GRIPS Development Forum
Discussion Paper No. 9

Supporting Growth and Poverty Reduction:
Toward Mutual Learning from the British Model in Africa
andthe Japanese Model in East Asia

Shigeru Ishikawa

March 2005

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Supporting Growth and Poverty Reduction:
Toward Mutual Learning from the British Model in Africa
andthe Japanese Model in East Asia

Shigeru Ishikawa

March 2005

This paper is a reproduction of Supporting Growth and Poverty Reduction: Toward Mutual
Learning from the British Model in Africa and the Japanese Model in East Asia, JBIC InstituteDiscussion Paper No.8. The author, Shigeru Ishikawa is emeritus Professor of economics,
Hitotsubashi University. All the opinions and interpretations expressed in this paper are theauthor’s personal views. They bear no relation to public activities the author is involved in. We are
grateful for the JBIC Institute to give us an opportunity to disseminate Prof. Ishikawa’s views.

Supporting Growth and Poverty Reduction:
Toward Mutual Learning from the British Model in Africa
and the Japanese Model in East Asia*
1.

Introduction .................................................................................................................. 1
1-1 Organization..................................................................................................................... 2
2.
British Aid under the New Labor Government – System and Philosophy ............. 3
2-1 Creation of DFID as a Cabinet Ministry.......................................................................... 3
2-2 Aid Concept in the 1997 White Paper on International Development............................ 4
2-2-1 Aid Philosophy ......................................................................................................... 5
2-2-2 Aid Policy System .................................................................................................... 6(a) Development Model ................................................................................................. 7(b) Aid System Narrowly Defined ................................................................................ 9(c) Synthesis ................................................................................................................. 12
2-3 Tony Blair’s Third Way and Amartya Sen’s Capability Approach............................... 13
3.
British Approach to the African Economy .............................................................. 15
3-1 DFID-ODI Research on Africa...................................................................................... 15
3-2 The Political Economic Structure of “Semi-Democratization” ..................................... 16
3-3 PRSP Institutionalization: Slow Progress...................................................................... 20
3-3-1 Government Commitment as the Premise of Institutionalization .......................... 20
3-3-2 MTEF and PEM...................................................................................................... 21
3-3-3 Was Reform of the Political System Induced?....................................................... 21
4.
East Asia Model of Japanese Aid—Basic Characteristics...................................... 22
4-1 Aid Policy to Developing Countries .............................................................................. 22
4-1-1 Aid Philosophy ....................................................................................................... 22
4-1-2 System of Aid Procedures ...................................................................................... 23
4-1-3 Development Model ............................................................................................... 23
4-1-4 Aid and Conditionality ........................................................................................... 24
4-2 Application to Major Recipient Countries..................................................................... 24
4-2-1 Initial Conditions .................................................................................................... 24
4-2-2 Development Process ............................................................................................. 25
4-2-3 Role of Aid ............................................................................................................. 26
4-2-4 Toward Low-Income East Asian Countries ........................................................... 28(a) Vietnam................................................................................................................... 28(b) Laos and Myanmar ................................................................................................. 29
5.
Toward Mutual Learning—Conclusion................................................................... 30
5-1 Expectations on the British Model................................................................................. 30
5-2 Japan’s Aid to Africa ..................................................................................................... 33
References ............................................................................................................................... 35*

This paper is the English translation of the original text (in Japanese) published in March 2005, as Chapter
13 of Chiiki Keizai Apurochi wo Fumaeta Seisaku no Ikkansei Bunseki: Higashi-azia no Keiken to Hoka
Donā no Seisaku Kenkyū-kai Hōkokusho (Regional Analysis on Policy Coherence: Past Experiences in East
Asia and Current Donor Practices). In preparing this paper, JBIC Institute and Anne Emig (through GRIPS
Development Forum) provided translation support.

1.

Introduction

My interim report to the December 2003 Study Group1, “East Asian Model Aid of
Growth and Poverty—Japanese Experience,” spells out the following research objective:
Ultimately I would like to contribute to mutual understanding and learning between
Japan and the UK and Nordic countries by contrasting Japan’s aid policy based on its
experience in East Asia and British and Nordic aid based on their experiences inAfrica. In that process, I would like to propose a Japanese model of aid to low-income
developing countries to be disseminated internationally as early as possible. My
objective at the present preliminary stage is to highlight the special characteristics ofthe East Asian model of aid policy based on Japan’s experience as an improved
alternative to the aid policy toward low-income countries recently being implemented
in the international aid community. In doing so, I assume that many of the newinternational aid policies attempt to address difficulties faced in British and Nordic
aid to African countries.
The largest hurdle in this research was the difficulty in understanding whether the
British government’s aid policy centered on poverty elimination through grants can truly
realize sustainable growth and poverty reduction in Africa. We know that the 1997 White
Paper on International Development2 outlining British aid policy states, in the beginning of
the first section, that the encouragement of economic growth along with the elimination ofpoverty as its policy objectives. We also know that the new Labor government’s Department
for International Development (DFID), which authored the White Paper, has assumed the
responsibility to make and implement the British government’s aid policy as a cabinet-level
ministry. As a result, DFID is able to speak up vis-à-vis other key ministries not only on its
core area of Official Development Assistance (ODA) issues but also on foreign policy andtrade and investment policy as well. Accordingly, the department may place greater emphasison trade and investment policy than aid to promote growth. However, there is hardly any
official explanation of the process by which growth support will be delivered and linked topoverty reduction.
With the progress of my research, I have come to understand that the UK’s diagnosisof the current situation in African development and the outline of its long-term policy
prescription are consistent with the general aid policy of the British government indicated in
1

This Study Group (titled “Chiiki Keizai Apurochi wo Fumaeta Seisaku no Ikkansei Bunseki: Higashi-azia
no Keiken to Hoka Donā no Seisaku Kenkyū-kai” (Regional Analysis on Policy Coherence: Past
Experiences in East Asia and Current Donor Practices)) was organized by the JBIC Institute for the periodof November 2003 - July 2004. The author was a member of the Study Group.
2
DFID, Eliminating World Poverty: A Challenge for the 21st Century – White Paper on International
Development, HMSO, November 1997.
1

the above White Paper, as well as with the philosophy behind it. It must be clarified that thisunderstanding is based not only on my research on British aid policy and Africa, but also on
the publications of the Overseas Development Institute (ODI)—a British think tank with deep
experience in Africa research and extensive collaboration with DFID. However, many of thepolicy prescriptions indicated there are wishful scenarios and do not offer the prospect ofresolving pressing problems. Nor do they propose concrete policies related to economic
growth. In general, viewed from the perspective of the near-term future, Britain’s Africa aid
model is by no means an optimistic model.
By contrast, the East Asia model of Japan’s assistance started and expanded as aid to
East Asian countries (NICS and ASEAN countries), originating as reparations and semireparations to countries on which Japan imposed extensive (or somewhat less extensive)
damage during World War II. This aid model achieved success, thanks to a combination of
extremely favorable conditions: (a) respect for recipient country ownership in the selection
and implementation of aid projects, under a procedure called the “request-based system” (Asa result, ODA loans to fund investment projects for infrastructure construction expanded
quickly along with Japan’s economic growth); (b) the fact that the need for Japan to importmineral resources and export capital goods for its postwar reconstruction and rapid growth
was matched by complementary needs in recipient countries; and (c) the existence of highhuman and social capability in East Asian countries. We know each of these elements well,
however. What is necessary in this research is to link these elements and establish a Japanese
aid model for East Asia that is comparable with the British aid model for Africa.
1-1 Organization
Section 2 will examine the current British Labor government’s aid system andphilosophy, based on the 1997 White Paper on International Development. This is a topic
which is not necessarily recognized by many people. Regarding aid philosophy, I willcomplement the plain explanation in the White Paper with descriptions in The Third Way 3—
the new Labor government’s welfare state policy, authored by the Prime Minister and Labor
Party leader Tony Blair in 1998. The ethical standard of the Third Way resembles Amartya
Sen’s Capability Approach4 to poverty alleviation; so this section will also touch on that.
3

Tony Blair, The Third Way: New Politics for the New Century, The Fabian Society, 1998. This paper
relies heavily on Hideki Fukai, “Shakai-teki Haijo Mondai to Nijūisseki Kanzen Koyō Kōzō—Blair
Fukushi Kokka no Shatei to Genkai,” (The Problem of Social Exclusion and the Idea of 21st Century-style
Full Employment: The Range and Limitations of the Blair Welfare State”), Hitotsubashi Ronsō, vol. 130,
no. 4 (October 2003).
4
Amartya Sen, Development as Freedom, Alfred A. Knopf, New York, 1999. Examination of thisapproach in the context of ideological trends in the international aid system is discussed in Shigeru
Ishikawa, “Growth Promotion versus Poverty Reduction—World Bank Rethinking of Aid Policy and2Section 3 explores how British aid policy applies to the issues of development andpoverty alleviation in the African countries, the main recipients of British aid. It pays
attention to the ODI analysis of initial conditions in several African countries chosen for casestudies. These case studies reveal that a modern bureaucracy has not been established in manyof these countries and that their political systems still retain a patron-client system (orpatrimonial system); consequently they are unable to coordinate among ministries or adopt
coherent policies and it is impossible to establish priorities in government expenditures. These
initial conditions complicate development and poverty reduction; on the other hand, Britain’s
aid policy expects that if the political leadership commits to poverty reduction, the politicalsystem itself may democratize. In reality, this possibility has hardly been realized.
Section 4 clarifies the characteristics of Japan’s aid model toward East Asia and why it
is regarded as a success model in the NICS, China and the ASEAN 5, based on therecognition that the British aid model for Africa has not achieved success despite its grand,
idealistic aid policy system. I will discuss only major points to keep the paper concise.
The final section of the paper will offer an interim conclusion on how the UK andJapan can and should learn from each other in order to develop a common policy for truecooperation, assuming that mutual understanding of the two aid policies can be achieved
based on the results of the above research.

2.

