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JAPAN SOCIETY LECTURE 14 December 2005 - Oriental Club, London Lecture by Mr. Toshiyuki Iwama Japan Society, Excellencies ……………………………………………………………….., Distinguished members of the Japan Society, I am honored to be invited by the Japan Society and to have the opportunity to speak to you. I came to London in May 2004 as the Deputy Resident Representative of the JICA United Kingdom Office, and was appointed as the Resident Representative on 1st July 2005. I joined JICA in 1987 and have worked mainly in the infrastructure sector with external postings at the Japanese Ministry of Construction, the World Bank in Washington D.C. and the JICA office in Cairo. I am sure that there are a lot of members present today who have far more experience and knowledge in their profession, on development assistance and concerning living abroad. Even my chosen topic today - the history of Japan's development assistance - may have been well analysed and presented even by someone from the Society at some point. But tonight, I will try to enrich the usual historical tale with recent topics about aid and Africa. And please note that the views expressed here is based on my personal observation and thoughts, and therefore do not represent JICA's nor JICA UK Office's official statement. Ladies and Gentlemen, Last year, Japan commemorated the 50th anniversary of its ODA. Japan began contributing to international development assistance when it started to participate in the Colombo Plan in 1954. The history of Japan's development assistance usually dates back to that time. But I would rather start the story in the 4th century in order to understand the under-lying principle of Japanese cooperation. At this time it was the Yamato-era. The governor at that time was the Yamato-Chotei under the emperor, the Tenno. This was when Japan was first unified. The Yamato-Chotei accepted experts from Korea who brought in advanced knowledge and technology and were offered high positions. Major imports during this time were the Chinese characters, Kanji, brought in so that the governor could record and register facts - the basis of governance. Confucianism was also adopted to bring law and order to the country. In addition, the 17 articles of the first constitution were set out by Shotoku-Taishi in 604, and a ranking order of bureaucrats was also established to select candidates through competition rather than the automatic selection that existed under the feudal system; under current terminology this is a fundamental element of a democratic system. In order to achieve equal partnership with China the first government mission called Kenzui-shi led by Ono-no-Imoko was sent in 607. Missions followed at regular intervals for almost 300 years. The missions went to Xi'an, the old capital of China located in the central part of the continent, the beginning or end point of the Silk Road. The objectives of the missions were to study the culture, governance system, and urban planning systems. Imports from as far as Persia came to Japan through trade on the Silk Road. Active trade with China was established. This kind of relationship with neighboring countries continued for well over 1000 years. During the Edo Regime in the 17th and 18th century, authorized trade vessel fleets sailed regularly between Japan and South-East Asia. Some Japanese business people emigrated to South-East Asia and formed the first overseas Japanese colony there. However, fearing that Christianity would influence domestic politics Ieyasu Tokugawa banned Christians and limited external trade to only the Netherlands and China on the small isolated island of Nagasaki. In this way the Tokugawa regime monopolised trade. This contributed a great deal to the stabilization of the country and wealth of the regime, because the regime could therefore focus on domestic issues and development. New rice fields were created, rivers dammed, harbors built, and a tax and banking system developed. The capital of Japan - Edo - already had a population of 1 million in the 18th century but had a very efficient sewage and waste recycling system. Many public and private schools had been opened for both the children of Samurai and civilians. Learning western knowledge from the Netherlands became a boom in the late Edo period ending the 2 century long closure of the country and leading to the re-opening of the country to the world in 1854 and the switch from the Edo regime to the Meiji period. Railways came from Britain, medicine and river protection techniques came from the Netherlands. As you see from this introduction, the Japanese were always keen to adopt advanced knowledge and systems from abroad; they were able to communicate with other countries from very early on. Particularly important is the fact that the desire for external experts and technology came from Japanese people themselves. They used the knowledge of external experts to build the country and government system. They imported many goods and technology, but they started to build these goods by themselves and developed their own technology. This is very different from what happens with international aid these days which is