More proof of the Rising Sun's eclipse

Posted in Japan | 16-Jul-07 | Author: Hisane Masaki| Source: Asia Times

TOKYO - Foreign policymakers in the Land of the Rising Sun would be on Cloud 9 if they could turn the clock back just a few years and bask in the glow of seeing their nation vying for the status as the world's top aid donor again.

According to a recent report by the Paris-based Organization for Economic Cooperation and Development, Japan slipped to third place among the world's 22 major foreign-aid donors in 2006, only five years after being replaced by the United States as the world's largest aid donor in 2001, the slot it had kept for 10 years.

In 2006, the US was by far the biggest aid donor, extending $22.7 billion, followed by Britain with $12.6 billion, Japan with $11.6 billion, France with $10.4 billion and Germany with $10.3 billion. It is the first time that Japan has ranked third or lower since 1982. Japan is widely expected to slide further into fifth place around 2010, trailing Germany and France.

The net amount of Japan's overseas development assistance (ODA) disbursements in 2006, which excludes yen loans repaid by developing countries, was down 11.7% in nominal terms and 9.6% in real terms from 2005. This was largely due to reductions in humanitarian relief aid after large expenditures for the Indian Ocean tsunami in 2005 as well as smaller amounts of debt cancellations, especially for Iraq.

Since the terrorist attacks in the United States on September 11, 2001, the US and European nations have recognized anew the importance of addressing such issues as poverty, which can be a hotbed of terrorism. They have overcome the "aid fatigue" they suffered in the 1990s and sharply increased their ODA spending.

Japan has bucked the international trend, however. The nation has continued to cut back on its ODA budget in the past decade as part of efforts to nurse its ailing finances back to health. Japan's fiscal condition is the worst among major industrialized countries. The Foreign Ministry's desperate calls for an end to the cycle of ODA budget cuts have been drowned out by much louder clamors for belt-tightening, especially from the Finance Ministry.

For Japan, sliding down the rankings of aid donors is not just a matter of national pride but a serious issue that has already begun to cast a dark cloud over the nation's international clout. For the world's second-biggest economy, whose military contributions to ensuring global peace have been strictly constrained by the postwar pacifist constitution, ODA has been the most powerful foreign-policy tool for playing a role commensurate with its economic power.

Highly alarmed by a possible further erosion of Japan's international clout, voices calling for stemming a further decline in the nation's ODA budget are growing louder these days within Prime Minister Shinzo Abe's Liberal Democratic Party-led coalition. A special ODA committee of the House of Councilors adopted a seven-point resolution last month that includes a call for increasing the nation's ODA budget.

In its recommendations on Japan's ODA policy, issued in May, Nippon Keidanren (Japan Business Federation), the nation's most powerful business lobby, criticized the 2006 report by the government's Council on Economic and Fiscal Policy, saying it "gave the international community the impression that Japan's ODA budget was moving backward, and this left a black mark in Japan's foreign policy".

China's emergence as an aid donor has also added fuel to those calls for a reversal of the shrinking Japanese ODA budget. Japan is locked in an increasingly intensifying rivalry with China, a rapidly ascendant economic as well as military power, for economic influence in Asia and energy resources, such as oil and gas, in various parts of the world.

It is not known exactly how much aid China, already the world's fourth-biggest economy in terms of gross domestic product, is providing to other developing countries, but is widely believed to be already a larger aid donor than some other regular contributors. Chinese President Hu Jintao told the Forum on China-Africa Cooperation that China would double its aid to Africa from its 2006 level by 2009, although he gave no figures.

Hu also promised the provision of $3 billion in preferential loans and $2 billion in export credits over three years and the establishment of a $5 billion fund to encourage Chinese investment in Africa. These pledges are part of Beijing's strenuous efforts to strengthen ties with Africa as it continues its aggressive search for new oil and other energy sources and export markets. More recently, China hosted the annual board meeting of the African Development Bank in Shanghai in May. It was the bank's first such meeting in Asia.