British Aid under the New Labor Government – System and Philosophy

2-1 Creation of DFID as a Cabinet Ministry5
DFID was newly established as a cabinet-level ministry with responsibility for foreign
aid and international development under the Labor government, which returned to power in
May 1997. DFID’s cabinet level representation ensured a stronger position compared with its
predecessor, Overseas Development Administration (ODA). ODA was no more than one unit
within the Foreign and Commonwealth Office （FCO）. Under the Conservative Thatcher
Implications for Developing Countries,” Discussion Paper No.5, GRIPS Development Forum, August 2002.
The original text in Japanese was published in Transactions of the Japan Academy (Nihon Gakushiin Kiyō),Vol. 56, No.2, January 2002.
5
The analysis in this subsection is mainly based on information from ODI, Changing Aid Policies of the
Major Donors: UK Case Study: Final Report, London, 2004. The study was contracted by JBIC Institute,and based on this study, a detailed report in Japanese has been compiled. See Satoshi Iijima and Mami
Sakuma, “Eikoku Enjo Seisaku Dōkō—1997 nen no Enjo Seisaku wo Chūshin ni” (UK Development
Assistance Policy—Focusing on Changes since 1997), Kaihatsu Kinyū Kenkyūsho-ho, vol. 19, June 2004.
3

government from 1979-1997, aid and development policy was ignored or treated in asecondary manner in the face of political and commercial considerations. In contrast, as
mentioned earlier, DFID became a ministry able to speak up on British foreign and economic
policy from a development perspective (thus, in theory, it has been given a status equal to
FCO and the Department of Trade and Industry, DTI).
British aid and development policy after 1997 gave birth to a sea change at home andabroad, but this was not only the result of the government organizational restructuring. The
fact that Clare Short, an influential figure in the Labor Party, was appointed DFID’s Secretaryof State and exercised strong leadership also influenced the change (Short was one of theleading figures in the Labor Party, on par with Prime Minister Tony Blair and Chancellor of
the Exchequer Gordon Brown). Under her leadership total ODA on a net disbursement basis,
which had fallen to a low annual average of merely $1.48 billion in 1984-85 during theThatcher years, recovered sharply after 1997, reaching a high $6.17 billion in 2003 on aprovisional basis. The Aid and Trade Provision (ATP), the tied grant aid incentive scheme
which was promoted by the Thatcher government but then caused a scandal, was abolished. In
addition, DFID decided to end “pursuit of commercial profit” through aid. In both cases,
Clare Short’s strong executive ability is said to have operated in the background.
Internationally, the 1999 decision on the Enhanced Heavily Indebted Poor Countries (HIPC)
Initiative was the product of Short’s teamwork with Chancellor Gordon Brown. Strongpressure from the “Like-Minded Group” formed under Short’s leadership among the UK, theScandinavian countries and Holland was at work when the World Bank’s Poverty Reduction
Strategy Papers (PRSP) system was established, replacing the Structural Adjustment Lending(SAL) system, and when all low-income countries seeking concessional aid were required toparticipate. Recently Short also pressed hard, in cooperation with the same group, for a
proposal to change the form of donor bilateral ODA to Africa, ending investment projects andloans and replacing them with the Sector-Wide Approach (SWAp) and general budget support
based on development partnership.
2-2 Aid Concept in the 1997 White Paper on International Development
In November 1997, six months after DFID’s establishment, the International
Development Secretary presented the 1997 White Paper on International Development to theParliament. When read together with Prime Minister Blair’s The Third Way discussed in thenext section, the White Paper appears to be based on a philosophy of social justice expanded
and applied internationally and to attempt to build a grand doctrine with theoreticalcomprehensiveness and consistency as an aid policy system.

4Prime Minister Blair’s Third Way represents neither the concept of nationalist social
democratic welfare state of the Labor government elected in 1905 (First Way) nor
Thatcherism’s neo-liberal welfare policy (Second Way). As a Third Way, it elucidates a new
welfare state concept that guarantees “rising capabilities based on equal opportunity” topeople under the new order. It also has a structure that closely resembles the Capability
Approach of Amartya Sen in relation to development and poverty reduction. On the other
hand, the aid policy system presented in the White Paper does not conflict with the realizationof poverty reduction, the ultimate goal of the PRSP system advocated by the World Bank and
IMF and agreed by the international aid community; instead it even tries to correct theimperfections of the development model and systemic procedure model contained in the
PRSP system.
However, adhering to ethical integrity, comprehensiveness and consistency as theory
can produce a lack of flexibility required on the actual political stage, and thus easily gives
rise to discord with various kinds of pragmatism. Presumably, this is the background which
led to the idealistic policy being questioned after Ms. Short resigned in May 2003 due to adifference of opinion with Prime Minister Blair over Iraq policy.
In this sub-section, first I will attempt to summarize the British aid philosophy andsystem to the extent it can be grasped from the 1997 White Paper on International
Development.
2-2-1 Aid Philosophy
The first section of the White Paper, “The Challenge of Development,” discusses thephilosophical background of the Labor government’s new international development
approach while providing an overview of the progress of British and international
development over the previous 50 years. Let me mention a few of those points:（1）
The quest for international development has been one of the great themes of the last 50
years. A key challenge was to manage the transition from the colonial empires to a world
characterized by independent states. (1.1)（2）
The end of the Cold War has transformed international politics. Until 1989, theideological divide distorted development efforts. Both sides used aid to tie developing
countries to their interests, leading to the diversion of effort from sustainable development.
The new era provides a fresh opportunity to focus development efforts on poverty elimination.
(1.5)
5

（3）
Some 1.3 billion people—nearly a quarter of the world’s population—continue to livein extreme poverty, on less than the equivalent of $1 per day. They lack access toopportunities and services. They feel isolated and powerless and often feel excluded by
ethnicity, caste, geography, gender or disability. (1.9)（4）
The fact that people survive at all under these conditions is a remarkable testament to
the human spirit. Poor men and women apply enormous creativity, strength and dynamism ona daily basis to solve problems that those who live comfortably can hardly begin tounderstand. Poor people have assets—in their own skills, in their social institutions, in theirvalues and cultures and in their detailed and sophisticated knowledge of their own
environment. (1.11) Given the necessary support, the poor can be the means as well as thebeneficiaries of sustainable development. (1.12)（5）
There have been two flaws in models of development over the past half century. The
first was characterized by a belief that the State should extend its control over production andtrading activities, and over the allocation of resources and prices, in a way which createddistortions and led to inefficiency and corruption. The second was a belief in a minimalist
State and unregulated market forces which failed to secure economic growth and led toincreases in inequality across the world. (1.15) There is now an opportunity to create a new
synthesis which builds on the role of facilitating economic growth and benefiting the poor.
Both States and markets make good servants and bad masters. We have learned that thevirtuous State has a key role to play in supporting development. (1.16)（6）
The present British government was elected on 1 May 1997 on a renewed
commitment to the principles of social justice—security for all, access to health and education
services, strong social institutions, greater equality and the provision of opportunity. What wewant for our children, we want for all children. These principles form the basis of ourinternational as well as our national policies. The Government has already made clear its
commitment to human rights and a more ethical foreign policy. (1.20)
2-2-2 Aid Policy System
Here, I will examine the aid system presented over four sections of the White Paper in
two parts, using the framework of my previous work6: the development model (explaining the6

Shigeru Ishikawa, “PRSP Taisei no Yukosei ni tsuite,” Kokusai Kyoryoku Kenkyu, vol. 19, no. 1, April
2003 (in English, “On the Effectiveness of the PRSP Regime,” Technology and Development, no.17,
Institute for International Cooperation, JICA, January 2004). The framework of the paper is built on threepillars: in addition to the two pillars discussed here I added a third pillar, “the effectiveness of the HIPC
6

mechanism of how development in the recipient country is realized using aid as one of the
input factors) and the aid system narrowly defined (explaining what kind of aid procedures
can motivate recipient countries to implement the above development model).
(a) Development Model
The analysis of the development model can be made fairly straightforward by quoting
the main points stressed in the White Paper.
（1）
The ultimate goal of international development assistance: the elimination of poverty
and encouragement of economic growth.
（2）
Elements of the mechanism for linking poverty elimination and encouragement of
economic growth: Sustainable development to eliminate poverty rests above all on theachievement of economic growth that is not only stable and vigorous, but which embraces
poor people and allows them to share in the fruits of development. (1.17) Specificrequirements for growth are the following:••••

Macroeconomic stability, including a sound fiscal balance and low inflation.
Promotion of more open domestic and less regulated foreign trade.
Resultant higher savings, which can help to finance investment.
Such a framework will encourage private sector development, which provides themain impetus for economic growth.

••

In some countries, foreign investors play an important role.
The transformation of the economic environment in this manner will greatly invigoratea wide range of productive activities, most importantly providing opportunities forpoor people to establish sustainable livelihoods. (1.18)（3）
Development program and policy support: Development is a complex process, and thechallenge is daunting particularly for countries with limited resources. Some countries withsuccessful records (with effective government, enlightened legislation, prudent budgeting andan efficient administration) will make more rapid progress toward international development
goals. However, most poor countries seek help to carry through their development programs.
Effective support for their efforts will require action both through development programs andthrough wider policies. (2.1, 2.2)

Initiative,” and treated the debt forgiveness issue separately from the discussion of the aid system narrowly
defined. Here, however, they are examined together.
7•Interventions necessary for direct support of the development program are as follows:
support for the provision of the basic necessities of life; water and food; investment ineducation; health and family planning services; investment in necessarily
infrastructure to create employment opportunities through the encouragement ofsmall-scale enterprise; support for good governance and the rule of law and firm
action against corruption; and action to promote greater equality for women and to end
the exploitation of children. (2.3)•

Where low-income countries are committed to the elimination of poverty and pursuingsensible policies to bring that about, the British government will be ready to enter a
deeper, long-term partnership and to provide an enhanced level of resources andgreater flexibility in the use of resources. (2.21) Within such partnerships, the different
types of assistance may include capital aid (financial support for specific projects oractivities); program aid (balance of payments and budgetary support); technicalcooperation and various other schemes. What we do in any particular country will take
into account the situation of the partner countries, other donors, and ourselves. Where
we have confidence in the policies and budgetary allocation process and in thecapacity for effective implementation in the partner government, we will consider
moving away from supporting specific projects to providing resources morestrategically in support of sector-wide programs or the economy as a whole. (2.22)•

Donor coordination: True partnership between developing countries and donors isimportant for poverty reduction. We, together with the rest of the international
community, must be ready to respond accordingly and to commit resources overextended periods in support of sound development strategies. Countries with limited
administrative capacity should not have to negotiate separate country plans with eachof the major bilateral donors and the multilateral agencies. We will encourage
strengthened donor coordination. (2.20)•

