to seek common ground between them at an assistance policy consultation between the Economic Cooperation Bureau and the U.K. Department for International Development (DFID), which was held in Tokyo in April 2003 with the participation of the DFID Asia offices. Moreover, the countries confirmed that they would continue to promote coordination in (1) field-level cooperation (Vietnam, Bangladesh, etc.), (2) personal exchange, and (3) concerted effort in the international arena (DAC, etc.), at the assistance policy consultation between the Director-General of the Economic Cooperation Bureau and the Parliamentary Under-Secretary of State of the DFID, which was held in Tokyo in November 2003. As a result of our efforts, specific cooperation has been accomplished so far, such as a joint visit to Vietnam (jointly implemented by the Director-General of the Economic Cooperation Bureau, Ministry of Foreign Affairs and the Parliamentary Under-Secretary of State of the DFID in October 2003), personal exchange (one officer of the Economic Cooperation Bureau received training at the DFID for about one month from January 2004), and the OECD/DAC Peer Review of Japan (the achievement of Japan-U.K. collaboration was introduced by a U.K. representative at the Peer Review meeting for Japan held in Paris in December 2003).

In addition, Japan holds director-general level assistance policy consultations with Germany, France, Australia, the European Commission, Scandinavian countries, the Republic of Korea (ROK), and other donors to exchange opinions about the major challenges in the field of development, and has also been making efforts to increase the understanding of assistance policy and mechanism of assistance of each country.

In addition to movements toward aid coordination among bilateral donors as mentioned above, movements to review aid modality based on the past experience and movements toward aid coordination among more bilateral and multilateral donors have been intensifying in the international community to increase aid effectiveness with limited assistance resources. Although bilateral donor countries and international organizations have in the past also had discussions and coordinated their aid on individual challenges and on the project level, lately they have been coordinating their aid on the sector strategy level or on the national development strategy level. For example, budget support, Sector Wide Approaches (SWAps) and harmonization of aid procedures have been promoted in some developing countries from the viewpoint of further emphasizing the ownership and overall capacity-building of the developing countries and reducing transaction costs in developing countries in order to implement assistance efficiently aligning with their national development strategies such as the Poverty Reduction Strategy Paper (PRSP). Japan is also making efforts to provide effective assistance according to the situation of developing countries by promoting coordination in line with such movements in the international community.

Regarding aid modality, Japan, as with the United States and France, basically assents to the need of budget support to Low Income Countries, improvement of the recipient countries' capacity for public financial management, and comprehensive support to development plans. However, Japan considers it important not to take uniform actions but to appropriately combine various forms of aid modalities depending on the situation of each developing country. As an example, Japan provided budget support of 500 million yen in scale to Tanzania by experimentally using funds for Non-Project Grant Aid in March 2003. Tanzania formulated the PRSP in 1999 and also reached the Completion Point $ ^{*1} $ of the Enhanced HIPC (Heavily Indebted Poor Country) Initiative in 2001. In this way, Tanzania has energetically worked on its own development with ownership. Before providing direct budget support, Japan examined the conditions in the meantime and policies in case of providing direct budget support based on past experience in participating in the Tanzania Poverty Reduction Budget Support (PRBS) and other donors' policies of budget support, and decided to provide direct budget support to Tanzania with certain conditions. Japan believes that the provision of budget support is a practice of aid delivery based on its development philosophy, that is, to

## $ ^{*} $ I: Decision Point and Completion Point

The Enhanced HIPC Initiative is implemented in two stages. Firstly, monitoring is conducted on the status of implementation of the IMF/World Bank Structural Adjustment Program and efforts for poverty reduction and social development in a debt country, and the necessity of application of the Enhanced HIPC Initiative is determined, according to individual situations, at the time when the debt country is recognized to have accomplished a certain goal (Decision Point). After that, monitoring is further continued for a certain period of time, and comprehensive debt reduction is implemented only after the country is considered to have fulfilled the conditions.