Please cite as:
Hirata, K. (1998). New Challenges to Japan's Aid: An Analysis of Aid Policy-Making, Pacific Affairs, vol. 71, no. 3

New challenges to Japan's aid: an analysis of aid policy-making
by Keiko Hirata


A study was conducted to examine the interests and policies of aid
policy-makers in the Japan using Japanese aid to Vietnam and Cambodia as
case studies. The various changes in the country's political landscape were also
analyzed, including initiatives on fiscal and administrative reform that were
characterized as expressions of the balance of forces among conflicting entities.
Results indicated that Japan will have a difficult time performing its leadership
role in the international arena.

In the last decade, Japan has emerged as the largest aid donor in the world.
Recently, though, Japan's foreign aid has reached a turning point in the face of
domestic and international challenges. The political and economic conditions
affecting Japan's Official Development Assistance (ODA) have been rapidly
changing, forcing Japanese decision makers to reexamine their existing aid

Meeting these challenges, however, has been difficult as the Japanese aid
administration is fragmented and involves intense competition and bargaining
among various policy-making units. Contrary to the popular Western notion of
Japan as a monolithic entity, Japanese aid policy-making groups exhibit diverse
views and opinions as they perceive Japan's ODA from their own sectarian
interests. Therefore, to analyze how Japanese aid leaders have viewed and dealt
with these emerging challenges necessitates careful scrutiny of the interests,
goals, and policies of a variety of Japanese aid organizations and groups.
Circumstances surrounding Japan's ODA to Vietnam and Cambodia typify the
international and domestic challenges to Japanese aid. The reduced U.S.
presence in Indochina has left Japan with a major opening for achieving
economic and diplomatic influence in the region. Japan resumed full-scale aid
to Vietnam in 1992, well before the U.S. had lifted its own embargo on that
country. Tokyo also sent Self-Defense Forces to Cambodia in 1992-93 to take
part in peace-keeping operations of the United Nations Transitional Authority
in Cambodia (UNTAC), representing the first deployment of Japanese forces
overseas since World War II.Japanese aid and involvement in Indochina can be
seen as an opening shot in defining a new Japanese role in the post-cold war
world. This has brought about conflict, at times sharp, among various
policy-making leaders in Japan about the role that Tokyo's aid to Indochina can
and ought to play. While Japan is devoting substantial aid resources to the
region,(1) exactly how and for what purposes aid policies should be carried out
is a focus of contention.

This paper analyzes the emerging challenges to Japanese ODA at the approach
of the twenty-first century as illustrated by Japan's aid to Vietnam and
Cambodia. The paper examines the views and opinions of major Japanese
organizations and groups influential in ODA policy making in this region: the
Ministry of Foreign Affairs (MOFA); the Ministry of Finance (MOF); the
Ministry of International Trade and Industry (MITI); aid-implementing
agencies, i.e., the Japan International Cooperation Agency (JICA) and the
Overseas Economic Cooperation Fund (OECF); politicians; the private sector;
and nongovernmental organizations (NGOs). While examining the roles of
these groups in aid policy making, this paper addresses the following questions:
(1) What are the new challenges to Japan's ODA in the changing domestic and
international environment of the post-cold war era?; (2) how does each
policy-making unit perceive these challenges to Japanese ODA as a whole and
to Japanese ODA to Vietnam and Cambodia in particular?; and (3) what
strategies does each policy-making unit promote in order to deal with these
challenges, and how are they illustrated in Japanese aid to Vietnam and
Cambodia? Finally, the paper looks at current efforts at fiscal and
administrative reform to see how the competing interests of the major aid
players are being impacted upon.

New challenges to Japanese ODA

Currently, Japanese ODA faces two critical challenges. The first challenge is
the country's serious fiscal deficit. Contrary to the large trade surplus
accumulated in the private sector, the Japanese government has recently
recorded its worst fiscal deficit in history, a grim sign for the rapidly aging
society. Japan's public debt incurred by both central and local governments
currently stands at 7 percent of the country's Gross Domestic Products (GDP).
Debt-servicing costs account for 22 percent of the total budget.(2) The
budgetary crisis has forced the government to reduce the deficit through
cutbacks in public spending and a tax increase. ODA, a budgetary item that
due to its importance emerged unscathed from previous fiscal cutbacks, can no
longer be treated as an exception. The growth rate of ODA expenditures has
declined from a high of 8.2 percent in FY 1990 to 3.5 percent in FY 1996 and
to 2.1 percent in FY 1997.(3) Furthermore, the Conference on Fiscal Structural
Reform, a committee headed by Prime Minister Ryutaro Hashimoto,
announced in June 1997 that the FY 1998 ODA budget would be cut 10 percent
from the previous year and that there would be no increase afterwards. The 10
percent budget cut indicates a radical change in Japan's aid policy, since ODA
had never undergone budget cuts in yen terms since Japan first launched its aid
at the end of the 1950s. The Japanese government has recently announced that
it will abandon the goal of the fifth midterm ODA plan to increase Japan's
ODA from $50 billion during the years of 1988-92 to $70-75 for FY

The second challenge to Japan's future ODA concerns the country's aid
leadership. During the cold war period, the international aid community -
including Japan - followed dominant U.S. leadership in providing strategic aid
to capitalist governments in the Third World. Recently, though, U.S.
leadership has slipped, due to a declining U.S. commitment to supply strategic
and military aid to the developing world, coupled with Washington's fiscal
problems. Similarly, the phenomenon of "aid fatigue" has also spread among
European donor countries, such as France, Britain, and Germany, which have
begun to cut back their ODA programs in the midst of their own domestic
financial difficulties.(5) These changes - the loss of the U.S. aid leadership and
the general trend of aid fatigue among Western donors have raised expectations
towards Japan for a leadership role as Tokyo has become the world's largest aid
donor. The international aid community, represented mainly by the
Development Assistance Committee (DAC) of the Organization for Economic
Cooperation and Development (OECD), has pressed the Japanese government
to improve its existing ODA program so that it will be more beneficial to the
recipient countries as well as to the entire world. This pressure has particularly
targeted Japan's infrastructure-oriented aid policy which allegedly brings
insufficient benefits to the poor in the Third World.(6)

These two challenges to Japan's aid have prompted many Japanese aid leaders
to search for new strategies to deal with the rapidly changing environment
surrounding ODA. However, meeting these challenges has been a difficult task
for the Japanese government as it requires a skillful balancing act: Tokyo has
had to combat the serious fiscal problem at home while being pressured to play
a leadership role abroad. Furthermore, forging a coherent aid policy in dealing
with these challenges has become a more difficult task since the various
Japanese policy-making units have divergent goals and interests in ODA.
Policy makers of Japan's aid

The Ministry of Foreign Affairs (MOFA)

The Japanese bureaucracy plays the central role in ODA policy. The leading
ministries in the aid administration are the Ministry of Foreign Affairs
(MOFA), the Ministry of Finance (MOF), and the Ministry of International
Trade and Industry (MITI), all of which participate in the decision-making
process of Japanese loan aid through the so-called four-ministry system
(yonshocho taisei). The other participant in the four-ministry system is the
Economic Planning Agency (EPA), which plays the least influential role of the
four ministries in the decision making of loan aid. Although EPA has a legal
authority over OECF, one of Japan's aid-implementing agencies, the other three
members in the four-ministry system have much stronger influence over OECF
than does EPA. Some of EPA's employees are former officials from MOF and
MITI who remain loyal to their home ministries.