Policy consistency: Development assistance is an important part of the way in which
we can help tackle poverty. But, it is not by any means the only aspect of ourrelationship with developing countries. Both nationally and internationally, there is acomplex web of environmental, trade, agricultural, political, defense, security, andfinancial issues which affect relations with developing countries. To have a real
impact on poverty we must ensure the maximum consistency between all thesedifferent policies. (3.1)（4）
Financial assistance: Financial assistance is necessary to support programs indeveloping countries. Concessional resource transfers from the international community todeveloping countries have declined sharply in recent years. Britain’s ODA expenditures are
the same and have fallen from 0.51% of GNP in 1979 to the current level of 0.27%. We are8committed to reversing the decline and increase ODA to 0.7% of GNP as demanded in the
United Nations Millennium Development Goals. (4.9) It is important to public confidence that
there should be a clear and unambiguous framework for the use of our development funds.
(4.6) Furthermore, all our future assistance to developing countries will be on grant terms.
(b) Aid System Narrowly Defined
In the World Bank-IMF SAL or PRSP systems, discussion of the aid system narrowly
defined tends to concentrate on the pros and cons or the contents of policy reform conditions(so-called conditionality) between donors and the recipient government. But in the case of the
British Labor Party’s aid policy, this will not do. As has already been indicated in (a) above,the development model envisioned under this aid policy model assumes that sustainable
development and poverty reduction in developing countries can be facilitated by the provisionof desirable forms and levels of support from the UK and other donors, such as material andfinancial assistance as well as policy support—in addition to the development capabilities ofeach national economy. Thus, the aid system narrowly defined that ensures the effective
operation of this development model must also furnish incentive mechanisms across multiple
dimensions and situations which correspond to the development model. Below, I will look at
each part of this multi-layered system.
（1）
The White Paper provides the following description of relations between the British
government and recipient governments:
The Government believes that genuine partnerships between poorer countries—
including developing countries and relevant middle income countries such ascountries in transition and Dependent Territories—and the donor community areneeded if poverty is to be addressed effectively and in a coherent way. The
establishment of such partnerships moves beyond the old conditionalities ofdevelopment assistance and will require political commitment to poverty
elimination on both sides. We hope that developing countries will be ready to set
out their strategies for moving towards the achievement of the targets, and share
their plans internally as well as externally so that civil society is consulted about
national priorities and can use its voice to strengthen commitment to theimplementation of pro-poor policies. (2.19)
The White Paper does not indicate the procedures to confirm the establishment of apartnership that fulfills the above requirements, but it clearly suggests what kind of incentive
mechanism is required. As described in (a) above, establishment of a partnership will lead tolarger and longer commitments and greater flexibility in the use of aid. In addition, use ofhigher-level aid modalities such as SWAp and general budget support will be considered.
9There is also a possibility of simplifying aid negotiation procedures as a result of donor
coordination and reducing transaction costs. The benefits gained from such partnership can becompared with countermeasures for cases where partnership does not materialize. The
following paragraph describes such circumstances:
There will be some circumstances under which a government-to-government
partnership is impossible, because the government concerned is not committed to theelimination of poverty, is not pursuing sound economic policies or is embroiled inconflict. Where poor countries are ruled by governments with no commitment tohelping the poor realise their human rights, we will help—where we can do so—through alternative channels. These will include the institutions of civil society,voluntary agencies and local government. In such cases our assistance will be tightly
focused on the victims of neglect and oppression. (2.24)（2）Relations between the UK and Other Donors and International Institutions

The White Paper’s development model describes policy measures to support recipientdevelopment programs that are possible only when close cooperation exists with other donors
and international institutions. However, it does not give the details of partnership relations
necessary for this purpose. The White Paper states that by allocating half of the British
development aid budget (roughly £1.1 billion) through contributions to international
institutions such as the World Bank Group, regional development banks and the United
Nations (UN) (and presumably the European Union (EU) and British Commonwealth), theUK can “have influence over a much larger area” compared to relying only on its own
bilateral aid program. In other words,
We can, however, use our influence in the multilateral system to increase international
commitment to poverty eradication, and work in such a way that our multilateral andbilateral efforts complement each other. (2.8)
With regard to relations with other donors, a key issue is how to gain their consent andimplement new aid modalities as part of partnership efforts which strongly reflect the British
approach.
（3）

Coordination within the British Cabinet

The White Paper’s development model also mentions policy support, in addition to
direct assistance to development programs, as a way to assist developing countries. This isexactly the realization of “policy consistency” centered on development. Such policy
consistency became possible when DFID was elevated to a cabinet-level ministry with10

ultimate responsibility for development policy. As a result, other ministries of the British
government have been pressed to implement trade, investment and agriculture policies thattake account of DFID’s sustainable development objective. System-specific measures werealready discussed in 2-1 above.
（4）

Relationship between the British Government and the Private Sector

The White Paper’s development model also protects the interests of developing
countries by imposing restrictions on commercial activities by the British private sector indeveloping countries. The White Paper provides the following statements to counter potential
opposition from the private sector.
Just as we want to develop partnerships with developing countries, the Government
will seek a new partnership with the UK private sector based on a sharedunderstanding of the role that the public and private sectors can play in development.
(2.31) From a business perspective the developing countries contain a majority of the
population in the faster growing markets. There is therefore a shared interest in aconstructive approach between Government and business to support sustainable
development. Such an approach needs to avoid the distortion of development funds inpursuit of short-term commercial objectives, such as the previous Government’s
support for the Pergau project or Westland helicopters. 7 (2.32, 2.33) In theinternational arena, we will therefore strongly support, and seek to strengthen, thedisciplines which limit the use of tied aid credits…We will also seek to develop further
the use of local and regional skills and resources in assistance programmes. (2.34)
With British business, we will move away from a narrow relationship based on
individual contracts to a broader sharing of approaches to the eradication of poverty,
drawing on the extensive skills of the British private sector—consultants andcontractors, investors, exporters and importers, business organisations, large
companies and small firms. The Aid and Trade Provision (ATP 8 ) lacks poverty
elimination as its central focus; no more applications will be accepted for ATP
assistance, and the scheme will be closed. This does not preclude deploying
development assistance in association with private finance, including in the form of
mixed credits. But in order to avoid the abuses of the past, any mixed credits will be
7

These refer to aid projects carried out during the Thatcher government under ATP (discussed in the next
section) that became scandals. One, the Pergau incident, arose from the Pergau 24 project in Malaysia. The
British government made a £2.34 million fund allocation under ATP to British firm that was bidding on the
project, but the Malaysian government prohibited the bid, claiming corruption on the part of the firm. The
British NGO World Development Movement brought suit against the same firm in High Court in 1994 in
relation to the corruption charge. In November of that year, the court ruled that the fund allocation was
contrary to the economic and humanitarian interests of the Malaysian people and ordered Foreign Secretary
Douglas Hurd to retract the allocation. See ODI document cited in footnote 5.
8
A scheme installed in 1977 in the Department of Trade and Industry called “Aid and Trade Provision”
which allows the UK government to provide aid funding to development projects if securing a contract
would benefit British commerce or industry. See the same paper as above.
11

managed within agreed country programmes and subject to the agreed strategy andsectoral focus of each country, which would have the primary aim of helping to reducepoverty not of subsidising exports. (2.35)(c) Synthesis
The following summarizes the above analysis of the British aid policy system as seenin the 1997 White Paper on International Development, with a comparison to what is inherent
in the World Bank’s SAL and PRSP systems.
（1）
The recipient country “development model” assumed in the White Paper is a multilayered process in which economic growth and poverty elimination are achieved with material
and financial assistance as well as policy support (particularly through trade and investment
policy and aid partnership) from the UK, other donors and international institutions—inaddition to the country’s own reforms. The development model under the SAL and PRSP
systems primarily focuses on an economic growth and poverty reduction process, based on
the recipient government’s own reform efforts. Here, the role of aid is limited to the World
Bank-IMF balance of payments and budget support.
（2）
Regarding the growth mechanism, there appear to be few essential differences
between the White Paper model and the SAL-PRSP model. Both models assume a scenario in
which macroeconomic stability and deregulation lead to development of the private sector(also the expansion of foreign direct investment in some countries), which becomes theengine of growth. Both models lack recognition that industrial policy is indispensable at thestage when the market mechanism is underdeveloped.
（3）
Corresponding to the development model’s multi-layered process, the description of
the “aid system narrowly defined” also becomes multi-layered. It is recognized both insideand outside the World Bank that conditionality in exchange for aid allocation was a failure as
an incentive structure. (Conditionality was the most intensively debated topic under the SAL
system.) The White Paper, recognizing the same, proposes preferential aid principles as anincentive mechanism in place of conditionality for countries that have establisheddevelopment partnerships with the British government. This partnership requires, among
other things, that the recipient government make a political commitment to eradicate poverty
and design a development strategy to make that commitment concrete. Compared with theconditionality debate under the SAL and PRSP systems, the partnership concept goes beyond
simply rectifying the failure of ex ante conditionality by replacing it with ex postconditionality; it tries to use the latter as a tool of country selectivity for aid provision. This12

does not mean in either case that countries not selected are completely cut off from aid. Still,whether this partnership approach is effective or not remains to be tested.
（4）
With regard to the incentive mechanisms for other situations not included above, someconcepts are clear (Britain’s domestic Cabinet relationships, relations with the private sector)
while others are not. In either case, the policy objectives that are the target of incentives arehighly ethical in nature. Since some of them are not fully explained, their feasibility must still
be tested.
2-3 Tony Blair’s Third Way and Amartya Sen’s Capability Approach
In this sub-section, I will discuss the aid philosophy presented in the 1997 White
Paper on International Development, using the welfare state concept of Tony Blair’s The
Third Way. Furthermore, I will touch on the Amartya Sen’s Capability Approach to poverty
alleviation and development, which has a similar theoretical structure.
First, it is important to emphasize that the White Paper states that the principles ofsocial justice mentioned in the Labor Party’s victorious 1997 election manifesto apply not
only to the British, but also to the people of all countries. Next, the White Paper states that
there were two flaws in the development models of the past half-century. First, the stateintervened excessively in the economy, causing distortion, inefficiency and corruption.
Second, too much confidence was placed in the minimalist state and the power of theunregulated market, which failed to secure economic growth and sharply increased global
inequality. The White Paper also states that an important lesson of the past several years is theneed for balance between the state and the market in generating economic growth that
benefits the poor. These correspond to the statements that the Third Way aims for an optimalgoal, different from strong social protection under the old welfare state concept of the First
Way and also from the Second Way with its anti-welfare, anti-social protection policy of themarket principles under the Thatcher government. The following are more concrete
descriptions of the choices made under the Third Way:
（1）
Although the series of policies on income security introduced by the Blair government
severely reduced income support to the individuals outside the labor force (On this point theLabor government followed the policy of the previous Conservative government that sought
the cut, arguing that the support creates a moral hazard); on the other hand, it has undertaken
various measures to provide preferential treatment to people with low incomes and to makework an attractive option. Measures include favorable tax schemes and national healthcontributions as well as the introduction of a minimum wage system. It has also taken steps to13