mainly donor - externally - driven and is more and more finance oriented. We have to always bear this clear difference in mind. Internally and technically driven - these are the first key words for today. Colombo-Plan, the start of the foreign assistance Ladies and Gentlemen, WW II and the reconstruction thereafter led Japan to be actively involved in development assistance. In January 1949 the American President Harry S. Truman announced in his inaugural speech that technical assistance and investment are needed for the economic development of developing countries. The Extended Plan for Technical Assistance (EPTA) started in 1950 with developed countries putting funds in under their own initiative. Japan put 80 000 dollars into this fund in 1952, and this was the first Japanese active involvement in foreign assistance. In 1950 the meeting of the Commonwealth Foreign Ministers took place in Colombo. The meeting endorsed the Colombo Plan to help free Asian countries from poverty and provide technical assistance for increased food production and provision of capital resources to promote core industries. Japan joined the Colombo Plan in 1954, and started official development assistance then. The basic principle of the Colombo Plan was "to support the self-help efforts of member countries based on bilateral agreements between developed and developing countries." For Japan it was a golden opportunity to re-gain its position in the international community through promoting economic development. In the same year, 1954, the first agreement for compensation, peace and economic development was signed between Burma and Japan. Japan started economic cooperation for compensation at this time. Agreements with the Philippines, Thailand and Vietnam followed. Similar arrangements were made with Lao, Cambodia, Malaysia and Singapore as well. Compensation was completed in 1977 and helped Japan to build firm experience and its position in development assistance and in the international community. In order to effectively implement the assistance a specialised organisation was necessary, therefore the Asian Association was created to accept technical trainees from Asia and send experts. The first training programme was a Japan-US collaboration and training programme entrusted by the UN in addition to the government-owned training programme. This is exactly the same scheme as the Third Country Training programme which is part of the South-South cooperation work Japan still carries out. So, the next key words from this section are: Asia, self-help, and economic development. Emigration was another aspect of Japanese ODA. In the Meiji era more than 100 years ago, a Corporation for Emigration was established. The first emigrants had a very tough time because of the war, but I will not go into detail on this today because it has its own long history. Post-war emigration started in 1946 when family members of the second generation left Japan to join the first generation. However, it was taboo to officially talk about emigration at that time because this may provoke the old idea of the Japanese empire. After the signature of the San Francisco Peace Agreement in 1951, official emigration started again. In 1963 the Agency for Emigration was created. What was happening in the rest of the world in 50s and 60s? Developing countries recognized their common strategy in the Bandung Conference in 1955. Many African countries gained independence in 1960s. Recognising the big difference between the two worlds President Kennedy initiated a UN resolution to create the 1960s as 10 years of UN development. The US Agency for International Development (USAID) was created in 1961 and in Britain the Department in charge of Technical Cooperation was established in 1961. There have been several changes since then as you well know. In France, the Fund for assistance cooperation was set up in 1959, and in Germany the Kreditanstalt fur Wiederaufbau (KfW) was altered to administer bilateral aid. Creation of JICA and OECF There was a change in the policy of development assistance in the donor community around the 1970s. Until the 1970s the focus was on funding as represented by the Marshall Plan. The big inflow of ODA to developing countries had a positive effect on private money flows. However, as the funds flowed the debt increased. The international community appealed to consider the quality of the funds, calling for more grants and un-tied aid, but they also admitted that funds alone do not promote development. There must also be capacity created through technical assistance. In response to this movement the Japanese government decided to promote technical assistance - this consequently increased 9 times during the 1960s, but was still at only 6% of total ODA compared to the international average of 20% of ODA. ODA started to boom at this time, and due to the capacity constraints of the implementing agency, many Japanese ministries participated in ODA activity. Diversified objectives made Japanese ODA policy unclear. While the rest of the world was strengthening the country-based approach, Japanese ODA was characterized by a scheme and ministry-based approach - a fragmented and