MOFA is the most prominent ministry concerned with Japan's aid. It not only
participates in the decision making of loan aid through the four-ministry system
but also takes responsibility for Japanese grant aid. MOFA has jurisdiction over
the Japan International Cooperation Agency (JICA), an implementing agency
for grant aid. In addition, the ministry takes charge of coordinating with the
other ministries that also carry out ODA activities under their own budgets.
MOFA also receives the largest ODA budget in the aid administration (585
billion yen for FY 1997).(7)

MOFA is the "window" of Japan to the world and is the most sensitive of all
the ministries to foreign pressure on Japanese aid. It tries to respond to external
demands on Japan's aid policy, while simultaneously paying attention to
domestic needs. The ultimate goal of MOFA is to increase Japan's influence in
the international political-economic arena under the ministry's leadership. Since
the country lacks a military means in its diplomacy, ODA is the most powerful
tool to fulfill this goal.

MOFA's efforts to increase Japan's influence in the international arena coincide
with the ministry's domestic agenda - to strengthen its own standing in the
government. MOFA is a small ministry with less than five thousand officials
and is vulnerable in domestic politics because it lacks a constituency. Unlike
other ministries such as MITI, which has powerful backing from the private
sector and politicians, MOFA does not have strong supporters for its policies
since they do not usually benefit any particular domestic interest group. In this
context, the ministry hopes to increase its domestic influence through an
expansion of ODA under its jurisdiction. Since a continual expansion of Japan's
ODA activities is critical to MOFA's domestic agenda, the ministry always
pushes for a large ODA budget.

Due to its weak stance in domestic politics, MOFA often takes advantage of
international pressure (gaiatsu) to pursue Japan's larger international role in the
aid community.(8) Since MOFA lacks a domestic constituency, the ministry
tries to find foreign allies and attempts to forge an alliance with foreign
governments in order to push for Japan's larger aid role in the world. MOFA
often tries to persuade other ministries that the gaiatsu on the Japanese
government is so high that the government has to comply with it. By
successfully playing the gaiatsu card, the ministry can strengthen its own
domestic position.

In recent years, MOFA has grappled with the challenges to Japanese ODA: the
budget crisis and the question of aid leadership. In terms of the budget crisis,
MOFA has been forced to accept the declining ODA growth rates in recent
years. According to a leader in the Aid Policy Division in the Economic
Cooperation Bureau of MOFA, this type of reduction cannot be avoided due tO
the mounting fiscal problem.(9)

While MOFA has recently resigned itself to accepting cutbacks in the ODA
budget, the ministry is aggressively seeking an expanded leadership role for
Japan in international aid politics. With the declining U.S. aid leadership and
the general trend of aid fatigue among the donor countries, MOFA has
searched for policies of new aid leadership, which would require new
principles and concepts of aid - such as basic human needs (BHN), poverty
alleviation, women in development (WID), and people-centered, sustainable
development. The significance of this new emphasis on aid in the social sector
is that MOFA has begun to cover a wider range of activities for Japanese aid,
including not only Japan's traditional infrastructure-based aid but also
small-scale, community-based aid in health, education, and environment.
Hard-pressed to adopt new strategies to deal with the emerging challenges to
Japan's ODA, MOFA has advocated four new reforms to reconstruct Japan's
ODA. These reforms are still in flux but are surely being incorporated into
Japan's new aid policies. They address both the budget crisis and the question
of Japan's aid leadership. They are designed to cope with the ODA cutbacks
and also to improve the existing Japanese ODA program so that Japan can take
a more active leadership role commensurate with its status as the world's largest

Prioritizing Regions

MOFA approaches the budget crisis in a realistic manner. Since the ministry
has been forced by MOF and other groups to accept a reduction in ODA
growth for the coming years, MOFA has attempted to adjust to the financial
crisis. With ODA funding limited, MOFA has decided not to disburse ODA
indiscriminately in the future. Instead, the ministry has begun to give priority
to certain regions of importance, while cutting funds to others.

One such region of importance is Indochina, where MOFA hopes to increase
ODA at a moderate pace in yen terms despite the current fiscal crisis. Since the
end of the cold war, MOFA has come to regard the former and current socialist
countries in Asia, particularly Vietnam and Cambodia, as a new frontier for
Japanese aid. The ministry has argued that assisting these countries to move
towards market-oriented economies is essential in order to accelerate the
economic integration of Southeast Asia as a whole. In the ministry's view,
these countries are crucial to regional stability in Southeast Asia, directly
affecting Japan's foreign policy not only in Indochina, but also in the broader
Southeast Asian region. In addition, Indochina offers great political
opportunities for the Japanese government; if Japan could play an important
political role in the stabilization of Indochina, Tokyo would increase leverage
over other countries throughout Southeast Asia. Japan's larger political role in
Indochina could also allow Tokyo to win more international support for its
pledge to gain a permanent seat in the U.N. Security Council.

Recently, MOFA has promoted ODA to Indochina through multilateral
arrangements, such as the International Committee on the Reconstruction of
Cambodia (ICORC),(10) the Forum for Comprehensive Development of
Indochina (known as "the Indochina Forum"),(11) and the Mekong River
Commission.(12) The ministry has thus played a leading role in these
organizations to promote the development of Indochina. For the Indochina
Forum, MOFA has formed a task force ("The Task Force on the Greater
Mekong Region") to design a blueprint for the development of the Mekong
River region, and the task force has recently published a report on the
industrialization of the region, with a focus on the development of

Due to the significance of Indochina in Japan's overall foreign policy, MOFA is
not likely to lessen its aid role in Indochina; rather, it is expected that the
ministry will continue to play an important role in regional development,
despite the current budget crisis. Several MOFA officials anticipate that the
growth of aid to the region will not be as rapid as it used to be in the early
1990s, but that aid disbursement will gradually increase.(13)

Increasing Soft Aid

In an attempt to improve the quality of Japanese ODA, MOFA has begun to
gradually incorporate "soft" aid based on BHN, poverty alleviation, WID, and
people-centered, sustainable development. An indicator of the increase in
social aid is the number of volunteers in the Japan Overseas Volunteer
Cooperation (JOVC), the Japanese equivalent of the U.S. Peace Corps. In
Vietnam, the number of JOVC volunteers increased from only 4 in 1994 to 468
in 1995.(14) In Cambodia, Japanese technical training has also become more
available. The number of Cambodians receiving training from the Japanese
government increased from only 54 in 1992 to 133 in 1993, and to 183 in

MOFA's new efforts to increase soft aid also include the adoption of the
concept of"South-South cooperation" (nan-nan kyoryoku). This type of aid is
designed to encourage technical cooperation at the grass-roots level between
countries in the developing world. As many countries in Asia have achieved
rapid economic development and have become increasingly aware of the need
to provide assistance to their less-developed neighbors, MOFA has started
supporting donor developing countries (such as Thailand) in transferring
appropriate technologies to their recipients (such as Cambodia). Since 1992,
MOFA has been implementing a project of South-South cooperation in
Cambodia (called "the Tripartite Cooperation" as it involves Japan, ASEAN,
and Cambodia). For this project, the ministry has invited technical experts from
Indonesia, the Philippines, Thailand, and Malaysia, to assist Cambodian
repatriates engaged in agriculture. Though small in scale, MOFA hopes that
this kind of cooperation will be expanded to the developing world under Japan's

General Untied Aid Policy

MOFA has taken a step to improve the quality of aid further and also to avoid
international criticism that through tied procurement, Tokyo's ODA deliberately
benefits Japanese firms. MOFA has strongly promoted a general untied aid
policy to allow foreign firms in both developed and developing countries to
take part in bids for Japanese loan projects,(16) despite strong opposition from
the business community and MITI, which represents Japanese business
interests. Currently, 97.7 percent of Japanese ODA loans are general untied
aid.(17) A MOFA official defends the ministry's support for the general untied
aid policy from domestic critics, arguing that due to international criticism,
Japan can no longer maintain its tied aid policy.(18)

General untied aid policy has been adopted in Japan's loan aid to Vietnam.(19)
Of the nine firms involved in the four largest Japanese loan aid projects in
Vietnam in FY 1994, three firms were non-Japanese.(20) While Japanese firms
remain in the majority, foreign firms have begun to take part in Japanese loan
aid to Vietnam.