ensure that those who truly need public assistance would not be demeaned by receiving it.
（2）
The government has been making efforts to encourage employers to hire informal
laborers to create employment in the external labor market.
（3）
Adopting austere fiscal and monetary policies, the Blair government abandoned full
employment policy through macroeconomic management; however, it has been carrying out
employment expansion on the supply side with support for job-search activities, provision of
employment subsidies, and job training and education as micro policy interventions into thelabor market.
The reason for choosing the Third Way on welfare policy is easy to understand when
one looks at the sharp increase in households with no working members plus individuals
outside the labor force (the economically non-active population). The particular cause of thisproblem is that the drastic change in industrial structure in recent years has brought about adecline in leading industries in traditional regions and created unemployment and a large
population that is outside the labor force, since unskilled workers are unable to transfer to newjobs and have lost the motivation to seek employment.9
Blair considered the unemployed labor force and those outside the labor force victims
born of “social exclusion” and designated the elimination of the causes of such exclusion achallenge for the various Third Way measures. The objective was to give these people “equal
opportunity” with regular workers, providing the same starting line and enabling them todemonstrate their capabilities.
Finally, let me touch on the structural similarity between the Third Way and Sen’s
ethical economics. The latter also attaches the highest value to enhancing the “capability” ofthe poor (ideally, making it equal among all people). Capability is not a specific thing thatpeople acquire (wealth in the form of income), but a combination of things, abilities,
restrictive factors which can change to function and serve in various ways and forms to
improve people’s lives (By Sen’s definition, “functioning” is what a person manages to do or
to be with things, and “capability” is a set of that person’s “functioning” vectors). Incidentally,
there are a variety of social restrictions on the capabilities of poor people (“social exclusion”).
The World Bank’s World Development Report 2000/2001 on attacking poverty summarizes
9

See previously cited paper by Hideki Fukai. The sharp rise in individuals outside the labor force is also an
issue that has garnered attention in Japan recently. Yūji Genda and Mie Maganuma, Nīto― Freeter demo
naku Shitsugyūsha demonaku, (NEET: Neither Freeters nor Unemployed) Gentōsha, Tokyo, 2004.

14

Sen’s consideration of social exclusion in three concepts—i.e., lack of opportunity,
powerlessness and low security—and uses them as a framework of its structure. When thecauses of social exclusion are removed, the capabilities of the poor are enhanced and equal
opportunity is assured. This is Sen’s concept of social justice.
Where the strong similarity between the conceptual framework of social justice inBlair’s Third Way and Sen’s Capability Approach comes from is an interesting question forresearch, but it is not important for the moment. The most important point is to note that,
despite the similarities in concept and structure, there is a significant difference in the context
of the real economy—which brings about social exclusion—between the society, households,
the labor force in a mature market economy and the same in a low income developing
economy in which the majority of the population lives in rural areas.

3.

British Approach to the African Economy

3-1 DFID-ODI Research on Africa
In Section 2, I examined Britain’s idealistic aid policy formulated under the new Labor
government and the leadership of Clare Short. The central topic in this section will be how
this policy and, above all, its distinguishing characteristic of focusing on poverty eradication
through grants, reflect the economic challenges of its main recipient region, Africa, and how
those issues are being resolved as a result of implementation of the policy.
The relationship between Britain’s policy and the development demands of the African
economy is not easy to investigate head on, so it is more realistic to identify a narrow “entry
point” that conforms with our research objective. After experimenting with various
approaches, I decided to use the entry point suggested by joint Africa research projects
between DFID and ODI. They respectively have long experience with aid to Africa andextensive research accomplishments regarding the economies of Africa. Here, I refer to threesets of ODI Africa research projects. An overview report of each is as follows (ODI also has
country reports separate from these, but I have read no more than parts of these).
PRSP Institutionalization Study: Final Report, Chapter 1: Overview of PRSP Processes andMonitoring (Submitted to the Strategic Partnership with Africa), 15 October 2001, ODI(hereafter, ODI 2001).
The study covers eight countries: Benin, Ghana, Kenya, Malawi, Mali, Mozambique,Rwanda, and Tanzania.
15M. Foster, A. Fozzard, F. Naschold, and T. Conway, How, When and Why Does Poverty Get
Budget Priority? Poverty Reduction Strategy and Public Expenditure Reform in Five African
Countries, ODI, May 2002 (hereafter, ODI 2002).
This study covers five countries: Uganda, Ghana, Tanzania, Malawi and Mozambique.
Laure-Helene Piron and Alison Evans, Politics and the PRSP Approach: Synthesis Paper,
ODI, March 2004 (hereafter, ODI 2004).
This paper covers four countries: Bolivia, Georgia, Uganda, and Vietnam.
Of the three projects, the first is formally research contracted by the StrategicPartnership with Africa (SPA); but it specifies that the overall coordination, especially thereview of important reports, would be conducted by DFID for SPA. The second and third
reports were conducted with DFID funding. The distinguishing characteristics of the DFIDODI Africa research that furnishes our “entry point” can be summarized into the following
three points.
（1）
In the Terms of Reference (TOR) for the research, DFID specified that the researchers
would draw up an effective prescription for aid to Africa (focusing on poverty reduction
through grants) based on DFID’s aid philosophy. But prior to the research, ODI identified acommon context of the target African countries, using its own accumulated knowledge: thestructure of the “vicious cycle” (with the “neo-patrimonial state” political system suggested as
the point of departure).
（2）
Consequently DFID-ODI’s hypothesis for the entire research is the proposition thatpoverty reduction in African countries may be impeded by the existence of the vicious cycle,
but that the structure of the vicious cycle may be gradually broken down if there is acommitment of political leaders to poverty reduction.
（3）
What became clear from the research is that although there are major differencesamong African countries, there has been very little progress toward poverty alleviation in
general. Nonetheless, there have been some incremental changes in political systems.
In the following, I examine the relationship between British aid policy and the African
economy, using the above-mentioned entry point.
3-2 The Political Economic Structure of “Semi-Democratization”
The TOR for ODI 2001, which is the starting point for the ODI research series, sought
16

to investigate public expenditure management and governance policies as essential elementsof the functioning of the PRSP system aimed at poverty reduction. It acknowledged that tostrengthen the PRSP system, it is necessary to have not only the strong commitment to thesystem by the recipient countries and other stakeholders, but also the implementation of thesepolicies. This is the background for “PRSP Institutionalization Study.” However, at thescoping stage of the project,10 ODI had already identified a research topic not included in the
TOR—that is, the importance of recognizing that the PRSP process is political—and it
designed a detailed account of the “common context in the eight countries” to explain its
reasoning.
Below are the key points of the common context identified in the final report.
（1） In the international movement toward democratization through elections since the1980s, presidential elections under a multi-party system became common in Africa by the lateeighties. A free press was also seen. However the democracy seen there was superficial, withthe reality that these were no more than “semi-democratized states.” In the language ofpolitical science, they should be called “neo-patrimonial states” and in general, they havepolitical systems based on patron-clientism. In the genuine patrimonial state (that existed
historically), a state’s resources were not public property in the modern sense, rather they
were treated as the patrimony (private property) of the ruler. Public servants and theirretainers received compensation not through salaries but through prebends associated with theappointed positions. Whether it exists under autocracy or a bureaucracy with the façade of aliberal democratic state governed by the rule of law, neo-patrimonialism functions in adominant manner anywhere the above principles apply.
（2）
Where patron-clientism is the dominant political form, each government ministry
resembles a fiefdom or prebend under a stipend system rather than a unit executing authorities
entrusted by the center. As a result, the Cabinet is unable to guarantee policy decisions. Seniorbureaucrats do not necessarily participate actively in internal policy decision-making. Even if
decisions are made, in principle there can be no assurance that the policies are coherent
among ministries. In general, this means that the policy process is fragmented.
（3）
Heavily aid-funded activities, especially construction projects, tend to strengthen
fragmentation of the policy process under neo-patrimonialism. This type of aid weakens theaccountability toward domestic stakeholders and removes planning and policy
implementation capacity from the recipient. It also implants a rent seeking culture in both the10

PRSP Institutionalisation Study (Scoping Phase) Report on Progress and Preliminary Findings,
November 2000, ODI.
17

public and private sectors, further amplifying neo-patrimonial social and political
relationships.
（4）
At a more technical level, the public expenditure and revenue management systems
have not served public policy objectives, at least until recently. The administrative system has
been the same, characterized by low morale and weak incentives to achieve results.
Additional Thoughts on Neo-Patrimonialism
I would like to provide some additional thoughts on the concept of the neo-patrimonialstate, the highlight of ODI’s research on Africa.
First. ODI was original in its raising the neo-patrimonial state political system as the primary
initial condition of African economies. We in the Japanese development community haveworked so far to understand the characteristics of the African economy relying exclusively on
economic analysis, but in reality these methods have been inadequate and the results havebeen unsatisfactory. When investigating characteristics of the African economy, we tend touse comparisons with the Asian economy, but what emerges with economic analysis isnothing more than degrees of difference in key variables between the two regions. By contrast,
patrimonialism is a political science term, coined by Max Weber. In China, it is known as thepolitical system that gave birth to state enterprises based on the “bureaucratic capitalism” of
the Nationalist Party and which was abandoned with the emergence of the People’s Republic.
In Thailand, the end of “patrimonial corporations” began when Prime Minister Sarit accepted
the aid conditions of the U.S. government (later, the World Bank). In this way, in East Asia
the abandonment of patrimonialism has been a clear signal of modernization; thus, thedifference with African countries, where patrimonialism remains, is an absolute one.11
Second. However, I have one reservation at this stage of my research about the term
“patrimony” used in ODI 2001. In the case of China, when you discuss the traditional sociopolitical structure in terms of a patrimonial system, there is evidence that it includes a11