input-driven approach. During the early 1970s the rapid increase in the presence of Japanese business in Asia led to an anti-Japanese backlash in many countries. The role of the government and the private sector had to be clarified, because it appeared that there was a massive Japanese economic flood flowing into Asian countries. In response to these factors there was an urgent need for clear ODA policy and a strong implementing body. The race for leadership over ODA began. The Ministry of Agriculture brought in the idea of the Overseas Agri-forestry Development Agency and the Ministry of Trade and Industry had the idea of an Overseas Trade Development Agency. The ODA budget was implemented by 13 ministries with an Overseas Technical Cooperation Agency up and running since 1962. These moves by the ministries were clearly against the political will of the Japanese leaders who were hoping for a better overview of ODA by changing to a single managing organization. It was the strong will of Prime Minister Mr. Kakuei Tanaka who finally and in the last minutes of a huge battle over the budget for the new fiscal year decided to abolish the idea of creating agricultural and trade development agencies and create JICA instead, merging the Overseas Technical Cooperation Agency and the Emigration Agency. Finally the Japan International Cooperation Agency, JICA, was established in August 1974. The funding needs of the Asian region were huge. In the 1950s Japan lobbied for the creation of an International Fund for South-East Asian Development and was ready to contribute 5 billion Japanese Yen to it, but the idea was defeated by the creation of the International Development Association (IDA) in the World Bank. For Japan, the focus was how to let the funds flow to Asia. There was already the Export-Import Bank of Japan, and mixed loans between the Ex-Im Bank and private banks. Because of pressure to decrease interest rates for developing countries, it became impossible for the Ex-Im Bank to operate with private banks because private banks took the majority of the interest, which was at the market rate although the actual lending rate was low. Therefore, a special bank for low interest and long term lending was created in 1961 which was called the Overseas Economic Cooperation Fund (OECF). Since then and until the merger in 1999 to create the Japan Bank for International Cooperation (JBIC) the two banking institutes, the OECF and the Ex-Im Bank, were operating in parallel, differing on their interest rates and thereby on their lending policy. Expansion of ODA The 1970s and 80s are characterized as the period of rapid expansion of Japanese ODA. Just to give you an example, in 1970 the total amount of Japanese ODA was around 500 million US dollars. It reached 14.5 billion dollars in 1995, the highest level ever in the history of Japan. The percentage increase of Japanese ODA during those 25 years was a remarkable 3000%. I joined JICA in 1987, so you may imagine how busy I was during the first years of my career. Throughout this period Japan maintained its basic policy of ODA as: Avoid interference in the internal politics of the recipient country, provide assistance based on the requests of recipient governments, provide technical assistance to build the capacity of the people, and promote economic development. When you look at today's Asia, you may agree that Japanese ODA policy was a good choice for Asia. When we compare ODA and other funds, it was almost 50 - 50 in 1990, but in 1996 other funds were 5 times larger than ODA. This fact shows that ODA alone does not contribute to development. Let me give you a couple of major facts to illustrate this period. A human resources development plan for ASEAN started in 1981, and Japan assisted the Philippines, Thailand, Malaysia, Indonesia and Singapore in particular. A Youth Invitation Programme to build friendship for the 21st century started in 1984 to provide opportunities for young people in Asia, the Pacific, Latin America and Africa to visit Japan. Co-financing Structural Adjustment Loans started in 1986. Disaster relief operations became one of JICA's activities from 1987. The first Tokyo International Conference on Africa Development took place in 1993. The Kyoto Initiative to protect developing countries from global warming was issued in 1997. ODA also helped to offset the huge account surplus of Japan. Driven by the strong Japanese economy and exports a large proportion of the ODA increase took the form of loans. ODA was used to release and recycle the growing current account surplus, which was often criticised by other industrialised countries. Japanese ODA focused on the economic sector in Asia. Large Yen-loans to build ports, highways, railways, airports, power plants and transmission lines, and industry parks were provided. The Japanese private sector clearly benefited from this, as infrastructure developed using ODA provided the base for industrial growth in Asia. Nobody in Japan was against this policy as the people knew that the money leaving Japan would come back to Japan as a huge profit. New Challenges The 1990s was the time of a shift in ODA strategy. After the end of the Cold War human