However, Japan and the other donor nations are increasingly critical of China's aid policy, especially in Africa, saying it lacks transparency. Oxfam Japan says, however, "Japan's expressed concerns over Chinese aid in Africa do not sound particularly credible with its own aid contribution falling and promises broken."
Rich nations should do more
Critics say the major aid donors should do more. The $103.9 billion spending on ODA in 2006 was less than a tenth of global military spending. In its annual report released last month, the respected Stockholm International Peace Research Institute (SIPRI) said world military spending had risen by 37% in the past 10 years to $1.2 trillion - a trend that was largely led by the US. The report also said that the rising trend is unlikely to taper off soon.

United Nations Secretary General Ban Ki-moon has called on developed nations to do their own part in a bid to achieve the Millennium Development Goals set in 2000, which call for, among other things, halving the global number of people living in extreme poverty by 2015. About a sixth of the world's population still live in extreme poverty, earning less than $1 per day, and nearly a seventh of the world's population face starvation.

Japan's per capita ODA was 15th among the 22 major donors in 2005, at $102.9. This means Japan's relatively large population has so far made it possible for Japanese people to boast of their nation's status as a leading ODA donor while shouldering a lesser burden than their counterparts in many other industrialized nations on a per capita basis.

Although the widening gap between rich and poor and the growing ranks of "working poor" have been hotly debated in Japan lately, many Japanese seem to be more inward-looking than before, showing little interest in the acute issues of global wealth gap and poverty.

Japan has continued to slash its ODA budget in the past decade amid its tight fiscal condition. The government's general-account budget for fiscal 2007, which started in April, includes ODA spending of 729.3 billion yen (about $5.9 billion), is down 4% from the fiscal 2006 budget. The fiscal 2007 ODA budget represents a whopping 38% decline from the nearly 1.2 trillion yen in fiscal 1997. ODA accounts for less than 1% of the fiscal 2007 general account budget, which totals about 83 trillion yen.

To be sure, spending for public-works projects, widely seen as a main target for budget reductions, has been axed in recent years amid strong public criticism of pork-barrel projects. But the size of cuts in spending for public works projects made in the past decade - 19% - is smaller than that for ODA spending. ODA is not a vote-winner for politicians, and resistance to spending cuts has not been so strong.

To be sure, the volume of ODA projects includes yen loans from such special accounts as the Fiscal Investment and Loan Program (FILP), widely dubbed as the "second budget", and debt forgiveness, as well as spending from the general-account budget. So cuts in ODA spending in the general account budget do not necessarily mean an overall reduction in the volume of ODA projects.

But if ODA spending is actually trimmed by between 2% and 4% annually until fiscal 2011, as stipulated in the Council on Economic and Fiscal Policy's 2006 report, it would be extremely difficult - and perhaps impossible - for Japan to fulfill its commitments.

The Liberal Democratic Party's select commission on strengthening Japan's diplomatic might, which was established last year with former prime minister Yoshiro Mori as its chairman, released a 10-point action plan last month recommending that the nation expand ODA in terms of both quantity and quality ahead of the next Group of Eight summit to be held in the Lake Toya hot-spring resort area of Hokkaido next July. The year 2008 will have particular significance for the development issue because it is just a halfway point toward the 2015 target date for the UN's Millennium Development Goals.

To be sure, resource-poor Japan is also desperately seeking strengthened relations with resource-rich countries to ensure stable supplies of oil, gas and other resources. But Japan, the self-proclaimed champion of democracy in Asia, cannot go China's way. Japan cannot turn a blind eye to poor records on democracy and human rights in many African countries. Japan has applied strict criteria for aid provision to developing countries in Asia, Africa and elsewhere in the world, with democracy and human-rights protection being stipulated in the ODA Charter as basic conditions.

Meanwhile, Japan has already decided to stop offering fresh low-interest yen loans to China before the 2008 Beijing Summer Olympics. The yen loans account for the bulk of Japanese ODA to China. Japanese ODA money began to flow into China in the late 1970s, when China embarked on a policy of reform and openness.

But Japan is expected to continue to provide technical cooperation in such areas as environmental protection and human-resources development. Yellow sand and acid rain originating in China have affected parts of Japan.

Hisane Masaki is a Tokyo-based journalist, commentator and scholar on international politics and economy. Masaki's e-mail address is