Shigeru Ishikawa, Kaihatsu Keizaigaku no Kihon Mondai, (Basic Issues in Development Economics;
Iwanami Shoten, 1960) treats the concept of “patrimonial state” as a key concept in the political economy
approach to modern development economics. With regard to the information on the vestiges of thepatrimonial state owned enterprises of the Chinese Nationalist government, see Mitsutoyo Matsumoto ,Chūgoku Kokumintō “Toei Jigyō” no Kenkyū (The Study of the “Party Enterprises” of the Chinese
Nationalist Party), Asia Seikei Gakkai, 2001. With regard to the information on Thailand, please refer to;
Oey A. Meesook et.al., The Political Economy of Poverty, Equity, and Growth, Thailand (March 1987),
mimeo; J. Alexander Caldwell, American Economic Aid to Thailand, Lexington Books, Lexington, Mass.
1974; Akira Suehiro, Tai: Kokka to Minshushugi (Thailand: The Nation and Democracy), Iwanami Shinsho,
1993.
18

centralized bureaucratic system that can be traced back to the Han Dynasty. In India as well,there are ample records and research showing that control of Indian society in the medieval
era of Muslim conquest (from the beginning of the 13th century to the end of the 18th century)
was based not on feudalism but on a bureaucratic prebend system (in which bureaucratic
positions accompanied by perquisites were bought and sold). 12 I do not yet know what
historical research is behind ODI’s reference to patrimonialism, nor is my knowledge of thepolitical systems of the ancient African kingdoms destroyed by colonialism sufficient. Fromthat perspective, ODI’s interpretation is best understood for the time being as the patron-clientsystem, which is used in almost the same way as patrimonialism. The World Bank’s World
Development Report 1997,13 a special issue on the role of the state in development, teaches usthat until the 19th century the British government was managed by public servants thatreceived their positions under a traditional patron-client system (There was no common salarysystem; instead, salaries were supplemented through bribery. Bureaucrats considered theirpositions personal property that could be bought and sold, and they frequently hired staff andpaid their salaries.). In 1854, the Northcote-Trevelyan report presented a blueprint forbureaucratic reform, calling for the first time for introduction of a modern bureaucratic system
based on a career public service. But there was strong resistance to the recommendations,which all ministries were finally compelled to adopt in 1970. ODI’s reference to patron-client
relations at minimum teaches us that African countries are presently in a “pre-NorthcoteTrevelyan report” state.
Third.

Whether one calls it a patrimonial system or a patronage system, it should beemphasized that it has appeared in Africa since the late 1980s. After colonial states pulled outof Africa there was a long period of tribal conflict. The 20 years of “national violence” from
1966-1986 in Uganda (the conflict between the Bantu tribe in the fertile south and the Nilotic
tribe in the barren north) and the 1967-1970 Biafra civil war in Nigeria (a conflict among thenorthern Hausa-Fulani tribe, the western Yoruba tribe, and the eastern Igbo tribe) are
examples of this. In the 1980s a change in the nature of the conflict began to appear. A
12

A patrimonial state was originally a prototypical concept related to Max Weber’s historic “The Types ofLegitimate Domination” in Economics and Society: An Outline of Interpretive Sociology (in Japanesetranslation, Kenryoku to Shihai). Regarding the cases of India and China mentioned here, Weber writes indetail about each in his great work, Gesammelte Aufsätze zur Religionssoziologie (The Sociology of
Religion), which contains “Konfuzianismus und Taoismus (Confucianism and Taoism)” and “Hinduismus
und Buddhismus (Hinduism and Buddhism).” Each has been translated into English by Hans Gerth and
Don Martindale under the title of Religion of China: Confucianism and Taoism, and Religion of India: The
Sociology of Hinduism and Buddhism (Japanese Translation, Jukyō to Dōkyō and Hindū-kyō to Bukkyō:
Sho-Shūkyō no Keizai Rinri II, translated by Tokusaburō Hosoya and Hiroshi Fukazawa respectively. In
either case, under this system the ruler who stands at the pinnacle of political power divides his power overtime among his subordinates, demanding obedience (or loyalty) and administrative services (maintaining
the peace, collecting taxes, etc.) in return for the perquisites of office. Thus, we see perquisites and services
linking the center to the periphery.
13
World Bank, World Development Report 1997 (The State in a Changing World), p. 80.
19number of causes for this change can be cited, but one is that the political influence of Britain,
Europe and international development institutions strengthened, replacing the East-West
conflict of the Cold War. As a result, one began to see states with presidential systems frommulti-party elections but unchanged tribal conflicts. In this situation, the appearance of
patronage political structures can be regarded as mechanisms for pursuing political and social
stability. ODI 2001 mentions the following facts with regard to what it sees as the distinctive
characteristics of relations among political parties:•

Opposition parties are numerous, unstructured, non-ideological and lacking in policy
positions, with continual defections to the dominant political party.

•

There is very little modern political transition, where the dominant party loses anelection based on its policy platform leading to a change of administration.

•

Civil society in the classical sense is virtually non-existent.

3-3 PRSP Institutionalization: Slow Progress
Next, following the framework of ODI’s research project “PRSP Institutionalization,”
I will examine how much poverty alleviation has progressed. However, due to the short timesince the start of the PRSP system, the research results could only provide interim conclusions.
The research plan itself is evolving each year. In ODI 2002 the objective was to study the
relationship between the poverty reduction strategy and public expenditure management(PEM) reform, and ODI 2004 focused on the relationship between the PRSP approach and thepolitical structure. But these attempts are not sufficient to compensate for the limited
experience with PRSP. The only progress has been the recognition of the background to slow
institutionalization of PRSP. The following discusses ODI’s observations on this point.
3-3-1 Government Commitment as the Premise of Institutionalization
Government commitment to poverty reduction is strong at the level of central
government officials, but weak at the regional or local government level. Furthermore,commitment at the political level is far weaker than at the technocratic level. This isespecially true in Ghana and Kenya. In Mozambique and Rwanda, there is political support
but it is limited to the ruling party. In Tanzania a high level of political support is assumed but
most observers question whether it will continue after the completion of HIPC2.[ODI 2002]
In Uganda, President Museveni of the National Resistance Movement, which brought tribal
conflicts to an end and unified the country as a result of the 1986 coup d’etat, has shown astrong commitment. However, there have been some doubts on its sustainability as thecountry’s political structure is an unusual “no political party” system, and political tensions
20

have arisen surrounding the president’s plan to seek a third term in the presidential election
scheduled for 2006. [ODI 2004]
3-3-2 MTEF and PEM14
Public expenditure management, the major focus of reform in PRSP
institutionalization, was inefficient and regressive in all five countries studied by ODI. One
aspect is that the government has been involved in numerous activities and consequently mostof them do not receive necessary budget or administration. Available revenue was notallocated efficiently among the necessary expenditure items, with little attention to specificcriteria or objectives. Each year the increment over the previous year’s budget is allocatedequally among existing expenditure items based on incrementalism. The Medium-Term
Expenditure Framework (MTEF) was proposed to resolve this particular problem of PEM. It
aims to re-allocate expected revenue over a three-year period based on officially agreed
expenditure priorities. [ODI 2002] However, there is insufficient coordination withingovernment units between those responsible for planning and those for budget, which has
made MTEF implementation difficult. As another aspect, the efficiency of MTEF is based on
the premise that the government needs to control all its revenue. But in reality, foreign aid
funds are not captured in the budget, and there are many off-budget accounts within thegovernment. [ODI 2004] Country case studies indicated that the only country that has
achieved desirable results on all three aspects is Uganda. Progress in other countries is lagging.
[In Uganda, the Ministry of Finance, Planning and Economic Development (MFPED) wasestablished with centralized authority for planning and budget; the Poverty Eradication Action
Plan (PEAP) was institutionalized as the basis for budget planning; and MTEF was
implemented. But MFPED does not control the military budget and state house expendituresthat include those of the president’s office (NRM)].
3-3-3 Was Reform of the Political System Induced?
As mentioned earlier, this topic was proposed by ODI at the beginning of the DFIDODI joint study. It is not only one of the highlights of the joint study but also the issue that
holds the key to the near term success of DFID’s aid policy designating poverty reduction as
its ultimate goal. ODI’s diagnosis [ODI 2004] on this issue concludes that progress in that
direction is possible at least for the period to 2004, but changes to date have been incremental.
14

For the two concepts, please refer to Shigeru Ishikawa, "Hinkon no Wana to Kōkyō Shishutsu Kanri—
Atarashii Kaihatsu Model wo Motomete” (The Poverty Trap and Public Expenditure Management—
Seeking a New Development Model), FASID, Discussion Paper on Development Assistance, No.2,
December 2003
21

This is similar to the result of its assessment of the political commitment to PRSP. However,when ODI says progress is possible, I take it to mean that there is deeper understanding of thetheoretical possibility. Below are some descriptions that indicate this view.
（1）… if governments are obliged to discuss poverty and what they are doing about it with
their citizens, they are likely to regard these things more seriously, and to be held toaccount more effectively. If this happens, it will involve processes that are formally or
informally political. [ODI, 2001: 58]（2）

Poverty reduction is fundamentally a political objective: relations of power, access tostate resources, government policy priorities, legislative frameworks, and evenconstitutional guarantees may need to be transformed…Even if poverty reduction is
not necessarily a zero sum game, there will inevitably be winners and loses in theprocess of change, as vested interests are no longer protected, discriminatory
practices come to an end, and policies become more broad based and benefit widersocial groups.. [ODI, 2004: 4]

4.