Collaboration with NGOs

In efforts to incorporate the concept of people-centered, sustainable
development into Japan's ODA, MOFA has started seeking the collaboration of
Japanese Non-Governmental Organizations (NGOs). There are apparently two
reasons for MOFA's eagerness to work with NGOs. First, MOFA wants NGOs
to participate in the implementation of the government's grass-roots projects
and thus help compensate for the shortage of aid personnel in the Japanese aid
administration. Secondly, by incorporating NGOs into the aid scheme, MOFA
hopes to improve the image of Japan's ODA, which has been criticized as
lacking human involvement at the grass-roots level.

MOFA established the NGOs' Assistance Division within the ministry in 1989
and has since provided financial assistance to NGOs engaged in Third World
community development. MOFA offers two sources of financial assistance to
NGOs: (1) the NGO Assistance Fund, provided by MOFA's NonGovernmental
Organizations Assistance Division of the Economic Cooperation Bureau; and
(2) Grass-roots Grant Aid, provided by the Grant Aid Division of the Economic
Cooperation Bureau within MOFA via Japanese overseas embassies which
select proposed projects for the fund.(21)

MOFA has given financial assistance to an increasing number of Japanese
NGOs in Vietnam and Cambodia since 1991. In Vietnam, for instance,
MOFA's Grass-roots Grant Aid was available only to four organizations in
1992-94 but was provided to ten NGOs in 1995.(22) In Cambodia, the number
of NGO recipients of the Grass-roots Grant Aid grew from two in 1992 to ten
in 1994 and to forty-one in 1995.(23)

At the same time, MOFA has begun paying at least some attention to the views
expressed by Japanese NGOs on a range of subjects. Since the 1994 Cairo
Conference on Population and Development, MOFA officials have been
holding regular meetings with Japanese NGOs interested in issues of population
and AIDS. In addition, MOFA has been meeting regularly with NGOs since
the beginning of 1996 to discuss the government's NGO financial assistance.
These meetings involve MOFA officials from various divisions within the
Economic Cooperation Bureau and major NGOs registered at the Japan NGO
Center for International Cooperation (JANIC).(24)

The MOFA-NGO contact is especially prominent in Indochina, a region where
many NGOs are active and where MOFA is interested in playing a major
international role. In particular, Japanese NGOs have been pressuring MOFA
to pay closer attention to the environment of the Mekong River region, where
the Japanese government is attempting to expand Japanese infrastructure-based
aid projects in order to accelerate the region's industrialization. In January
1997, MOFA officials, together with representatives from JICA and OECF,
participated in a workshop on sustainable development in Indochina sponsored
by the Japan International Volunteer Center (JVC), one of the oldest and most
progressive NGOs in Japan, to discuss Japan's future ODA projects in the
Mekong River region. It is expected that the workshop may be followed by
another series of regular meetings between MOFA and JVC in the future.(25)
In summary, MOFA has embarked on efforts to deal with the challenges to
Japan's ODA in the post-cold war era by providing four reforms to overcome
these challenges: (1) coping with the fiscal crisis by prioritizing certain regions,
(2) integrating "soft" aid into Japan's ODA, (3) pursuing an untied aid policy,
and (4) collaborating with NGOs. In the process, MOFA has challenged other
ministries, particularly MOF (over the budget) and MITI (over the untied aid

Ministry of Finance (MOF)

MOF, the most powerful and prestigious ministry at the apex of the Japanese
bureaucracy, views ODA mainly in relation to its impact on Japan's national
budget. Unlike MOFA, MOF does not formulate its ODA policy from the
framework of foreign policy and thus does not find it urgent to respond to
international pressure to improve the quality of Japan's aid.

Because of Japan's current budget crisis, MOF usually takes a conservative
approach to the allocation of budgetary resources. MOF is particularly critical
of hiring new aid personnel and starting new aid programs, since it is difficult
to lay off personnel or eliminate new programs once they are in place. MOF
generally prefers loan aid over grant aid because (1) loans imply repayment and
thus cost less money for Japan in the long run and (2) loans are under the
ministry's jurisdiction. MOF's preference for loan aid over grant aid presents an
obstacle to MOFA's efforts to implement soft aid projects in the social sector,
because such projects are usually financed through grant aid.

MOF is often criticized as being ungenerous and hard on developing countries
since it imposes higher interest rates for Japanese ODA loans than for loans
from international development banks such as the World Bank. A Vietnamese
aid representative in the Ministry of Planning and Investment expressed his
frustration over Japan's loans to Vietnam. He complained that the current
interest rate imposed by MOF is 2.3 percent, a large increase from 1.8 percent
in 1995 and from 1.0 percent in 1992.(26)

MOF's main concern is with the budgetary aspect of aid and thus the ministry
has not responded to the changing international environment that demands
more aid leadership from Japan not only in the economic field but also in the
social sector. The ministry has concentrated only on the problem of the fiscal

Ministry of International Trade and Industry (MITI)

MITI represents the interests of the Japanese private sector. The ministry had
dominant influence in the aid administration in the 1960s and the early 1970s,
when Japan's ODA was purposely designed to promote Japanese external trade
and investments. However, MITI's influence in aid administration has
gradually declined over the years as the focus of Japanese aid has broadened
from economic concerns to include political and strategic factors.

MITI is less concerned about the budget crisis and its implications in Japan's
future aid policy than MOFA because MITI is not in charge of Japan's overall
aid programs. MITI is mainly interested in preserving the share of ODA budget
under its jurisdiction. For FY 1997, MITI received an aid budget less than 10
percent of that of MOFA and approximately 12.6 percent of MOF.(27)

Because of its smaller share of the aid budget, MITI is less outspoken than
MOFA in calling for the preservation of ODA programs in the face of
threatened cutbacks. For example, MITI's Industrial Structure Council supports
the FY 1998 plan to cut ODA by 10 percent on the grounds that ODA should
be subject to the same budget cuts as other budgetary items.(28)

Like MOF, which has a narrow interest in the financial aspect of Japan's aid,
MITI also has a limited interest in ODA: the protection of Japanese business
interests in aid projects. MITI is frequently criticized as being insensitive to the
needs of the poor in the Third World because the ministry often opposes an
increase of soft aid, such as aid for basic human needs and poverty alleviation,
which would not bring economic benefits to Japanese firms. MITI's narrow
business interest in Japan's ODA clashes with MOFA's new strategies to
increase aid in the social sector.

As many Japanese firms have been losing bids for Japanese loan aid, MITI has
recently advocated the revitalization of the tied aid policy to allow only
Japanese firms to participate in Japanese aid. (29) The ministry has pressured
MOFA to abolish the general untied aid policy that has put Japanese firms at a
disadvantage; since their projects are costly, Japanese firms cannot easily win
in open international competition under the current system.

In recent years, MITI has attempted to recover its influence over Japan's aid,
particularly in Indochina, where the Japanese private sector sees abundant
business opportunities. In rivalry with MOFA's Indochina Forum, MITI
established with ASEAN a Working Group on Cooperation for Industrialization
on Cambodia, Laos and Myanmar (or "CLM WG") in 1994 at the ASEAN
Economic Ministers - Minister of International Trade and Industry
(AEM-MITI) Meeting in Chiang Mai, Thailand in 1994. In this group MITI
seeks to take a lead in planning economic development in the region while
working with representatives of both public and private sectors from ASEAN,
Indochina, and Myanmar. CLM WG has the following six objectives for the
development of Indochina and Myanmar: (1) promoting the transition toward a
market economy, (2) establishing special market economy zones, (3)
supporting infrastructure development, (4) providing trade and investment
policy, (5) enhancing market linkages on a sectoral basis, and (6) providing
cooperation in the development of mineral resources.(30) However, MITI has
not yet launched any concrete development projects to meet these objectives.
To have an effective Indochina policy, the ministry will likely need to consult
with MOFA to eliminate overlaps with MOFA's Indochina Forum.

