In Search of New Approaches to Japanese Development Assistance

In Search of New Approaches to Japanese Development Assistance

The Foundation for Advanced Studies on International Development (FASID) was established in April 1990. FASID and its affiliate, International Development Research Institute (IDRI), conduct research, facilitate interaction among researchers and practitioners, and offer training programs to development specialists. These activities are aimed for improvement in the quality of development programs and policies. Copyright 2006 by FASID Published in 2006 in Japan by the Foundation for Advanced Studies on International Development, 1-6-17 Kudan-minami, Chiyoda-ku, Tokyo 102-0074, Japan e-mail : pub@fasid.or.jp URL : http://www,fasid.or.jp

Foreword Naonobu Minato Acting Director, International Development Research Institute, Foundation for Advanced Studies on International Development International development has entered a dynamic phase, as indicated by increases in funding at the onset of the 21 st century following declines in the 1990 s. An important contributing factor to this has been accelerating economic, political and social globalization. Assistance to the most fragile states has also been prompted by terrorism concerns in major donor countries. If development had ever been an issue to be treated in isolation, clearly that time is past. It has now become a process with a global context, global consequences and global ramifications. Some donors have restructured their organizations to adjust to the changing trends. Noticeable examples include the UK, which established the Department for International Development (DFID), the US, which established the Millennium Challenge Corporation (MCC), and France, which established Agence Français de Development (AFD). The UN aid agency, UNDP, shifted its attention away from technical cooperation to the provision of upstream political analysis and policy recommendations, and changes are also under consideration at the two Bretton Woods Institutions the World Bank and the International Monetary Fund. In Japan, two important international conferences are scheduled for 2008 the G8 summit to be held in Hokkaido and the 4 th Tokyo International Conference on African Development (TICAD IV) to be held in Tokyo. And in the fall of 2008 a significant new ODA organizational structure is set to be introduced. This is an opportune time, therefore, to review and examine the Japanese system as part of a search for a new Japanese approach to ODA. That is the purpose of this fourth volume in the Trends in Development Assistance series: to analyze international trends, development assistance institutions and important development issues. This book describes and analyzes key modalities loans, grants and technical assistance and presents key issues facing the Japanese development community. Takamasa Akiyama, senior advisor of IDRI, FASID and Yuichi Sasaoka, Professor, Graduate Institute for Policy Studies (GRIPS), are the co-editors. I want to express my gratitude to external contributors to this volume:

Yasutami Shimomura, Professor, Hosei University; Yasuhisa Ojima, Senior Advisor, Planning Division, Department of Development Operations, JBIC; Izumi Ohno, Professor, GRIPS; Koichi Miyoshi, Professor, Ritsumeikan Asia Pacific University; Koji Makino, Director, Human Security Team, Planning and Coordination Department; Yukio Sugano, Professor, GRIPS; and, Mikiko Nishimura, Associate Professor, Kobe University. Each contributor brings valuable insights from the academic as well as the practical perspective. I would also like to convey my appreciation to Hajime Sato, Junko Takeuchi and Nagashige Chou for their translation. I hope this book will be useful to the on-going reform of ODA system in Japan. Each chapter reflects the opinion of its author, not of their organizations. Titles are the ones used in the original version. March, 2006

In Search of New Approaches to Japanese Development Assistance Foreword List of Tables, Figures and Boxes Abbreviations and Acronyms Chapters 1 Recent Trends in International Aid and Their Impact on Japan 001 2 Rediscovering the Role for Japan Counter force against the Negative Side of the Trends in International Aid 035 3 Structures of Donor Partnerships For more effective partnerships 054 4 Infrastructure Finance: A New Direction for Yen Loans 086 5 Improving Grant Aid Cooperation Strategy and Effectiveness Formation of a comprehensive economic cooperation policy 119 6 JICA and Future Technical Cooperation 160 7 Human Security and Aid from the Perspective of an Aid Practitioner 188 8 The Private Sector and Development A Review of the Development Role of Developed Country Private Enterprise 210 9 Africa s Poverty Reduction Strategy 239 Perspectives on African Development Steategies and their Policy Implications 264 Final Chapter Transition to Strategic Aid 290