East Asia Model of Japanese Aid—Basic Characteristics

Above I have examined the British model of aid to developing countries. For the sakeof keeping this paper concise, in Section 4 I will summarize the principal structural elementsof the East Asia model of Japanese aid, using the framework introduced in Section 2 andcomparing it with Britain’s Africa model. That should be sufficient to achieve the objectivesof this section because there is a common understanding among (at least) Japanese researchers
on the key elements of Japan’s East Asian aid model.
4-1 Aid Policy to Developing Countries
4-1-1 Aid Philosophy
The policy of the current British Labor government systematically stresses that thecommitment and a theoretical basis for the new philosophy of social justice (equal
opportunity and for that purpose, ending social exclusion) should apply not only to British
citizens but also to all people of developing countries. Japan adopted the ODA Charter in1992 and since then has made continuous efforts to establish its own aid philosophy.
Nevertheless, Japanese aid is not based on the same sort of grand concept or theoreticalsystem. In practice, it is the request-based approach that has been long recognized as Japan’s
aid philosophy. This approach reflects the Japanese sense of atonement inherited from
reparations and semi-reparations to East Asian countries victimized by Japan in World War II,
22and it is justifiable from an ethical perspective.
4-1-2 System of Aid Procedures
In the UK, DFID as a cabinet ministry bears the sole responsibility for aid. Based on
the government’s aid philosophy, the department has the ultimate authority on matters related
to assistance to developing countries. DFID can speak up vis-à-vis other ministries (especially
FCO and DTI) when British trade and investment policy has an effect on the development ofrecipient countries. In addition, it has the authority to negotiate with the other donor
governments and international aid institutions. In Japan, the Ministry of Foreign Affairs(MOFA) plays the central role, under the Council of Overseas Economic Cooperation-Related
Ministers, in coordinating aid policy. While cooperating with the Ministry of Finance(International Bureau), the Ministry of Economy, Trade and Industry (Trade and Economic
Cooperation Bureau), and other ministries, MOFA makes the decisions, consulting andmaking adjustments along the way. Although this system achieves policy uniformity andbalance, it also makes it difficult to pursue an aid policy with leadership based on Japan’s own
development and aid expertise.
4-1-3 Development Model
The development model assumed by British aid policy is structurally similar to themodel of the World Bank-IMF PRSP system. The development model assumed by Japanese
aid policy is implicit but is consistent with the other models, with the exception of one point.
The point is that the World Bank and IMF believe that structural reform policies cantransform a developing country into a market economy and the market mechanism willautomatically take care of modernization and industrialization of an industrial structure, whilemost Japanese officials and economists believe that such approach is difficult without aproactive “industrial policy.”15 British policy declares both poverty eradication and economic
growth as the ultimate objectives of development. This fits comfortably with Japanese policy,
but because the British approach does not touch on industrial policy, Britain’s growth support
15

To avoid misunderstanding, the industrial policy referred to here does not assume the early Japanese or
Korean-type industrial policy with strong intervention in industry and private firms, using means such asimport restrictions and export subsidies, selective financing, and preferential tax measures. An acceptabledefinition of industrial policy can be a government policy to correct misallocation of resources amongindustries, as often occurs due to market failure. Protection of infant industries is only allowed in this case.
However, in the case of developing countries where the market economy is underdeveloped, thegovernment must assume a more proactive role. In this situation, the market does not signal what industries
need to be developed or which industries have potential to be competitive. The first thing the government
should do is to build capacity for answering these questions, including the implementation of survey.
Strengthening the investment climate is also urgent. When industrial policy requires narrowly definedindustrial protections, then countries must comply with GATT and other international commitments.
23

may end simply at rhetoric. On the other hand, DFID’s authority to influence trade andinvestment policy may play a role in place of industrial policy.
4-1-4 Aid and Conditionality
Based on its recognition that the policy conditionalities on macroeconomic assistanceunder the SAL system damaged recipient government ownership and were a failure, theBritish government proposed an alternative approach to build development partnerships withthe governments in recipient countries. After securing the government’s commitment topoverty reduction and implementation of a series of appropriate development policies asconditions, the UK would pledge to give preferential aid. Aid would still be given even if thepartnership were not established, but it would be provided directly to the poor through NGOs,
local governments, etc. rather than through the central government. The effectiveness of thisapproach as an incentive system still needs to be tested. By contrast, the Japanese government
has traditionally given aid, without policy conditionalities, on a request basis to projects
proposed by the recipient government. Under this approach, Japan discusses and advises on
the related development policies in a separate policy dialogue in which the two parties
participate with independence and on equal footing. This has contributed to strengthening
relationships of mutual trust.
4-2 Application to Major Recipient Countries
4-2-1 Initial Conditions
The most critical initial condition of the African countries (hereinafter, from five toeight countries that have deep relations with the UK) is the fact that, as a result ofinternational pressure for democratization of political systems in the 1980s, national socialand political relations broke free of tribal conflict and shifted to relations distinguished by apatron-client system or a neo-patrimonial system centered on a president elected in multiparty elections. Under this system, even if the government hierarchy and the supporting
bureaucracy appear to be organized according to modern discipline and chain of command,
that is not the case in reality. Instead, job positions are patrimony accompanied by their own
perquisites: in return for providing certain services (loyalty, tributes, etc.) to superiors,
officials are unrestricted in exploiting their positions. As a result, there is no policy
consistency or coordination among ministries, and public finance is not managed so as toallocate resources based on uniform criteria.
The decisive difference in East Asia is that shortly after World War II, the patrimonial24

structure was systematically abolished and modern administrative mechanisms andbureaucracy made their appearance. Consequently, unified policies on modernization andindustrialization and unified fiscal management became feasible. While some countries
experienced the excesses of autocracy and statism, resulting in an inefficient detour in thedevelopment process, most of these returned to the proper path without external intervention.
To understand why this occurred, it is necessary to understand additional initial conditions
such as differences in the stage of development of human and social capability.
East Asian countries also experienced the problem of ethnic conflict, similar to thetribal conflict in Africa. I will make two comments about this. 1) The roots of this conflict lie
in the history of the East Asian region being structured as primary product exporting
economies under colonialism. Since most of the land was occupied by the closed selfsufficient communities, the majority of the needed labor force was filled with immigrant laborfrom labor surplus regions of India and China. 2) This immigrant labor gradually assumed a
key role in primary industry and grew into an indispensable class in supporting the postindependence export economy. While there were some conflicts and strife with the ruling
native ethnic groups (belonging to such classes as government bureaucrats and employees ofstate enterprises), ethnic conciliation and assimilation were critically important to achieving
the growth of newly emerging states. The most remarkable achievement can be seen in
Thailand, where ethnic assimilation has been realized. Malaysia, which experienced serious
conflict, implemented the “Bumiputra” policy from 1971-1990, giving preferential treatment
to the economically and socially disadvantaged Malay ethnic group so they would grow tohave the ability to compete with overseas Chinese. The policy had substantial positive results,
so in 1991 a new national policy called “Vision 2020” was put in place to formulate a“national consensus.” The Vision calls on Malays and Chinese to “competitively coexist” in asense of unity within the framework of Malaysia as a nation. Malaysia’s success in its rapid
industrialisation cannot be explained without taking into account the considerable effect of
this national consensus.
4-2-2 Development Process
In African countries where British aid is dominant, the downward trend in per capita
income stopped around 1995 for the first time since the 1970s, thanks to the effects of donor
assistance. However, the expected reduction in poverty has been slow. Promoting change inthe traditional political structure and democratic reform through implementation of poverty
reduction strategy is an excellent approach, reached after experiencing many difficulties. But,
it too has hardly produced any results. In contrast with this approach, in East Asia mostcountries have made steady progress in poverty reduction together with growth. With regard25

to industrial structure, the rural agricultural economy had developed first, followed by ruralindustrialization, and the start of industrialization in urban small and medium enterprises andlarge-scale advanced technology firms. This industrialization brought about urbanization of
the population and an increase in the working middle class. These changes promoted reformin the social system and further democratization of the political system (albeit within theframework of an autocratic system in some cases).
4-2-3 Role of Aid
Let us look at the role of aid in the development process discussed above. In the caseof aid to Africa, I will examine the issue for the entire international aid community since it is
impossible to isolate aid from the UK alone. Prior to the 1980s, aid took place almost
exclusively in the form of projects; then structural adjustment lending became the main formof aid. Past results suggest that both types of assistance have been unsatisfactory. The primaryreasons for the failure of project aid were that the macroeconomic framework was not in place,communication and coordination among donors of investment projects were insufficient, andrecipient governments lacked management capability; therefore, implemented projects took
on a mosaic quality with no coherent plan.16 This evaluation brings to mind the following. In
discussions of the lack of capabilities in low-income countries to manage public expenditures,
which became a significant issue in the 1990s, the key reason identified for central
governments not having full information on their fiscal balances was the practice of donors
treating aid funds as off-budget items. 17 Similarly in discussions of the fungibility (thepossibility of diverting funds) of project aid, raised in a World Bank study on aid
effectiveness, case studies of seven African countries showed (paradoxically) that cases withno fungibility had the least desirable results. Because the seven countries did not have thecapacity to select public investment projects and manage their budgets, government program
became largely driven by the projects selected and funded by donors.18 Furthermore, cases ofcorruption are often cited in discussions of the micro effects of project aid. On the other hand,
it is widely recognized that structural adjustment lending in Africa was a particular failure. A
debt relief plan for HIPCs was thus recognized as unavoidable in the mid-1990s.19 The above
describes the issues British aid policy to Africa currently faces. It remains to be seen if theconcept outlined in the 1997 White Paper can resolve them.
16

World Bank (Africa Region), A Continent in Transition: Sub-Saharan Africa in the Mid-1990s,
November 1995, pp. 72-73.
17
See Ishikawa’s paper cited in footnote 13.
18
World Bank (1998) Assessing Aid: What Works, What Doesn't, and Why, Japanese translation byHirohisa Kohama and Yōko Tomita (Yūkō na Enjo: Fungibility to Enjo Seisaku), Tōyō Keizai Shinpōsha,2000, pp. 104-5.
19
Ismail Serageldin, Poverty, Adjustment, and Growth: Africa, The World Bank, January 1989, p. 21.
26