In summary, MITI's interest in ODA greatly differs from that of MOFA. MITI
is less concerned with the aid budget problem than is MOFA, because MITI's
share in the overall ODA budget is much smaller than that of MOFA. MITI has
also resisted MOFA's efforts to improve the quality of aid through the adoption
of the untied aid policy. Now that many Japanese firms have been losing bids
for Japanese loan aid, MITI has recently advocated the revitalization of the tied
aid policy to allow only Japanese firms to participate in Japanese aid. In terms
of Indochina, MITI is basically in agreement with MOFA that the region is a
new frontier for Japan. However, MITI's ambition to take a leadership role in
designing the region's development plan through CLM WG clashes with
MOFA's plan to do the same thing through the Indochina Forum.

Implementing Agencies: Overseas Economic Coperation Fund (OECF) and
Japan International cooperation Agency (JICA)

Both OECF and JICA are in charge of aid implementation. While OECF is
under the jurisdiction of the Economic Planning Agency (EPA), an
implementing agency for loan aid, JICA is under the supervision of MOFA. In
the Japanese aid administration, there is a clear demarcation of responsibilities
between the government ministries and these aid-implementing agencies. Major
decisions for loans are made by MOFA, MOF, and MITI, which belong to the
four-ministry system. Grant aid is determined by MOFA, in consultation with
MOE Neither OECF nor JICA directly participates in the high-level aid
decision-making process that determines the overall direction of ODA.

Instead, OECF and JICA take part in lower-level tasks such as finding projects,
conducting feasibility studies, and carrying out evaluations under the
supervision of the ministries in charge. In addition, they conduct research on
the economies of aid recipient countries and submit the research to recipient
governments to make recommendations for economic development. Since
OECF and JICA lack their own development specialists, such as engineers and
economists, they heavily rely on the private sector and academia to conduct
research. For example, OECF uses many engineers sent from the private sector
to do development research such as project finding and pre-feasibility
studies.(31) Similarly, JICA has a pool of consultant firms which have
registered to work for JICA-led development research.(32) JICA also has
country-based research groups consisting of economists in academia and
business. JICA's Vietnam group, for example, has conducted research on
Hanoi's Five-year Plan for 1996-2000 and submitted recommendations to the
Vietnamese government.(35)

Since the Japanese aid administration excludes OECF and JICA from ODA
decision making at the macro level, these agencies do not have the means to
inject their own perspectives into the government's aid policy. There is an
indication that some JICA officials engaged in grass-roots development
projects, particularly those who live in developing countries and have
knowledge of local situations, are unsatisfied with Japan's ODA system in
which their concerns and opinions are not reflected in the policies they carry
out. These officials are often critical of MOFA officials in Tokyo, who are
seen as lacking basic understanding of local conditions but who nevertheless
make decisions about aid policy.(34) A NGO member mentioned that some
JICA staff who have grass-roots perspectives express their willingness to work
with NGOs. JICA and JVC regularly hold meetings in which they share their
experiences in development.(35)

In terms of Japan's ODA to Indochina, the roles of OECF and JICA are
limited. They do not take part in the high-level aid policy making. Rather, they
influence Japan's ODA to the region by collaborating with Japanese private
firms such as consultants and trading companies for research and
implementation. JICA and OECF officials supervise these firms and serve as a
link between the business sector and the ministries in the aid administration.
Overall, JICA and OECF have not addressed the emerging challenges to
Japan's aid as their roles are limited in the decision-making process. As often
pointed out by Japanese aid observers, these agencies have sometimes served
as te-ashi (hands and legs) of the ministries which have provided atama (brain).
In other words, these agencies have basically offered labor to the ministries
which control aid decision making at the higher level.


Japanese politicians can be divided into three types in regard to ODA. We can
consider them the silent majority, the brokers, and the policy makers. Most of
the politicians in both ruling and opposition parties fit into the silent majority.
These politicians are generally uninterested in foreign aid because it is a poor
vote-catcher in Japanese elections. They also lack detailed knowledge of ODA
and do not have concrete ideas or strategies to shape Japanese aid programs for
the future. Not surprisingly, these politicians have recently joined MOF in
advocating budgetary reform. They have recently supported the Hashimoto
administration's plan to reduce the ODA budget by 10 percent for FY 1998
from the previous year. Cutting ODA growth has thus become part of their
political agenda. (36)

The lack of interest of the silent majority in ODA is further reinforced by the
role of the Japanese Diet. Although the Diet approves the annual budget
allocation of aid, the process is rather perfunctory. The legislature normally
passes a budget bill for ODA that has been already determined by the
bureaucrats. The Diet neither examines aid projects/programs nor evaluates aid
outcomes. The only exception to this general rule is that the Diet questions
cases of aid fraud. The most notable example of this is the 1987 Marcos
scandal, which involved a large amount of misused Japanese ODA to the

Because of their limited role and lack of interest in ODA affairs, these
politicians have paid little attention to the question of developing Japan's aid
leadership through an emphasis on quality aid. The only concern they have
explicitly exhibited is over budget deficits.

Another type of politicians, the brokers, take part in ODA decision making, but
only at a bidding level. In cases where aid decision making involves routine,
day-to-day operating procedures (tsujo-anken, or "ordinary cases"), these
politicians often represent Japanese business interests, "introducing" some
business people to the bureaucrats in the aid administration so that the former
can win a bid for a Japanese aid project. A former MOFA official who became
a member of the Special Committee for External Economic Assistance (Taigai
Keizai Kyoryoku Tokubetsu Iinkai) in the Policy Research Council within the
Liberal Democratic Party (LDP) - a committee consisting of approximately
70-80 LDP members to investigate Japanese overseas assistance(380 -
suggested that it is up to the bureaucrats whether to accept such an offer.(39)
These politicians participate sporadically in ODA affairs as brokers between the
business sector and the bureaucracy. Because of their limited role in aid, they
have not responded to any of the emerging challenges to Japan's ODA. They
are primarily interested in fostering relations with the business sector which
represents their constituency.

Finally, the policy makers include a small number of high-ranking legislators
who play a crucial role in aid decision making. Their participation in ODA
takes place when highly political aid or large-scale projects are involved. The
1992 resumption of Japanese ODA to Vietnam was a case in point. This was a
politically and economically significant step for both the Japanese government
and the Japanese business community. The resumption of aid to Vietnam was
highly political because it indicated that Tokyo would improve bilateral
relations with Hanoi at the time that the United States, Japan's strongest ally,
still had an economic embargo against Vietnam. This aid initiative was also
economically significant, signaling to the Japanese private sector that it could
expand investment in Vietnam as the restarting of Japan's ODA was a
precondition for an increase of Japanese investment there. Accordingly, the
decision on aid resumption to Vietnam involved high-ranking Japanese
politicians, particularly those with strong ties with Japanese bureaucrats, the
Japanese business circle, and Vietnamese officials in Hanoi.