List of Tables, Figures and Boxes Tables Table 2-1 Percentage of poor population and human development indicator in lowest ranking countries* in governance indicator 41 Table 2-2 Matrix of Tanzania,s PRSP 47 Table 3-1 5 organizational structure models in the Development Assistance Agencies 61 Table 3-2 Donors size and attitude toward partnership 64 Table 3-3 Factors defining the degree of commitment toward partnership 65 Table 3-4 Parameter of further cost to the partnership 67 Table 3-5 Measures to structure the partnership 79 Table 4-1 Infrastracture stock in developing countries 92 Table 4-2 Uhcompetitive and components of infrastracture network 100 Table 5-1 Overview of grant aid schemes and 2005 budet 123 Table 5-2 Remarks about ODA s evaluation system 134 Table 5-3 Recent actions for the improvement of ODA evaluation 134 Table 5-4 Situation of school canstructions in Cambodia by each organization (Made by citizen Forum in Cambodia, Japan) 136 Table 5-5 Examples of school building projects on cost reduction 136 Table 5-6 Grant aid adapted to the recipient country s situation 136 Table 6-1 Institutional change of JICA before and after the transformation into independent administrative institutions 180 Table 8-1 Involvements of private enterprises into the developments 214 Table 8-2 Breakdown of development finance in the U.S. 221 Table 8-3 The World Bank group aid scheme for private sectors 226 Table 8-4 Breakdown of GAVI funds (as of March, 2005) 228 Table 8-5 Japan s PPP cases (designed public & managed by private) 230 Table 8-6 Involvements of private enterprises into development and PPP 234

Figures Fig. 1-1 Fig. 1-2 Gross Disbursement 21 net disbursement 21 Fig. 1-3 Gross Disbursement (million dollars) 21 Fig. 1-4 net disbursement (million dollars) 21 Fig. 1-5 Transitio of ODA disbursements among DAC major countries 24 Fig. 3-1 Concepual framework 60 Fig. 4-1 Relationship between development of infrastractures and poverty reduction 88 Fig. 4-2 Road construction and medical service 90 Fig. 4-3 Infrastracture effect : case of northern Vietnam transportation infrastructure 91 Fig. 4-4 percentage of bilateral ODA (into infrastracture field commitment) 93 Fig. 4-5 regional trend of private sector involved infrastracture (1990-2003) 94 Fig. 4-6 sector trend of private sector involved infrastracture (1990-2003) 94 Fig. 4-7 characteristic of infrastracture : network 97 Fig. 4-8 Function of yen loan : case of Vietnam Phu My thermal power plants 101 Fig. 4-9 Development stage of development funds 105 Fig. 4-10 Concept of Output-based Aid 107 Fig. 4-11 Concept of temporary subsidy 107 Fig. 4-12 Orerview of Republic of Tajikistan Pamir Power Project 108 Fig. 4-13 Transition of Paris Club agreement 110 Fig. 4-14 Philippines municipal finance 112 Fig. 4-15 Philippines Revolving Fund Framework 112 Fig. 5-1 Japanese ODA and grant aid 123 Fig. 5-2 Transition of uncompensated financial assistance business budget 126 Fig. 5-3 Transition of regional distribution of grant aid (comoarison between 2000 and 2004) 127 Fig. 5-4 Breakdown of bilateral ODA patterns of Japan to Africa (comparsion between 1999 and 2003) 127

