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| Monday, 13 September 2004 |
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Japanese assistance to developing countries by Prof. S. Sandarasegaram, University of Colombo Consequent to her rapid economic growth in the 1960s and increased importance of Japan in the international community, she began her overseas assistance program to countries of the Third World which were facing problems pertaining to infrastructure development, poverty alleviation and low economic performance. Japan has established several government agencies and ministries to carry out her foreign aid program backed by the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation (JICA) which oversee the disbursement of grant aid, soft loans export credits and technical assistance. Japan's Official Development Assistance (ODA) is governed by the ODA Charter adopted by the government in 1992. This charter declared the following guiding principles for ODA. * The pursuit of environmental conservation and development; * Avoidance of the use of assistance for military purposes or for aggravation of international conflicts; * Monitoring of recipient countries' military expenditures, their production of weapons of mass destruction; * Monitoring of their efforts for promoting democratization, market oriented economy and their human rights situation. Policy guidelines Very recent policy guidelines for development assistance includes support for poverty alleviation, social development, economic and social infrastructure, human resource development and responding to debt relief and global issues. The global issues include environment, population, AIDS, food, energy and drug abuse. Japanese assistance presupposes to assist self-help effort on the part of the developing countries. To achieve self sustainable economic development, it is expected that there is awareness among recipient countries that they will use funds efficiently and effectively. The purpose of Japan's ODA to Sri Lanka is primarily to support the economic and social development of Sri Lanka and to improve the living standards of its people. There cannot be any intention of promoting Japan's commercial interests on her exports. Total direct government economic assistance to developing nations provided by Japan had steadily increased to US$ 9.2 billion by 1990 exceeding that of all other economically advanced countries. It should be noted that around 50 percent of Japan's aid that year (1990) was in the form of outright grants. From 1990 onwards Japanese assistance to developing countries continued to increase with an outlay of US$ 15.32 billion in 1999. Japan became the world's largest aid donor as measured by the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD). Measured as a percentage of GNP, Japanese aid was at 0.35 Percent, as compared to the average value of 0.24 percent of other advanced countries. Substantial portion It is also interesting to note that a substantial portion of the Japanese aid has gone to the Asian countries. Data for 1999 reveals that 63 percent of Japanese bilateral assistance went to Asia, 9.05% to Africa, 7.8% to South America and 5.02% to the Middle East. Japans ODA loans cannot be categorized as commercial loans; they are soft loans with low interest and long repayment period. In fact these loans carry a relatively small cost and are meant to finance large scale projects that have a major social and economic impact. The development projects ultimately benefit the masses and advantages that accrue from these projects are definitely greater than the financial obligations of the recipient country. In practical terms, in fiscal year 2004, Japan announced that the interest rate would be 1.5% per annum and a repayment period of 30 years, including a 10-year grace period. These favourable conditions are applicable to loan assistance to Sri Lanka. It was also announced that there would be a further reduction of interest rates (0.75% p.a) and 40-year repayment period if the particular project is directed towards environmental problems, human resource development or peace building. These are generally accepted as soft conditions and therefore Japan's ODA loans have been mostly utilized for those sectors indispensable to the development of Sri Lanka. Water supply, irrigation, power, ports, education, health and road networks are some of the examples of the sectors which are being developed using these soft loan facilities. ODA loans provided by Japan are 'untied loans' which do not place any restrictions on contractors or sources of procurement. Untied loans These untied loans constitute 90 percent of the total loans and the recipient country has the right to obtain supplies of goods and services from any country. This rate is one of the highest in the world. This gesture of Japan is greatly appreciated by the international community. These liberal and flexible terms pertaining to untied loans have allowed Sri Lankan companies to have a larger share of contracts awarded (nearly 40%) than Japanese companies in terms of amount. Grant aid is of outright donations provided to meet basic needs, such as, health, education and water supply. These 'grant aid projects' not only include hardware assistance, like the construction of public facilities, but also technical cooperation and training program to assist capacity building of local experts and professionals. Proportion of grant aid given by Japan to Sri Lanka has been substantial of the total grant aid received in recent times (see table) Another category of Japanese assistance to Sri Lanka is Grant Assistance for Grassroot Human Security Projects (GGP), which places considerable importance on reconstruction, rehabilitation and socioeconomic development of the country. People who may not fall directly under assistance provided by bilateral grants, loans or technical cooperation are supported by GGP assistance. Projects pertaining to rural development, de-mining, environment, peace building and promotion of agriculture are eligible for funding under GGP category. During the past three years (2001-2003), the Japanese government has contributed about US $ 3 million to 35 projects which covered the areas mentioned above. It is the experience of the recipient organisations that the government of Japan places importance on the impact and sustainability of the projects. Sri Lankan and international NGOs were responsible for implementing 70 percent of the 35 projects while the rest was handled by public sector bodies such as universities and local government institutions. |
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