rights, democracy, and the market economy became new key words for development assistance. Global issues such as the environment, education, population growth, HIV/Aids and drug trafficking were identified. In order to reflect the new challenges the UNDP issued the Human Development Index (HDI) in 1990. According to the HDI development achievement is expressed not by economic data, but by human development data. Consequently, development goals focused on social sector impacts in education and health in addition to traditional economic data. Economic development moved from being the development goal to being the means of development while the new development goal was set as being human development. The concept of human security was first mentioned in the 1994 UN Development Report. Its basic concept is, as you may well know, that the target of development assistance is people rather than the state. Everyone in this world has the right to be protected from insecurity ranging from poverty, hunger, unemployment, disease, discrimination, human rights abuses, crime, violence, drugs etc. In 1998 Prime Minister Obuchi mentioned the human security for the first time in Japan, and in the following year Japan created the Human Security Fund in the UN. The Millennium Development Goals were set in 2000. In 2003 Mrs. Ogata and Professor Amartya Sen published the Commission Report for Human Security. Various initiatives such as Education for All, the World Water Forum, HIV/AIDS, Tuberculosis and Malaria Support Funds, the Highly Indebted Poor Countries (HIPC) Initiative, Poverty Reduction Strategies, the Reconstruction of Afganistan and Iraq soon followed in the years to come. The Asian and Japanese economies were hit by the currency crisis of 1997, which triggered the bursting of the Japanese bubble economy. Since then, Japan has suffered from domestic economic stagnation and a growing fiscal deficit. It was clear that the system of the 1970s and 80s had reached its limit. In December 1997 parliament passed a law on financial structural restructuring and the Japanese government began resorting to cutting ODA to balance its budget. Many Japanese people think that the ailing domestic economy should be restored first before putting money into foreign aid. The total net disbursement of Japanese ODA in 1995 was 14.5 billion dollars while that of the USA was 7 billion, down from 10 billion in previous years, France was 9 billion, Germany 7 billion and the UK 3 billion dollars. There was no doubt that Japan was not only paying too much compared to world standards. In 1996, Japanese ODA plunged down to 9.4 billion dollars, a decrease of one third. This big dive in ODA had a very big negative impact on business. The trading companies, who were the real supporting arms of Japanese ODA - they identified the projects and actually managed implementation - pulled out from the ODA business, because of their own financial difficulties after the bubble burst but also because they were heavily and often unfairly criticised by the Japanese people as the ODA mafia. ODA was left to the ministries and implementing agencies such as JICA and the OECF. Everybody felt the lack of capacity within their own organization. Since Japanese aid is virtually tied to a large extent - the experts, consultants and prime contractors must be Japanese nationals - the cutting back of the ODA budget and the withdrawal of the private sector from ODA meant the end of the traditional ODA system. In order to overcome this difficult situation, JICA started to pool experts, and started to identify and formulate the projects on its own by creating its department for project formulation and opening up its capacity to undertake project formulation studies by its overseas offices. It also started country assistance strategies. This was the first wave of restructuring, but the basic components - decision-making power resting in Tokyo and departments set up in line with the line ministries - remained the same. Sooner or later this system would prove to be far from sufficient to tackle all the new challenges. Because of the weak Japanese economy development topics were not high on the agenda of the Japanese media except for scandals and reports of mismanagement of funds. New Hopes Mrs. Ogata assumed the post of presidency in October 2003, and at the same time JICA became an independent administrative agency. During the past year, JICA has begun transforming to fulfill three policy goals: 1) to strengthen its overseas offices and their assistance capacity to better focus on the needs of recipient countries and their peoples; 2) to incorporate the framework of human security and refocus various assistance activities for effective impact and 3) to simplify decision making process to secure efficient management and operational speed. Departments have been restructured in a such a way that the regional departments - 5 in total - were downsized, shifting country officers to overseas offices, and 5 new sector departments in accordance with major development issues - Social Development, Human Development, Economic Development Department, Geo-environment and Rural Development - were created from the former scheme and