The late Liberal Democratic Party (LDP) member Michio Watanabe was one
such politician who took part in the decision making regarding Japan's
resumption of aid to Vietnam. He was then situated in a perfect position to take
on such a role, as he was Foreign Minister in charge of MOFA bureaucrats, a
powerful LDP member, an influential politician in ODA circles (ODA-zoku or
aid caucus) with strong ties with Japanese business, and an active member of
the Japan-Vietnam Parliamentarian Friendship Association (giin-renmei).(40)
In this case, Watanabe's interest in Vietnam coincided with the goals of MOFA
bureaucrats. It is expected that this LDP politician hoped to expand Japanese
business activities in Vietnam, a country with abundant human and natural
resources and thus great economic potential in the future. Watanabe knew that
the ODA resumption would be essential for Japanese firms to increase
investments in Vietnam. Japanese ODA would not only provide basic
infrastructure for Japanese business activities in the country but would also
guarantee a more secure investment climate for Japanese firms.(41)

Taking advantage of his role as foreign minister, Watanabe intervened in the
bureaucracy-led aid decision-making process, as MOFA officials alone were
unable to proceed with their resumption plan due to strong U.S. pressure.
Watanabe took measures to soften U.S. opposition to the resumption of
Japanese aid to Vietnam. He tried to solicit U.S. approval by helping improve
U.S.-Vietnam relations. When he asked his counterpart, the Vietnamese
foreign minister, to make efforts to meet U.S. demands on POW/MIA issues,
the Vietnamese Foreign Ministry positively responded to Watanabe's request
and became more flexible on POW/MIA issues. The U.S.-Vietnam
negotiations over these issues proceeded and thus the United States expressed
to Watanabe its gratitude that he had helped the Vietnamese government deal
with that difficult problem. In return, the U.S. government softened its stance
on the resumption of Japanese aid and finally gave Watanabe tacit U.S.
approval in early 1992 for restarting ODA to Vietnam after the 1992 U.S.
presidential election.(42)

As seen by this example, some politicians take a crucial part in aid decision
making at politically and/or economically significant junctures. At the same
time, though, their participation in aid does not necessarily indicate that they
are concerned about the challenges to Japan's future ODA. They are rather
interested in maintaining relations with their business constituency. As such,
these politicians have not seriously addressed either the budgetary crisis or the
need to promote Japan's aid leadership.

It is important to point out that LDP leadership has recently become less
interested in using ODA as a foreign policy tool. Since Watanabe's death, there
has been no strong ODA advocate like him among key LDP leaders. In
particular, younger LDP leaders than Watanabe, such as Keizo Obuchi, Koichi
Kato, and Taku Yamazaki, have been critical of the current ODA policies
because they perceive aid as not helping the Japanese government pursue its
"national interest." They have recently advocated a large budget cut in ODA
and accused MOFA of providing "Santa Claus style handouts" to the Third

Private Sector

The participation of Japanese firms in Japan's ODA is largely due to a serious
dearth of government personnel with appropriate aid expertise. Japanese
officials in the aid administration are often unable to carry out proper oversight

The collaboration between the government and the private sector is further
encouraged by Japan's "request-based policy" (yosei-shugi), which demands
that recipient countries assess their development needs on their own and make
requests for ODA to the Japanese government. Many recipient countries lack
the knowledge and techniques to measure their own needs so they rely on
Japanese firms to advise them as to what kinds of programs they should request
from the Japanese government. The problem is that these firms sometimes
design requests more conducive to their own interests rather than those of the

There are three types of Japanese firms involved in Japan's ODA. The first is
made up of trading companies (sogo shosha). These have extensive networks
and information on developing countries and often participate in ODA through
the procurement of goods. The second type of Japanese firms involved in
Japan's ODA is made up of construction companies. These companies cultivate
networks among themselves through various organizations, such as the
International Construction Association. The third type is made up of consulting
firms,44 many of which belong to quasi-governmental associations to promote
overseas activities. One such organization is the Engineering Consulting Firms
Association (ECFA), which is under MITI's umbrella and thus receives
subsidies from the ministry. ECFA, which has 113 members, undertakes
overseas projects totaling 60 billion yen. Its major clients are JICA and OECE
In 1996, 31.3 percent of its monetary output went to JICA-related projects, and
47.1 percent to developing country governments for projects which were
mostly financed by OECF loans.(45) Indochina is one of the ECFA's new
priority regions

Many Japanese firms involved in ODA are also active members of Keidanren
(the Japan Federation of Economic Organizations), the largest and most
powerful chamber of commerce in Japan. Keidanren directly negotiates with
bureaucratic leaders over aid and often makes ODA policy proposals to the
Japanese government. For example, the 1997 Keidanren report proposed that
the government (1) streamline the fragmented aid administration by
establishing an International Aid Agency, (2) make effective use of both
financial and human resources in the private sector for ODA, (3) encourage
greater public participation in aid, and (4) stop setting a quantity target for the
next midterm aid plan (FY 1998-2003) and instead focus on the efficiency and
quality of aid? Of particular significance in these four suggestions is
Keidanren's emphasis on the strengthening of collaboration between the
government and the private sector. Keidanren is especially eager to promote
private sector financing of Japanese ODA through build-operate-transfer (BOT)
and build-operate-own (BOO) schemes. BOT/BOO means that private firms
invest in infrastructure building within a ODA scheme and later recoup their
investment with profits from operating what they have built.

As Japanese firms have begun to lose bids for Japanese loan projects, they have
gone on the offensive against their international competitors. In 1996,Japanese
construction firms formed a study group together with OECF and Keidanren.
The official purpose of this group is to re-evaluate the bidding system of
Japanese loan aid in order to improve the mechanism, which the group argues
requires a change of the current bidding criteria. The group maintains that the
bidders' technological capacity should become one of the criteria in the
selection for a bid. Such a change would clearly create a system in which more
Japanese firms can win bids for Japanese loan aid, since Japanese firms are
more technologically advanced than those of developing countries.(47)

The Japanese private sector recently won a victory in this regard when the
Japanese government announced it would start a new loan aid program based
on Less-Developed-Country (LDC) untied aid, that is, allowing only firms
from Japan or developing countries to bid on loan projects, and eliminating
competition from firms in the United States or Europe. This new aid project
will make available environmental loans at 0.75 percent interest. Though the
OECD generally opposed tied aid policies, it makes exceptions in cases when
aid is given on beneficial terms to the recipient country, and the low interest
rate of these loans thus allows the project to satisfy OECD guidelines. The new
loans are intended to boost Japanese firms' involvement in Japanese ODA and
to gain support for Japanese aid from the private sector.(48)

In Vietnam and Cambodia,Japanese firms have been highly involved in aid
procurement and planning. All Japanese grant aid and feasibility studies are
provided as tied aid, which allows prominent Japanese corporations to win
contracts without any foreign competition. This has allowed major Japanese
firms to dominate grant projects in Indochina; for example, a single Japanese
company, Nissho Iwai, won bids on five of the eight largest grant projects in
Vietnam in FY 1994.(49)

As many Japanese corporations have a keen interest in Indochina, Keidanren
has recently sent its missions to the region. In 1995, Keidanren's president
visited Hanoi to appeal to the Vietnamese government to improve the
conditions for foreign investment in the country. In 1996, Keidanren sent
another mission to the Mekong River region (Cambodia, Laos, and Yunnan
Province of China) to investigate business opportunities for Japanese firms in
the region and to prmote public/private cooperation in Japanese ODA through
BOT and BOO.(50)

In summary, the major role of the private sector in Japan's ODA is to design
projects for Japanese aid and to take part in their implementation. Japanese
firms are generally uninterested in the creation of new strategies to improve the
quality of aid. They are ultimately seeking profits for themselves and thus they
participate in aid projects that will directly benefit them. The private sector can
present an obstacle to meeting the international challenge to improve the
quality of Japan's ODA. At the same time, it has offered to the Japanese
government a strategy to solve the problem of shrinking government funding
for ODA by suggesting that the Japanese government start taking advantage of
private financing through the BOT/BOO scheme.