In the 1960s and 70s most East Asian countries were in the initial stages ofdevelopment. The import of foreign capital and technology was a high priority to establish
and expand economic infrastructure such as transportation, communication or electrical powerand, particularly for the countries that had taken the first steps toward industrialization, toestablish basic industries such as steel, metals and chemical fertilizer. On the other hand,
Japan was engaged in reconstruction from World War II and urgently needed to develop its
capital goods industries, led by ship and plant production for export, and to secure long-term
contracts to import overseas resources for heavy industry. A symbolic incident in which theneeds of both parties matched was the February 1978 signing of the Japan-China Long-Term
Trade Agreement. The 1979 start of ODA loans to China by the Overseas Economic
Cooperation Fund (OECF) and the 1980 start of resource development loans between the
Export-Import Bank of Japan (JEXIM) and the Bank of China were designed to deal with theunexpected state of affairs that arose shortly after the start of large-scale mutual exchange
based on this agreement. The trade agreement stated that over an eight years period beginningin 1978 Japan would send $10 billion in plant, technology and capital equipment for
construction to China, on deferred payment (at least initially), while China would send oil andcoal to Japan in return. The Chinese government immediately signed contracts for plant
imports, mainly from Japanese firms, and it initiated its Ten-Year Modernization Plan in thesame year. However, the Chinese government experienced difficulties in project planning and
as a result, notified Japan that execution of the contracts would be extended or cancelled. The
provision of ODA loans and JEXIM bank loans was proposed to overcome this crisis. The
contents of the loans are also interesting. The JEXIM loan was used to modernize export
production of coal in Shanxi province and oil in Shandong Province and Daqing City. ODA
loans were applied to modernize rail and port infrastructure to transport the increased coal andoil production to export facilities. Until the mid-1990s assistance to China continued with thesame form and objectives, using ODA loans and JEXIM resource development loans. In thisway, the needs of the two countries continued to converge.20 A similar aid structure can beseen in Japan’s ODA loans to Korea which began in 1966 and those to Thailand which began
in 1969.21

20

Shigeru Ishikawa, “Sino Japanese Economic Cooperation” in the China Quarterly, March 1987. Satoshi
Iijima, Chūgoku no Kaihatsu ni taisuru Nihon no Keizai Kyōryoku no Kōken— En Shakkan no Yakuwari
wo Chūshin ni (The Contribution of Japan’s Economic Cooperation to Development in China - Focusing
on the Role of ODA Yen Loans), May 2004, mimeo.
21
Japan Bank for International Cooperation (JBIC), Higashi Asia ni okeru Nihon no Keizai Kyōryoku no
Seisaku Ikkansei— En Shakkan no Jirei, (The Consistency of Japan’s Economic Cooperation Policy in East
Asia - Examples of ODA Yen Loans), February 2004, mimeo.

27

Later in the 1980s, particularly after the 1985 Plaza Accord, the economies of Japanand other East Asian countries developed markedly; consequently, the convergence of needs
evident during the reconstruction and early stages of development no longer existed. The
nature of economic cooperation between the two is shifting. It has graduated from an aid
relationship to the promotion of direct investment (from Japan) and industrialization (in East
Asia), based on ever-advancing trade relations.
4-2-4 Toward Low-Income East Asian Countries
To conclude Section 4 I must add some important supplementary information. I haveoutlined the East Asia model of Japanese aid but in reality “East Asia” in this context refers,
beside Japan, only to the NICS and the five founding members of ASEAN. These countries
had already grown to become middle-income countries by the 1990s. Japan has also become amature capitalist nation. A newly emerging issue is aid toward the remaining low-income
countries of the region, such as Vietnam, Myanmar, Mongolia, Cambodia and Laos, that were
not discussed above. Key questions are: what is the outlook for growth and development inthese countries; and how can Japan manage desirable aid relationships and contribute toprogress in development in these countries. What is clear from the lessons learned from theEast Asia model is that mutual trust was established when Japan provided aid without
attaching conditionalities and by continuing serious policy dialogue based on equal
partnership. Japan must retain this approach in supporting the current low-income countries ofEast Asia.
(a) Vietnam
As pioneering research on aid policy toward low-income countries in East Asia at thestart of the 21st century, we have undertaken a “Study on the Economic Development Policyin the Transition toward a Market-Oriented Economy” in Vietnam over the six year period
1995-2001. This study was begun at the request of the Vietnamese government, which sought
the Japanese government’s advice on the design and implementation of Vietnam’s Five-Year
Plan. It is a new form of aid called “intellectual cooperation.” The unique characteristics ofthe methodology for this research are that comprehensive and thorough analyses wereconducted by a joint research team, involving Japanese academics (approximately 20
researchers in the field of development economics) and the Vietnamese counterparts (mostly
senior professionals in the Ministry of Planning and Investment) and that the research
identified and examined issues related to formulation and implementation of Vietnam’s long-28

term economic development plans and made policy proposals to address them. 22 We wereinvolved in two plans, i.e., the Sixth Five-Year Plan (1996-2000) and the Seventh Five-Year
Plan (2001-2005). Through this Joint Vietnamese-Japanese Research mutual trust andfriendship with our counterparts were fostered. I believe we also received the trust of theleaders of Vietnam. Our research on East Asian low-income countries has been able to clarify
for an underdeveloped socialist economy the process of formation of a market economy in theareas of agriculture, the rural economy, and state-enterprise reform. Furthermore, it has madesome progress, while incomplete, on the formation of industrial policy, including tradeliberalization and attracting foreign direct investment. Let me indicate three publications
where results are presented:
Shigeru Ishikawa and Yōnosuke Hara, Vietnam no Shijōkeizaika (Vietnam’s Transition to aMarket Economy), Tōyō Keizai Shinpōsha, 1994
Ministry of Planning and Investment and Japan International Cooperation Agency, Study on
the Plan to Assist the Transition toward a Market-Oriented Economy in the Socialist
Republic of Vietnam, Phase 3, General Commentary, March 2001.
Kenichi Ohno and Nozomu Kawabata, Vietnam no Kōgyōka Senryaku (The Industrialization
Strategy of Vietnam), Nihon Hyōronsha, 2003.
(b) Laos and Myanmar“Intellectual cooperation” using the same methodology as in the Joint VietnameseJapanese Research was carried out in Laos from April 2000 to June 2002 with Professor
Yōnosuke Hara of University of Tokyo as the team leader, and in Myanmar from November
1999 to December 2002 with Professor Kōnosuke Odaka of Hitotsubashi University (at thattime) as the leader. Together with the subsequent follow-up studies, these efforts havecontributed to clarifying the special characteristics of the low-income countries of East Asiaand the ideal approach of Japanese aid in the two countries. To list the principal reports,
Committee for Planning and Cooperation (Lao People’s Democratic Republic and Japan
International Cooperation Agency), Macroeconomic Policy Support for SocioEconomic Development in the Lao Republic. Sector Report, Volumes 1, 2, and 3. July
2002.

22

The author was appointed as the leader on the Japanese side. The project was implemented jointly by the
Vietnamese and Japanese teams over six years (from August 1995 to March 2001) in three main phases
plus additional studies.
29

The Government of the Union of Myanmar and Japan International Cooperation Agency,
Myanmar-Japan Cooperation Programme for Structural Adjustment of the Myanmar
Economy, Executive Overview, March 2003.

5.

Toward Mutual Learning—Conclusion

The ultimate goal of this report is to facilitate mutual understanding and learning
between the UK and Japan regarding their aid policies on which there exist considerable
differences. I have done this by comparing Japan’s aid policy based on experience in East
Asia and British aid policy based on experience in Africa. I believe we have achieved our goalon mutual understanding to a considerable degree because we were able to stylize the British
aid model in Africa and Japan’s in East Asia. However, the mutual learning objective can beachieved only by systematically indicating what lessons we draw from mutual understanding
so that the international community can build a common aid policy on which donors can truly
cooperate. This is a significant issue that warrants new preparation, but several points are
already clear at this stage. I would like to close with a few of those points.
5-1 Expectations on the British ModelFirst, I believe that the British model needs reconsideration. We have been strongly
impressed that the aid policy of the British Labor government forms a doctrine supported by agrand design and idealism; however, we cannot help but perceive problems of feasibility
when the equality of opportunity and the need to overcome social exclusion—the ethicalnorms of Prime Minister Blair’s Third Way (the domestic version of the doctrine)—are
simply applied to developing countries. This is because the central problem for social
exclusion in the Third Way is the structurally unemployed and persons outside the labor force
in a mature economic society which results from high growth. By contrast, the central
problem for social exclusion in developing countries, especially those in Africa, is the
problem of the poor which originates in low levels of productivity and development.
A related issue emerges when that aid policy is applied to Africa. DFID realized that it
would not be easy to achieve poverty reduction—the overarching goal of its policy—in Africa
but it continued to search for a more effective path to that goal, not moving away from thedifficulties. In a series of studies on African countries, ODI asserts that at the root of thosedifficulties is the fact that the patrimonial (or patron-client) political system that dominatedthe traditional political regimes of African countries reappeared, together with the end oftribal conflicts and the movement toward democratization including implementation of30

multiparty presidential elections. (In most countries of East Asia the patrimonial system was
fundamentally abolished soon after the end of World War II before modernization andindustrialization.23) ODI calls this a neo-patrimonial system. At the same time, it emphasizes
that if African leaders make a political commitment to eliminating poverty the neopatrimonial political system will gradually dissolve. However, the expected results have yet to
be seen.
Based on our knowledge mainly from Asia, we know that changes in old social
structure and even, in some cases, political structure can occur in two ways: one throughreform of the institutional system or the structure itself; and the other as a by-product of
economic development including industrialization. When a government hurries reform, it
initiates systemic change without touching development which takes a great deal of time torealize. In hurrying reform at the expense of development this approach risks becoming aneven more protracted path. On the other hand, when development takes precedence there is astrong likelihood that even if vestiges of the old system remain, the political system will beable to overcome this barrier and move forward provided government and private sector
development activity is sound—though of course this process may be delayed depending on
the degree of underdevelopment in the social system. Such evidence can be seen in manysuccessful examples of the East Asian model.24 ODI is primarily interested in the pursuit of23