ministry driven configuration. Let me explain these developments in detail. The total number of JICA staff is about 1330. They are based either in Tokyo or in overseas offices. Under the new strategy JICA places half of its staff in overseas offices, so they know what happens in the field. At the same time, JICA has also delegated decision-making to field offices. Board presentations of new programs can now be made by video conference and necessary information and documents can be distributed by e-mail. The program concept is also undergoing change. JICA, as an official agency, used to talk to the government departments of recipient countries for program formulation and implementation. However, it has become clearer and clearer that governments of recipient countries are not necessarily the most appropriate source of such information. Particularly when dealing with the issue of human security, it is often misunderstood as a part of national security. The meaning of JICA's "Human Security" concept is defined by the following 7 points. 1) putting people at the center of assistance, and providing aid that actually reaches them; 2) putting people as not only recipients but also as implementers of development and empowering them accordingly; 3) prioritizing aid to the most vulnerable and endangered people; 4) freeing people from "want" and "fear"; 5) tackling people's issues and solving them professionally and comprehensively; 6) approaching central and local governments as well as civil society at the same time; 7) coordinating and cooperating with other development actors such as NGOs and donors. Therefore, talking only with the central government of the recipient country in a traditional way is not enough to know what the people want. JICA is more and more involved in going into the country side to find out the real needs of the people. Allocating staff to overseas offices and opening new field offices provides opportunities to do so. There are now 100 overseas offices and field offices all over the world. New field offices have been set up in Sierra-Leone, Rwanda, Chad, and possibly very soon in Sudan. In order to effectively cope with this new agenda, JICA needs new professionals. JICA has been an agency for technical cooperation for more than 30 years, and has a big pool of technical experts in agriculture and irrigation, civil engineers and industrial productivity specialists. However the new idea of human security requires specialists in post-conflict, peace building, local government administration, health and education. I know that in Britain for example, there are many more people specialised in these fields. One could suggest that such people should be employed regardless of their nationality. This might be one possible idea - the idea that JICA should just fund development assistance rather than carry out in-kind technical assistance. However, technical cooperation is a people to people mode of existence and it is not just a transfer of knowledge. We are not satisfied even if very professional western experts make brilliant teachings to the people of recipient countries. We want to share our common goals and work together. Therefore, we have to look at our own resources. It is for this reason that the second restructuring of JICA is dealing with domestic offices. In Japan there are 19 domestic JICA offices, and they recruit volunteers, accept technical trainees from developing countries, and provide opportunities to local Japanese citizens to learn about development issues through workshops and events. It is very easy to understand that local resources should be best utilized for local development. Therefore, Mrs. Ogata instructed the domestic offices to identify the comparative advantages of each region around the domestic offices to bring them into international cooperation. Some on-going incentives use the so-called "Isson Ippin Undo" concept, in English "one unique product for each village". Traditional dyeing or shiitake growing are some examples of on-going cooperation. Isson Ippin Undo does not require huge investment and fits perfectly into small communities for their swift economic development. Domestic offices are looking for potential partners among local civil society organisations, universities, and producers. Conclusion: Where are we going from now It was a promising statement that our Prime Minister Mr. Koizumi announced that aid to Africa will be doubled. Mrs Ogata also said that development assistance is vital for helping people's lives, whether they live in conflict or in dire poverty, and for helping to minimize future conflicts. She and the Minister for Foreign Affairs are putting all their efforts towards preventing any further decline in the ODA budget. However, it is not easy as the Ministry of Finance strongly opposes increasing the real budget as fiscal restructuring is still continuing. Something must be scrapped to create something new and it is not easy to scrap the budget for domestic use. However, Mr. Koizumi got public support to privatise the national post system. There might be another organizational restructuring regarding ODA - but we do not know yet. There are also some arguments to divert