In general, Japanese NGOs are relatively small in size and lacking in stable
funding, technical personnel, and professional managerial skills. Many NGOs
provide small projects in agriculture, health and education in the Third World.
They are also engaged in public advocacy within Japan to promote
community-based sustainable development in the developing world. Most
Japanese NGOs are highly critical of Japan's conventional aid policy based on
infrastructure-based large projects, which they claim has had adverse effect on
the poor and the environment of the recipient societies. These NGOs argue that
Japan cannot play a genuine leadership role in the international aid community
unless it improves the quality of its aid. They press the government,
particularly MOFA, to shift the aid focus from the "hard" projects based on
infrastructure building to the "soft" projects at the grass-roots level.

At the same time, the relationship between Japanese NGOs and the Japanese
government has been rapidly changing in the 1990s with a move toward more
collaboration and dialogue. As indicated earlier, NGOs have started receiving
financial assistance from the Japanese government. They can now apply for
several sources of funds from various ministries and local governments.(51)
The major sources of NGO funding include the two MOFA funds listed earlier
(the NGO Assistance Fund and Grass-roots Grant Aid) and the Postal-Savings
Fund provided by the Ministry of Postal Services

In addition, as explained earlier, Japanese NGOs have started holding regular
meetings with MOFA officials to discuss the government funding for NGOs as
well as issues of development in certain regions such as Indochina, a region
where NGOs are active and where MOFA is anxious to highlight its new
policies. At these meetings, Japanese NGOs try to voice their concerns and
opinions of Japan's ODA projects and appeal to MOFA, saying that Japan's aid
should benefit the people in the recipient countries first, rather than Japanese
interest groups or certain ministries. Through frequent meetings, Japanese
NGOs hope to influence the government's aid policy making.

While NGO-MOFA cooperation is more prevalent than before, the Japanese
NGO community has not unanimously agreed to MOFA's request for wider
NGO participation in the government's ODA projects. Some progressive
NGOs, such as the Japan International Volunteer Center (JVC), are skeptical of
MOFA's intention of working with NGOs. These NGOs are afraid that they
will be used by the government to compensate for what it cannot do (i.e., to
implement small-scale grass-roots projects) but that they will not be allowed to
play a substantive role in decision making. They are also concerned that they
will lose their autonomy if they start participating in ODA.

In contrast, some Japanese NGOs are actively collaborating with MOFA. They
participate in the government's relief aid and small projects in health and
education. A representative of a NGO engaged in emergency medical
assistance criticizes some leftist NGOs for being highly "ideological" but
"hypocritical." In his view, these NGOs are heavily dependent on the
government for financial assistance even though they claim that they maintain
their autonomy. From his perspective, Japanese NGOs should work more
closely with the government so that both sides can compensate each other's
weakness (finance for NGOs and manpower for the government).(52)
In regard to Indochina, many Japanese NGOs are concerned about the future
environmental deterioration in the region and are closely observing Tokyo's
economic aid policies. In particular, they have been pressuring MOFA to pay
more attention to the environment of the Mekong River region, where the
Japanese government is attempting to expand Japanese infrastructure-based aid
projects in order to accelerate the region's industrialization.

While the role of Japanese NGOs in ODA policy making is still limited, they
have begun to exercise some modest influence over government aid policy
toward Indochina. JVC, a strong advocate for sustainable development,
succeeded in putting an end to one of Japan's ODA programs in Cambodia in
1993. JVC campaigned to stop Japanese pesticide aid to the country, a grant
aid program that had started in 1992 as part of the first Japanese bilateral aid to
Phnom Penh after the resumption of ODA. This pesticide aid, provided
together with chemical fertilizer and agricultural machines, was intended to
promote agricultural production (i.e., rice, cotton, and vegetables) in
Cambodia's countryside. JVC claimed that the pesticide aid was harmful to the
local environment and demanded that the government terminate it immediately.
JVC won support from other NGOs in Cambodia, joined together in the
Cooperation Committee for Cambodia (CCC), and from intergovernmental
organizations such as the International Rice Research Institute (IRRI) and the
Food and Agricultural Organization (FAO).(53) JVC also campaigned with
other NGOs in Japan by holding symposia and publishing a booklet to inform
the public of the danger of the Japanese pesticide aid. In December 1993, the
ministry finally yielded to NGO pressure and ended the pesticide aid, thus
making an about-face on the ministry's former claim that the pesticide program
was environmentally safe.(54)

JVC's success in halting the Japanese ODA project has encouraged other NGOs
to pursue campaigns for the preservation of the environment of Indochina.
Seven Japanese NGOs, including JVC, formed the Mekong Watch, a network
to advocate sustainable development in the Mekong region. The Mekong
Watch has recently criticized the report on the Mekong regional development
plan designed by the Task Force on the Greater Mekong Region, organized by

In summary, Japanese NGOs have not exerted substantial influence over the
aid administration. However, indications are that there may be an increasing
influence of NGOs over the government's aid policy, as demonstrated by the
termination of the Japanese pesticide aid to Cambodia. NGOs' participation in
ODA policy making will continue to be valuable as MOFA officials have
begun to listen to their views. NGOs can provide grassroots perspectives to the
government officials and can also pressure the government to play a leadership
role in promoting aid to help the poor in the recipient countries.

The future participation of NGOs in the implementation of ODAis open to
question, as most of them are skeptical of MOFA's intentions of collaborating
with them. At the same time, NGOs that have begun to take part in ODA might
continue to do so as they have cordial working relations with MOFA.

Fiscal and Administrative Reform

Current struggles over fiscal and administrative reform give some indication of
the balance of forces in controlling and shaping Japanese ODA. In response to
the political-economic crisis facing Japan in the late 1990s, Prime Minister
Hashimoto has implemented "six great reforms": (1) administrative, (2) fiscal,
(3) economic, (4) financial, (5) social security, and (6) education. It is the
fiscal reform that is most directly affecting Japanese ODA. Many other
budgetary programs have support from the business sector and/or politicians
which provides some protection from budgetary cutbacks. ODA lacks support
either from businesses (who are unable to win bids when loans are untied) or
from politicians (who don't view foreign affairs as a "vote-catcher"). This has
made it particularly vulnerable to pressure for budget cutbacks. As indicated
earlier, the FY1998 ODA budget will be cut 10 percent from that of 1997, the
first such cutback ever. These cutbacks represent a policy triumph for MOE
Given the current economic situation in Japan, MOFA is forced to operate
under fiscal constraint imposed by MOF and politicians. It was MOF that
pushed for these cuts, and MOFA had no choice but to accede.

Another important aspect of current reform is administrative restructuring. An
Administrative Reform Council was established in 1996 under the leadership of
Prime Minister Hashimoto in order to streamline the Japanese bureaucracy.
One of the many ideas initially raised by the private sector, academicians, and
journalists was for the establishment of a unified aid agency (such as "the
International Aid Agency" or "ODA Agency") by integrating aid related
divisions in different ministries and agencies. Despite the apparent broad
appeal of such a reorganization, the Administrative Reform Council did not
pursue the idea. There appear to be three main reasons for the council's failure
to take up this issue. First, the Reform Council's main goal was to streamline
the bureaucracy, which it hoped to achieve by sharply reducing the number of
ministries and agencies. Creating an entirely new agency, however, would
have contradicted this trend toward organizational reduction. Second, since
ODA involves so many ministries -nineteen of the twenty-two current
ministries - any such consolidation would have been extremely complex
organizationally. Lacking a compelling reason to carry out the change, the idea
was not pursued. Third, creating a new aid agency was never a major priority
of the council. Even more serious undertakings, such as privatizing the postal
services or restructuring MOF, remain undone. Thus it is not surprising that
lesser priorities, such as creating a new aid agency, have been dropped for

