief for the weak at times of crisis.
Since Japan obviously cannot determine Asia’s destiny unilaterally, making Asian
dynamism one of the central objectives of our foreign policy means developing andstrengthening the channels of constructive dialogue with our Asian neighbors. Asia is truly adiverse continent, but on some topics, such as development strategy and crisis
countermeasures, there can emerge an Asian view that differs from the global current. It isnaturally part of Japan’s job as Asia’s leading industrialized country to synthesize the region’sviews and make them heard in appropriate forums, such as the World Bank, the IMF, theWorld Trade Organization, and the G-7 summits.
We need to define what Asia means not geographically but functionally, based on its
dynamism as a supply region for the world. At its core are the countries already linked
together in a chain of structural transition: Japan, the newly industrialized economies (HongKong, Singapore, South Korea, and Taiwan), the “ASEAN Four” (Indonesia, Malaysia,
Philippines, and Thailand), China, and Vietnam. Outside this core lie a number of countries
able and willing to participate in the production network, notably Cambodia, Laos, Myanmar(Burma), and North Korea. Beyond them lie other developing countries and countries intransition that while unable to participate directly in this Asian production network because of
their distance from it are nonetheless keenly interested in the Asian-style development
strategy it presents. It behooves Japan to be generous in cooperation with this group as well.
A Vision of Asia
At this start of a new century, what should our vision of Asian dynamism look like? A numberof points need to be considered in coming up with an answer. The first involves China. Overthe past couple of years it has achieved great prominence as a base for assembly-type
manufacturing of products for export (though to some extent people’s perceptions haveoutstripped the reality). With its abundant labor supply and low wages, China is capable ofproducing low-priced goods, and recently the quality of its products has improved
considerably. China’s competitive power has become a force to be reckoned with in Japan,
North America, Europe, and elsewhere. But China is still struggling with knotty problems inareas including reform of state enterprises, inequalities among regions, environmental
destruction, and natural resources. Thought must be given to how long China’s advance islikely to continue and how its dynamism can be tied in with the rest of Asia’s.
From the Japanese vantage point, the countries of Southeast Asia can be consideredprimarily as overseas production bases, but China needs to be considered from a broader
range of perspectives; the aspects it presents include those of a target of investment, acompetitive rival, and a political adversary. We need to have a multifaceted, grand design
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going beyond economic concerns to encompass national security and joint leadership. Might
it be possible for us to restrain China by bolstering the productive power of Southeast Asian
nations? Or should we instead focus on developing mutual interdependence between the
Chinese and Japanese economies as the true path to Asian stability? On the long-range agenda,
we need to debate whether we should aim for Asian integration of the type found in theEuropean Union, with its single currency and free trade among countries, or whether it would
be better to continue along the present course of an open regionalism, which neither
discriminates against other regions nor involves the creation of an overall regional institution.
Such considerations may seem rather grandiose, but the point is that if we wish to use
ODA to good advantage, we cannot base our decisions only on the internal profitability andex post facto assessment of each individual project. The separate elements of Japan’s external
policy will become organically linked only if the policy is underpinned by this sort of
all-inclusive vision.
One more point we must not overlook is the coherence between external economic
policy and domestic structural reform. We will not be able to revitalize Japanese industry only
by promoting deregulation, reforming the bureaucratic machinery and structure ofgovernment finance, and supporting new businesses and industries. We must also allow
international competition to provide an orientation for corporate efforts and to weed out
inefficient industries. The mandarins and politicians in Tokyo alone cannot supply the design
for Japan’s industrial structure in the twenty-first century; in the final analysis, it is the world
market that will shape it. The government can play no more than an ancillary role in thiscontext, seeking to reduce the degree of uncertainty and offering support where needed. The
reform strategy the authorities are now pursuing seems too domestically oriented. It is plainly
contradictory for the government to be seeking to invoke safeguards against imports even as itsings the praises of intensified competition at home. Any vision for Asian dynamism needs tohave sufficient substance to provide for constructive pronouncements on how to coordinate
external and internal interests.
Contributing to the World
Our second principle should be that ODA is to be used as a tool for contributing to joint
solutions to global problems. This applies to a wide variety of themes, including actions onhumanitarian concerns and issues affecting the planet as a whole.
A number of points must be borne in mind. First, we should not aim our international
contributions at each and every issue, for that would lead to broad but shallow participation.
We should rather identify areas where Japan enjoys a comparative advantage and concentrate
our efforts on demonstrating leadership in them. For instance, compared with Western donors,
Japan has a relative abundance of funds and scarcity of human resources it can channel into
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aid, and so it should select projects where funding is of greater importance. Also, Japan has
some superlative environmental technologies, and it should make use of ODA to spread themwidely around the world. And in view of the constraints on the military cooperation Japan can
extend, I personally feel it should aim at becoming the world’s top provider of aid for disaster
relief.
The second point is a corollary of the first. There can be no denying that Japan’s aid
organizations lag behind their counterparts elsewhere in a variety of respects. Internationalorganizations and other donor countries have assembled a wealth of human talent, knowledge,
and systems, and we should give thought to how we can effectively employ these resources.
In specific terms, Japan could entrust parts of its own initiatives to specialized outside
agencies and make use of personnel exchanges for the training of young Japanese staff
members. And where appropriate, it should adopt superior systems and arrangements devised
by international organizations.
Third and most important, Japan should try to exercise influence on the policies ofinternational organizations instead of always responding passively to them. Particularly in thecase of the World Bank, there is a tendency for each new president to hammer out a new
initiative and for all the employees then to fall into line behind it. Given Japan’s adeptness atmaintaining policy consistency, one potential way for it to make a considerable contribution isby acting to counter fashionable currents in global opinion and return the attention ofinternational organizations and summit meetings to the fundamental issues of development.
And even as it seeks to play this role, it should strive to synthesize the views of Asia andexpress them to the rest of the world, as I have already noted.
Refining the Japanese Touch
The idea of providing the ODA program with a dualistic design may come across as a radical
proposal, but in fact it is a common-sense suggestion. It is a call not for altering the thrust ofJapan’s economic cooperation but for condensing, elucidating, and amplifying the orientation
it has had all along. The main uses to which Japanese ODA has been put in the Asian region
include installing infrastructure, promoting small companies, cultivating human resources,
accepting foreign students, and responding to crises. And the main axis of Japan’s foreign
relations --where making contributions to international causes is becoming increasingly
crucial-- will continue to be cooperation with the United States and other industrializedcountries.
It is important to sense the pride that comes with the application of a coherent design.
My point is that there is nothing inconvenient or otherwise amiss in having a dual identity; on
the contrary, it should be turned into an advantage peculiar to Japan. Furthermore, theJapanese public will surely become uncomfortable sooner or later with the current
8international-consensus approach to ODA, in which the focus is limited to reducing poverty
and resolving environmental problems. People will not be able to sustain their support for theprovision of aid unless it is possible at the same time to protect and develop our own traditionof skilled manufacturing.
Critics have been clamoring for the provision of aid with a Japanese face, butultimately this cannot be accomplished just by attaching Japanese government logos to thegoods we supply or flying the Japanese flag over our aid facilities in the developing world. If
we can manage to provide the policies and projects we formulate with a Japanese touch, therecipients will come to appreciate our efforts, and some among them will call for domestic
development strategies drawing on the strengths of the Japanese approach. The way totransform our country’s aid into something truly Japanese lies in adding such depth andappeal to the content of what we provide.
Translated from “Teigen: ODA nibunron,” in Ronza, December2001, pp. 54-63; abridged byabout one third. (Courtesy of Asahi Shimbun)

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