loans from Asia to poorer countries, but once loans have been written off, there is no potential for a fresh loan over the short term, and Asia remains the strategic focus of Japanese diplomacy. I think it is certain that in 2005 or in the coming few years Japanese ODA will reach 5th place after the USA, UK, France, and Germany. Although Japan has still a very strong position in Asia, in Africa, for example, Japan needs to coordinate more and more with other donors. However, a number of challenges remain for Japan to establish a good cooperative relationship with other donors. Amongst these are that Japan still thinks that technical cooperation is its key input; the challenges of public finance management systems in recipient countries; the move towards general budget support and pooling funds by other donors; and the need to have 'flags-down' ODA rather than 'flags-up' ODA. Aid to Africa is not the same as aid to Asia. However, although I understand that the rationale of these new aid modalities is that they are intended to particularly support Africa, I also have some concerns that may represent the general views of Japanese people. First, why is budget support a better modality? Based on the Asian experience, Japan does not feel comfortable to just put funds into the treasury of recipient countries. As I mentioned earlier there was a shift from the Marshall Plan to technical assistance in the early 1970s. Japan knows from its own experience knows that there must be human resources for development to occur. Do we know how the money will be spent? In some countries, for example, the World Bank is pulling out funds because certain targets have not been reached. So, funds only are not enough as a tool for development. If a country does not have the expertise to implement various policies and undertake development, expatriate professionals usually fill the gap - but how can the knowledge and technology be adopted by the recipient country as it happened in Japan? It is not only a theory and a teaching - it is something more than this, we believe. Let me point out the success story of Asia once again. The report published by the World Bank titled "the East Asian Miracle" points out that there was a functional market, healthy economic management, a public-private framework that promoted investment, and the development of human resources. Export-led growth in Asia was based on everybody's awareness of costs and the market. For example, the car industry in Korea was under price control by the state. Competition therefore could not be in terms of cost, but on other aspects like efficiency, design, and safety. This fierce competition led to the development of highly skilled technology for manufacturing that also pushed up the level of domestic industry as a whole. Characteristic of Asian development is the strong tie between the public sector and the private sector. The famous MITI, the ministry of trade and industry, for example was a strong promoter of the Japanese export business. Everybody was lined up in the same direction, to do business and win a position in the world market. Unfortunately, there is a very limited competition among African domestic products. What I think of as the clear difference with Asia is that in Africa there has been no industrial revolution. We must really must think deeply why this has not been the case. Secondly, why Africa now? Africa's problems have been there for decades. While Japan was busy reconstructing and developing Asia what did the Europeans do with Africa who suffered from a long period of colonialism? From ancient times, Japanese people have been doing what they could by themselves. I would say our DNA has a gene for self help, not for donation and charity. We certainly do donate if there is an exit strategy and a positive outcome envisaged, but for Africa an exit strategy is still not visible. To be fair, I agree that there has been no agricultural revolution in Africa so far. In case of Asia the increase in agricultural productivity pushed people out of the rural area to become factory workers who again contributed to the expansion of the economy. It is a long way ahead to change the peoples mind for productivity and self help, but this is the only way Africa can be prosperous for the future. Third, why should Japanese development assistance be increased? It is a shame that there has been no breakthrough concerning the expanded role of the UN Security Council. Japanese people are well informed that Japan contributes 19.5% of the UN budget while the 5 Permanent Member States of the Security Council (the US, UK, France, China, Russia) together make up to only 15.3%. It looks as if those who have a say have no obligation to pay to their own club while someone who has no say is taking the burden. Our Ministry of Foreign Affairs together with Mrs. Ogata are lobbying to restructure the UN system, but as long as there is no visible outcome, the Japanese general public is not happy just to put more money to the international community. Let me finish at this point. I think I have covered the recent topics on Japanese ODA. Thank you for your attention.

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