The fact that this idea was even raised and discussed indicates that there is
growing recognition in Japan that current approaches to developing and
implementing aid policy are too fragmented among a multitude of competing
organizations. However, as shown in this paper, this fragmentation is not just a
matter of organizational bureaucracy, but rather reflects competing political
interests among different ministries and sectors. Therefore, the creation of an
overall aid agency is a substantial political task, which can be expected to take
a long time

While there will not be a unified aid agency in the foreseeable future, the
council did recommend other steps that will streamline aid coordination in
small ways. The reform council decided to abolish EPA as part of its
agency/ministry reduction plan and handed EPA's aid role - the supervision of
OECF (the implementing agency for loan aid) - over to MOFA. Thus MOFA
will eventually be in charge of both aid-implementing agencies, JICA for grant
aid and OECF for loan aid. The abolition of EPA means the replacement of the
four-ministry system for loan aid, which is currently managed by MOFA,
MITI, MOF, and EPA, with a three-ministry system consisting of MOFA,

The reform council also acknowledged that more interministerial coordination
is necessary and urged MOFA to take a leadership role in promoting such
coordination. According to the council's final report, MOFA should:
[Take] on the role as the core ministry for the inter-ministerial coordination in
formulating overall policies on economic cooperation (Official Development
Assistance), including policies on loan aid (yen loans) as well as technical
cooperation. As for cooperation through international organizations,
collaboration between the Ministry and other relevant Ministries shall be
intensified while basically maintaining the existing system.(55)
Thus while MOFA has lost some influence due to fiscal reform, its role within
the aid process overall has not gone unrecognized and may even increase
slightly if the Reform Council's recommendations are implemented.


Because of various different vested interests in ODA, Japanese aid policy
making is fragmented, involving many rival groups trying to exert influence
over aid. In Japanese aid, no strong leadership has emerged among the
policymaking units.

This fragmented pattern of policy making has turned out to be an obstacle in
dealing with the emerging challenges to Japanese ODA: the fiscal problems and
the question of Japan's aid leadership role in international politics. Japanese aid
leaders have interpreted these challenges through the lenses of their own
organizations and thus have failed to see them in a broader perspective. The
fragmentation of aid policy making has also been demonstrated in Japanese
ODA to Vietnam and Cambodia, where various groups have divergent interests
and goals regarding aid.

While Japan's ODA policy making lacks strong leadership, MOFA plays the
most important role in ODA decision making, trying to meet the emerging
challenges to Japanese ODA. The ministry has implemented four reforms. One
is designed to prioritize certain regions for the aid program to deal with the
fiscal crisis. The rest seek to enhance Japan's international aid leadership by
making changes that mollify the international community. These include the
incorporation of soft aid into ODA, the promotion of untied aid, and increased
collaboration with NGOs. MOFA is carrying out these reforms in Indochina, a
region of political and economic significance to the ministry's goals. At the
same time, one needs to keep in mind that MOFA pushes these reforms under
the influence of domestic demands from MOF, MITI, high-ranking politicians,
the business sector and, to a lesser degree, NGOs.

Compared to MOFA's general role in aid policy making, the roles played by
MOF and MITI are much narrower. While MOF sticks to budgetary matters,
MITI's main concern over aid is to protect Japanese business interests. Both
MOF and MITI have failed to address the broader social issues that the
Japanese government has been asked to cope with by the international

In the case of politicians, there are three types in regard to ODA: the silent
majority, the brokers, and the policy makers. The latter are high-ranking
politicians who take part in politically and economically significant large-scale
aid. Although these politicians make important aid decisions, their participation
does not necessarily mean that they are concerned with Japan's aid challenges.
They often take part only to represent their business constituency.

The role of the private sector in ODA deserves serious scrutiny. Japan's aid to
Vietnam and Cambodia involves a high level of participation by Japanese
firms. It is thus important to pay attention to how they draw project designs,
win bids for Japanese ODA projects and carry out these projects. At the same
time, the general untied aid policy promoted by MOFA has slowly come into
effect in Japan's ODA to Vietnam. Thus it is also important to observe how this
policy will affect Tokyo's aid to Vietnam in the long run.

The role of Japanese NGOs in aid decision making is limited but steadily
increasing. NGOs have begun to exert influence over aid through contact with
MOFA officials who are interested in collaborating with them. An increase in
their influence over Japan's ODA will be critical for improving the aid
program. This is seen in Indochina, where NGOs are already actively
attempting to influence the direction of Japanese aid.

Among all the shapers of Japanese aid policy, MOFA has the most diverse
strategies for the rapidly changing international environment. It is the only
decision-making unit that has responded to the challenges to Japan's aid in the
post-cold war period. In this sense, MOFA is the major player in shaping
Japanese ODA. At the same time, though, other decision makers in the
Japanese aid system do not necessarily follow MOFA's lead. A critical task for
MOFA will thus be to balance the competing needs of the domestic actors.
MOFA will have to continue to negotiate with MOF over fiscal matters and
with MITI and the private sector concerning the participation of Japanese
private firms in Japan's ODA projects. MOFA will also have to work with
high-ranking politicians interested in ODA policy. As there are no concerted
efforts being made among the decision makers in the Japanese aid system to
adjust to the rapidly changing domestic and international environment, MOFA's
task will continue to be formidable.

The fragmentation of Japanese aid policy, together with the current fiscal
crisis, means that Japan will have a hard time assuming the international aid
leadership role expected of Tokyo. Fiscal constraints demand that aid policy
making and implementation become more efficient, but fragmentation prevents
this from occurring. Recent discussions about restructuring the aid
administration indicate that there is at least a growing recognition of this
problem. However, reconciling different political and economic interests that
cause this fragmentation will undoubtedly be a long-term task.