The cases of China and Thailand have been discussed above (pp.18-19). Indonesia is a classic country
where a patrimonial system remains. Under the Suharto regime it was called KKN or CCN (Corruption,
Cronyism or Collusion, and Nepotism). The inefficiency and difficulties brought about by this (system) did
not surface when growth was high prior to the 1997 Asian Financial Crisis. See Cornell University’s Iwan
Azis, “Why and How Institutions Matter in Indonesia’s Episode of Economic Performance,” ADB Institute,
December 1999, mimeo, and Sudarno Sumarto, et al, “Governance and Poverty Reduction: Evidence from
Newly Decentralized Indonesia,” in Y. Shimomura, ed., The Role of Governance in Asia, Japan Institute forInternational Studies, 2003. Richard Robison, Indonesia: The Rise of Capital, Sydney: Allen and Unwin,
1986 (Japanese translation by Hirotsune Kimura) is also important. In China and Vietnam, the patrimonial
regime was curtailed by the socialist reform, but its remnants remain in the administration of state
enterprises, blocking rationalization and modernization of management.
24
Let me provide several concrete examples: (i) In Japan, “farmer landlordism (tezukuri jinushi-sei),” theTokugawa era system maintained by the supply of poor rural labor (as tenants and farm laborers),
transformed into “parasitic landlordism,” when new urban industrial centers such as the Yokohama-Tokyo
and Northern Kyushu areas attracted them as workers during the Russo-Japanese War (1905-06) and WorldWar I. In the process of industrialization, the farmer landlordism was forced to lose its labor force
foundation. Regarding the Saga Plain in Northern Kyushu, see the research of Toshihiko Isobe, “Iwayuru
Saga Dankai no Kenkyū,” (Research on the So-called Saga Class) Shuyōchitai Nōgyō Seisanryoku Keiseishi, vol. 2, Nogyo Sogo Kenkyūjo, 1959, and Penelope Francks, Technology and Agricultural Developmentin Pre-War Japan, Yale University Press, 1984. Regarding Atsugi Village in Kanagawa (the YokohamaTokyo area), see Den Wada’s naturalist novel Mon to Kura, three volumes and sequel, Ie no Hikari Kyokai,
1972-1974. (ii) Regarding the destruction of the Jajmani system in Mysore villages in the south of India,
see the research of Scarlett Epstein, Economic Development and Social Change in South India, Manchester
University Press, 1962. As a more recent example, (iii) in China, progress in industrialization spurred therise of an urban middle class, which formed the background for the March 2004 revision of the constitution(to add the concept of the “Three Represents” and protection of private property). (iv) In the background of
England’s 1854 Northcote-Trevelyan Report which was mentioned earlier was the rise to prominence of31

the first case, and even in regard to change in the patrimonial political system, it seems tobelieve that if political commitment to poverty reduction exists, reform can be achieved
together with PRSP institutionalization. Even if this is theoretically possible, in reality it is anextremely inefficient approach. It would be more effective and straight forward to rely on the
results from modernization of the economic structure through growth promotion. At minimum,
I would like to see the UK reconsider the East Asian model that supports such an approach
experientially. I would like to make several related points.
（1）
In a speech in London in late 1999, Ms. Short stated that the UK strongly supports
broader adoption of the Sector-Wide Approaches and under them, measures by which donors
jointly support sound programs for development of all sectors of the economy. She stressedthat project aid, the main type of aid to that time, often failed because donor countries
provided it to serve their own political and commercial interests, with very few successes. If
donors truly think about supporting development, then they must stop competing over flag
projects or insisting on tied aid.25（2）
The 1997 White Paper also states that SWAp or general budgetary support ispreferable to project aid (as mentioned in 2-1), but it does so using expressions with
diplomatic terms and reservations. Perhaps Ms. Short candidly stated the policy’s true
intentions.
（3） Whatever the case, it is clear that the UK has no understanding of the successful
experience of Japanese aid in East Asia centering on project aid. Japan’s project aid (withsupport from other official flows such as JEXIM bank loans) helped address the realindustrialization needs of developing countries such as China, Korea, and Thailand. Our
successful experience is the aggregate result of the micro-level development effects of projectaid.
（4）
The work of evaluating the macro-level impact of Japanese project aid, taking into
consideration its fungibility as well, has not yet produced sufficient findings.26 Nevertheless,an IMF study comparing the impact of grants and loans on the domestic fiscal balance using
the middle class (The middle class demanded government job opportunities for their children). See Jenifer
Hart, “The Genesis of the Northcote-Trevelyan Report,” in Gillian Sutherland (ed.), Studies in the Growthof Nineteenth Government, Routledge and Kegan Paul, 1972.
25
Speech by the Rt. Hon. Clare Short MP, “Protectionism in Aid Procurement—Disposing of a Dinosaur,”
The Adam Smith Institute, 2 December 1999. A counterargument by Yutaka Iimura, Director General of
the Economic Cooperation Bureau of Japan’s Ministry of Foreign Affairs, appeared in the Financial Times
on February 22, 2000 (“Japan is dedicated to fair aid programme”).
26
The series of case studies by Haider Khan of Denver University on the fungibility of Japanese foreign aid
by recipient country is of special importance. For examples of published studies, see “Impact of Japanese
Aid to India: An Econometric Study of Bilateral Aid,” Asian Journal of Economics and Social Studies, vol.
12, no. 4 (Supplement), 1994, pp. 377-388.
32data from 107 recipient countries from 1970 to 2000 (in this period, the weight for Japan was
heavily toward loans, with less weight on grants) is suggestive. The study results indicate thatwhen total aid, including net loans and grants, increases each recipient country’s domestic
revenue decreases. However, when the effects of loans and grants are looked at separately,
domestic revenue increases in the case of loans (on average, a doubling of loans from 1.5% of
GDP brings about an increase in domestic revenue of 0.35% points of GDP), while it declines
with grants (doubling grants from a GDP 4% level results in a decline in domestic revenue of
GDP 1.1%).27
5-2 Japan’s Aid to Africa
I believe that Japan’s aid policy also needs reconsideration. First, there is a tendency
to generalize our knowledge of and aid experience with East Asia when the Japanese talkabout the African economy or aid policy to Africa. At the Third Tokyo International
Conference on African Development (TICAD III), which took place in Tokyo under Japanese
government sponsorship in September 2003, I was impressed that the TICAD Tenth
Anniversary Declaration and the Summary by the Chair made numerous references to “Asianexperience” and that they emphasized phrases such as “partnership based on respect andtrust,” the aid style that we believe Japanese aid organization staff uses in East Asia, and“poverty reduction through economic growth,” which we believe is the distinctive
characteristic of the development model supporting aid policy there. However, we must be
cautious because Japan’s interaction with Africa to date has been extremely limited. One
reason is that Africa is geographically distant from Japan and apart from a very small numberof specialists, our knowledge and experience with regard to its particular politics, society,financial affairs, economy and especially history is extremely meager. With regard to Japan’said, Africa in the 1990s was not a priority region, accounting for no more than 10% of total
Japanese aid. (While being assigned a low priority in terms of regional distribution, theabsolute volume of Japan’s aid to Africa may not have been insignificant.) As a consequence,
policy interest in Africa was also low. Since the 1980s the international aid community has
undergone dramatic shifts in strategy: introduction of the SAL system, inclusion of politicaland administrative reform (governance) in conditionalities and its increasing overall
importance, the Enhanced HIPC Initiative, introduction of the PRSP system to replace SALs,
and proposal and strengthening of aid coordination among major donors. All of these began toaddress and overcome the failure of Africa aid policies of the UK and other European donor
27

B. Clements, S. Gupta, A. Pivovarstky, and E.R. Tiongson, “Foreign Aid: Grants versus Loans” inFinance and Development, September 2004. The study also has estimates classifying recipient countries bycorruption index. It indicates that in the case of grants to countries in the lowest quarter of the index,
additional grants are completely cancelled out by the drop in domestic revenue.
33

countries. The Japanese government in general has taken a passive, somewhat reserved stancetoward these movements and been slow to participate in the initiatives.
Thus, the summary documents of the TICAD III mentioned above should beunderstood not so much as international endorsement of the relevance of Japan’s
development experience to Africa, but rather as a public commitment that Japan is ready to
become seriously involved in the development and national welfare of African countries andits acknowledgement by participating countries.
Next, let us touch on the question of the type of aid model Japan should adopt as it
becomes actively involved in aid to African countries. Discussions in the previous sections
already suggest two features of Japan’s East Asia model that can be applied immediately: theaid style centered on policy dialogue and the characteristic of giving attention to industrial
policy. However, even these features must be applied carefully. Especially for industrial
policy, there are numerous related areas that must be given careful thought (such as the needfor a macro-level analysis of funding requirements based on in-depth study of the fiscal andmonetary policies).
Finally, the most difficult issue is to consider what sort of message Japan should send
to improve the drastically changing international aid policies led by British aid policy toward
Africa. The cornerstone of Britain’s policy—aid for poverty elimination through grants—isalready supported by the fact that grants account for 98% of all ODA [2002 DAC statistics]
and project and sector assistance has decreased to a mere 10% of all aid [2003 DFID annual
report]. This reality is unlikely to be reversed easily. Still, where Japan can press hard, for thetime being, is probably limited to this area. Japan’s input would be that there are situations
where project aid and support for industrial policy using project aid are effective, though
Japan has not made sufficient effort to explain this point to date. British policy goes further inrequesting aid coordination among other leading donors (particularly on general budget
support) to advocating stringent policies on selection (selectivity) toward recipient countries.
Currently, Japan has difficulty in preparing a sufficient response to the question of what
stance it should take vis-à-vis this approach and on what basis it should support its position.
This situation arose because until now Japan’s aid policy did not pay sufficient attention totrends in the international aid community, instead walking the path of splendid isolation.
Responsibility for mutual learning on this point lies on our side. We must urgently carry out
our responsibility.

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38

［Discussion Paper Back Number］
No.1

Global Development Strategy and Japan’s ODA Policy
Izumi Ohno and Kenichi Ohno

March 2002

No.2

米国における世界銀行の改革論議と国際開発潮流―「メルツァー報告書」後の動き―
大野泉

May 2002

No.3

Growth Promotion versus Poverty Reduction―World Bank Rethinking of Aid Policy and Implications forDeveloping Countries
Shigeru Ishikawa

August 2002

No.4

Diversifying PRSP―The Vietnamese Model for Growth-Oriented Poverty Reduction
Izumi Ohno

August 2002

No.5

PRSP・貧困モニタリング・援助協調―タンザニアの事例
榎木とも子

April 2003

No.6

現地 ODA タスク・フォース強化策としての「ガーナ・モデル」―ガーナにおける案件形成の取り組み
橋本宣幸

July 2004

No.7

アフリカにおける貧困削減の制度形成―エチオピア、ケニア、タンザニアについての暫定的考察
笹岡雄一、山田肖子、平尾英治

March 2005

No.8

Educational Finance and Poverty Reduction:
The Cases of Kenya, Tanzania, and Ethiopia
Shoko Yamada

March 2005

No.9

Supporting Growth and Poverty Reduction:
Toward Mutual Learning from the British Model in Africa and theJapanese Model in East Asia
Shigeru Ishikawa

March 2005