Fig. 5-5 Workflow of grant aid: Role of MOFA and JICA (in the cases of grant aids for general projects and fishery) 129 Fig. 5-6 Transition of International ODA Loans and ODA Grants 140 Fig. 5-7 Transition of Japan ODA Loans and Grants 141 Fig. 5-8 Transiticn of trade relationships between Japan and other regions (increase of East Asian) importance 149 Fig. 5-9 Definition of PPP 150 Fig. 5-10 Regional allocation of Japan s bilateral ODA patterns (On average of 2002 to 2003, net disbursement basis) Fig. 5-11 Percentage of regional disbursement DAC leading 153 countries 154 Fig. 6-1 Cooperation to A country and measvres to indivisual schemes 169 Fig. 6-2 Development issues of A country and measures by the scheme formation 172 Fig. 6-3 182 Fig. 6-4 The policy system and Intervention to the policy, program, and project in developing countries 182 Fig. 7-1 Concept of human security 191 Fig. 7-2 Human securitys perspeitive incorporated development (assistance) 194 Fig. 7-3 Human resources development and human security 198 Fig. 8-1 Net flow into developing countries 212 Fig. 8-2 Net flow into developing countries 212 Fig. 8-3 Fund inflow breakdown from JAPAN into developing countries 213 Fig. 8-4 Private funds to developing countries and international organizations 213 Fig. 8-5 Regional breakdown of foreign direct Investment recipient countries 223 Fig. 8-6 Image of PPP 223 Fig. 9-1 Capacity development goals, outcomes and processes 279

Developing States development and Private Sectors Abbreviations and Acronyms ADB AFD AHSI APEC ASEAN AU BHN BOP BPD BRICs CDF CDM CfA CIDA CSR DAC DFID EC EFA EFA-FTI EIF E/N EPA EU FAO FDI FTA EU GAVI GDP GNI GNP GTZ HIPCs HLF Asian Development Bank Agence Francais de Development Africa Human Security Initiative Asia-Pacific Economic Cooperation Association for South-East Asian Nations African Union AusAID: Australian Agency for International Development Basic Human Needs Bottom of Pyramid Business Partnership for Development Brazil, Russia, India, China: CAS: Country Assistance Strategy Comprehensive Development Framework Clean Development Mechanism Commission for Africa Canadian International Development Agency Corporate Social Responsibility Development Assistance Committee Department for International Development European Commission Education for All Education for All Fast Track Initiative European Investment Fund Exchange of Note Economic Partnership Agreement European Union Food and Agriculture Organization Foreign Direct Investment Free Trade Agreement European Union Global Alliance for Vaccines and Immunization Gross Domestic Product Gross National Income Gross National Product Deutsche Gesellshaft fur Technische Zusammenarbeit Heavily Indebted Poor Countries High Level Forum DAC

Developing States development and Private Sectors IBRD IDA IDTs IFAD IFC IFF IMF JBIC JICA KfW LDC LICs LICUS LMCs MCA MCC MGDs MIGA MTEF NAFTA NEPAD NGO NORAD NPM NPO ODA OECD OECF OLS O&M OOF OPIC PF PFI PFM PPA PPP PRBS International Bank for Reconstruction and Development International Development Association International Development Targets International Fund for Agriculture Development International Finance Corporation International Finance Facility International Monetary Fund Japan Bank for International Cooperation Japan International Cooperation Agency Kreditanstalt fur Wiederaufbau Least Developed Countries Low Income Countries Low Income Countries under Stress Lower Middle Income Countries Millennium Challenge Account Millennium Challenge Corporation Millennium Development Goals Multilateral Investment Guarantee Association Middle Term Expenditure Framework North American Free Trade Agreement New Partnership for Africa's Development Non-Governmental Organaztion Norwegian Agency for Development Cooperation New Public Management Non-Profit Organization Official Development Assistance Organization for Economic Cooperation and Development Oversea Economic Cooperation Fund Ordinary Least Squares Operation and Maintenance Other Official Fund Overseas Private Investment Corporation Private Fund Private Financial Initiative Public Finance Management Participatory Poverty Assessment Public-Private Partnership Poverty Reduction Budget Support

PRGF PRS(P) PSA PSD PVO RDS SAP SIDA SSA SWAp TF TICAD UMCs UNDP UNCEF UNESCO USAID UXO WFP WHO WTO ZSP Poverty Reduction and Growth Fund Poverty Reduction Strategy (Paper) Public Service Agreement Private Sector Development Strategy Private and Voluntary Organization Rural Development Strategy Structural Adjustment Program Swedish International Development Agency Sub-Saharan Africa Sector Wide Approach Task Force Tokyo International Conference on African Development Upper Middle Income Countries United Nations Development Program United Nations Children s Fund United Nations Educational, Scientific and Cultural Organization United States Agency for International Development Unexploded Ordinance World Food Program World Health Organization World Trade Organization Priority Solidarity Zones