1 In FY 1995,Japan provided $170.19 million ($144.36 million in grant aid
and $25.83 million in loan aid) to Vietnam and $152.04 million (all in grant
aid) to Cambodia. Ministry of Foreign Affairs, Japan's Annual Report 1995
(Tokyo: Association for Promotion of International Cooperation, 1996), pp. 42
and 48.
2 "Failing to Bite the Bullet Train," Economist, January 25, 1997, p. 33.
3 "ODA Koyaku Tassei ni Gyaku-fu," Asahi Shimbun, June 6, 1996; "Heisei
Kunendo Hakusho ODA Yosan no Tettei Senpo," International Development
Journal, no. 484 (March 1997), p. 33.
4 Interview with official in the Aid Policy Division, the Economic Cooperation
Bureau, MOFA, April 1997. The difficulty in pursuing the Fifth Midterm ODA
Plan is also due to the depreciation of the yen in dollar terms. See "ODA
Jisseki 35% Gen," Asahi Shimbun, April 8, 1997.
5 See, for example, "Aid: Falling Fast," Economist, June 22, 1996, pp. 43-44.
6 For detailed discussion on Japan's aid leadership role, see Alan Rix, Japan's
Foreign Aid Challenge: Policy Reform and Aid Leadership (London:
Routledge, 1993), ch. 6.
7 "Heisei Kunendo Hakusho ODA Yosan no Tettei Senpo."
8 For further analysis of gaiatsu, see Robert M. Orr, Jr., The Emergence of
Japan's Foreign Aid Power (New York: Columbia University Press, 1990).
9 Interview with the deputy director-general in the Economic Cooperation
Bureau of MOFA, March 1997.
10 ICORC was established at the Ministerial Conference on Rehabilitation and
Reconstruction of Cambodia in Tokyo in 1992 to promote aid coordination
among bilateral and multilateral donors in Cambodia. Japan has served as chair
since the first ICORC meeting in Paris in 1993. In the near future, ICORC will
be replaced by a Consortium Group (CG) on Cambodia led by the World Bank.
Interview with official in the Aid Policy Division, the Aid Cooperation Bureau,
MOFA, April 1997.
11 The Indochina Forum was established at the initiative of Japanese Prime
Minister Kiichi Miyazawa in 1993. Interview with official in the Aid Policy
Division, the Aid Cooperation Bureau, MOFA, April 1997.
12 The First Southeast Asia Division, the Asian Affairs Bureau, MOFA,
internal report, November 1996. The original form of the Mekong River
Commission (the Committee for Coordination of Investigations for the Lower
Mekong Basin) was established in 1957 by Thailand, Vietnam, Cambodia, and
Laos to promote the development of the Mekong River region. The
organization was reinvigorated in 1995. The current chief executive officer of
the Mekong River Commission is a Japanese official, Yasunobu Matoba, from
the Ministry of Agriculture, Forestry and Fishery. See also OECF, OECF
Newsletter, August 1996.
13 Interviews with officials in the First Southeast Asia Division, the Asian
Affairs Bureau, MOFA, December 1996 and February 1997; interviews with
officials in the Aid Policy Division, the Economic Cooperation Bureau,
MOFA, March and April 1997.
14 Ministry of Foreign Affairs, Waga-kuni no Seifu-kaihatsu-enjo: ODA
Hakusho, vol. 2 (Tokyo: Association for Promotion of International
Cooperation, 1996), p. 44.
15 Ibid., pp. 59-60.
16 Japan's general untied-aid policy allows open international bidding on its
OECF-financed projects (loan aid). Until the end of the 1980s, Japan promoted
Less-Developed-Country (LDC) untied aid policy designed to restrict the
procurement of materials and services to LDCs and the donor country (Japan).
Since firms in LDCs did not have appropriate knowledge and technologies to
take on Japanese projects, in many cases Japanese firms won the bids.
17 Ministry of Foreign Affairs, Waga-kuni no Seifu-kaihatsu..enjo: ODA
Hakusho, p. 57.
18 Interview with official in the First Southeast Asia Division, the Asian
Affairs Bureau, MOFA, December, 1996.
19 Currently there is no Japanese loan aid to Cambodia because of the country's
fragile economic situation. Japan's ODA loans, however, are expected to be
resumed in Cambodia in the near future. Interview with official in the Embassy
of Japan in Cambodia, June 1995; interview with official in the First Southeast
Asia Division, the Asian Affairs Bureau, MOFA, February 1997.
20 Association for Promotion of International Cooperation, Vietnamu:
Kaihatsu-tojokoku keizai-kyoryoku Sirizu, no. 19 (Tokyo: Association for
Promotion of International Cooperation, 1995), p. 56.
21 The Grass-roots Grant Aid is also available to non-Japanese NGOs.
22 Ministry of Foreign Affairs, Waga-kuni no Seifu-kaihatsu-enjo: ODA
Hakusho, pp. 44-47.
23 Ibid., pp. 6061.
24 Interview with member of the Japan International Volunteer Center (JVC),
March 1997.
25 Interview with member of JVC, March 1997.
26 Interview with vice-president, Development Strategy Institute, Ministry of
Planning and Investment, May 1997.
27 MITI's ODA budget for FY 1997 is 55.83 billion yen, while MOFA is
allocated 585.09 billion yen. MOF's share is 441.90 billion yen. International
Development Journal p. 33.
28 "MITI Panel to Urge ODA to Tie to Purchases," The Nikkei Weekly, June
19, 1997.
29 As a result of the implementation of the general untied aid policy, only
about 27 percent of Japanese firms won bids for Japanese ODA loan projects in
1995. In contrast, about 38 percent of Japanese firms won contract in 1989.
Ministry of Foreign Affairs, Waga-kuni no Seifu-kaihatsu-enjo: ODA
Hakusho, vol. 1 (Tokyo: Association for Promotion of International
Cooperation, 1996), pp. 56-58.
30 The Working Group on Cooperation for Industrialization on Cambodia,
Laos and Myanmar, Policy Recommendation to ASEAN Economic Ministers -
Minister of International Trade and Industry (AEMMITI) Meeting, approved at
the Fifth CLM WG Meeting in Cambodia, August 1996.
31 Personal communication with official in RIDA, OECF, March, 1997.
32 See JIGA Chotatsubu Kanrika, ed., JICA Toroku Consarutanto Binran
(Tokyo: International Cooperation Service Center, 1992).
33 Interview with members of the JICA Vietnam Study Group, February 1997
and April 1997. See The Japan International Cooperation Agency and the
Ministry of Planning and Investment (the Socialist Republic of Viet Nam), The
Economic Development Policy in the Transition: Toward a Market-Oriented
Economy in the Socialist Republic of Viet Nam vols. 14 (Tokyo: The Japan
International Cooperation Agency, 1996).
34 Interview with member of JVC, March 1997.
35 Interview with official in IDRI, FASID, March 1997.
36 "Foreign Ministry Bemoans Aid Slump," Nikhei Weekly, October 7, 1996.
See also International Development Journal, no. 489 (August 1997), p. 19.
37 See Masaki Yokoyama, Firipin Enjo to Jiritsu Kosei-ron (Tokyo: Akashi
Shoten, 1994), ch. 3 and 4.
38 Orr, The Emergence of Japan 's Foreign Aid Power, pp. 21-25.
39 Ibid., pp. 176-78.
40 Seki Tomoda, "Resumption of Japan's ODA to Vietnam: Watershed of
Nippo-Vietnamese Relations," Project Report, Asia University Asia Research
Institute, March 1997.
41 Interview with the general-secretary, Japan-Vietnam Friendship
Association, April 1997.
42 Interview with the vice-head of the International Department, Central
Committee, Japanese Communist Party, April 1997; interview with the
secretary-general, Japan-Vietnam Friendship Association, April 1997;
interview with a visiting professor at the Japan Institute of International Affairs
(JIIA), April 1997; and interview with a professor in international law, Niigata
University, April 1997.
43 "New Breed Seeks Quality in Foreign Aid, Not Quantity," Nikkei Weekly,
June 9, 1997.
44 Robert M. Orr, Jr., The Domestic Dimensions of Japanese Foreign Aid
(Kuala Lumpur: Center for Japanese Studies at the Institute of Strategic and
International Studies, 1993).
45 ECFA, Engineering Consulting Firms Directory 1997-1998 (Tokyo: ECFA,
1997), p. 4.
46 Keidanren, Keidanren Iken-sho: Seifu Keizi Enjo ~ODA) no Kaikaku ni
Kansuru Wareware no Kangae, a policy proposal announced by Keidanren on
April 15, 1997, p. 2.
47 "ODA Nyusatsu Ruuto Minaoshi," Asahi Shimbun, February 2, 1997.
48 Kyodo News International, January 29, 1998.
49 Association for Promotion of International Cooperation, Vietonamu:
Kaihatsu-tojokoku Keizaikyoryoku Sirizu, p. 56; Association for Promotion of
International Cooperation, Kanbodia: Kaihatsutojokoku Keizai-kyovyoku
Sirizu, no. 20 (Tokyo: Association for Promotion of International Cooperation,
1995), p. 60.
50 Keidanren, Ho Mekon Karyuiki Kaihatsu Kyoryoku Misshon Hokokusho, a
report on the Keidanren mission to Yunnan in China, Cambodia, and Laos,
July 1996.
51 Michio Ito, "Doko e Iku Nihon no NGO?" (Paper presented at the Eighth
FASID Meeting, Tokyo, April 18, 1997).
52 Interview with member of the Association of Medical Doctors of Asia
(AMDA), March 1997.
53 Japan International Volunteer Center, stoppu!: Kiken na Noyaku Enjo
(Tokyo: Japan International Volunteer Center, 1993).
54 Interview with member of JVC, March 1997.
55 Ministry of Foreign Affairs, December 3, 1997 (provisional translation).
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