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Japan’s Foreign Aid
As the world’s third-largest economy, Japan is a global powerhouse. Japan’s foreign aid is also impressive, contributing the fourth largest amount in the world, and the largest in Asia. This article will cover where this aid goes, how effective it is and what Japan plans in its future.

Revising Japan’s Foreign Aid

In tandem with its rise as an economic superpower, Japan became the world’s leading foreign aid donor in the 1980s. However, the international community widely criticized Japan for funding environmentally harmful projects of various corrupt Asian leaders. Japan created its first Official Development Assistance (ODA) charter in 1992, which set out a fairly standard list of goals, such as poverty alleviation and healthcare. Former Prime Minister Shinzo Abe significantly updated it in 2015 by intermingling military and aid funding together, and explicitly linking Japan’s foreign aid projects with the “prosperity of the Japanese people.”

Infrastructure

Japan’s foreign aid strategy is unique. Bilateral aid constitutes 77% of Japan’s ODA, meaning the Japanese government donates directly to the recipient country without a third-party organization.

This is well above the 59% average of other OECD countries, a collection of the world’s largest donor countries. Of this bilateral aid, 60% comes in the form of loans in comparison to an OECD average of 9%. Japan’s prioritization of infrastructure projects explains these differences. Japan favors infrastructure because of the immediate, tangible benefits it provides and also because these projects provide work for Japanese manufacturing companies.  In 2018, loans going towards infrastructure projects accounted for over one-third of Japan’s total ODA.

Currently, Japan’s largest infrastructure project is a proposed bullet train from Mumbai to Ahmedabad, a distance of around 330 miles. Besides improving transportation between India’s largest city and one of the country’s most important industrial ports, Indian officials expect the construction to create upwards of 90,000 jobs. Japan has pledged to fund 81% of the construction, equivalent to $12 billion USD, on a 50 year, low-interest loan.

Southeast Asia

Japan considers Asia, especially Southeast Asia, a critical region in which to promote Japanese interests through aid. About 57% of Japan’s ODA went to Asian countries in 2018, with India, Bangladesh and Vietnam being the largest benefactors. In this region, infrastructure, renewable energy and education are the three areas receiving most Japanese aid. Japan’s assistance has been instrumental in improving educational opportunities for women and for people living in rural areas.

Territorial disputes between China, Vietnam and the Philippines have recently intensified in the South China Sea. Abe introduced ‘Japan’s Proactive Contribution to Peace’ in his 2015 update of the ODA charter, which allowed Japan to use its aid budget to fund military operations that work towards “peace and stability” in the region. Recent aid packages to Vietnam and the Philippines included surveillance ships and liberal-arts military training. Japan’s intermingling of its de facto military and foreign aid caused some controversy. However, as long as China stays aggressive and powerful in the region, Japan will continue to provide military aid in Southeast Asia.

Healthcare

Healthcare is a growing priority for Japan, specifically in sub-Saharan Africa. With international pressure to allocate more money to the world’s lowest-income nations and away from Japan’s explicit national interest in the Pacific, Abe responded in 2016 at the Tokyo International Conference on African Development (TICAD) by pledging $30 billion to public and private sector recipients in Africa. At the 2019 conference, Abe launched the Africa Health and Wellbeing Initiative, which aims to improve healthcare using Japan’s extensive healthcare technology.

Japan will give aid through both public and private sectors in what the government calls “Mt. Fuji Shaped Healthcare” that prioritizes basic sanitation before investing in advanced healthcare systems. Japan will customize aid based on the different needs of each country.

On October 3, 2020, Japan gave a $9.4 million grant to Nigeria for medical equipment through the Africa Health and Wellbeing Initiative.

The COVID-19 pandemic refocused international attention on the importance of adequate healthcare. Japan responded in September 2020, committing over $6 billion in both bilateral and multilateral aid (chiefly to UNICEF). This aid will provide healthcare systems, training and vaccine funding for Asian and African countries.

Looking Ahead

The outlook for Japan’s foreign aid is quite positive. Yoshihide Suga, who was elected Prime Minister on September 16, 2020, is not expected to change Japan’s foreign aid policies.

While infrastructure will continue to be the main tenet, Japan’s contributions to poverty reduction and healthcare in sub-Saharan Africa have increased in the past 5 years, and this trend should continue. Additionally, the OECD projects Japan’s total ODA to increase by a modest 3% in 2020. Look for Japan’s foreign aid to grow and diversify, albeit slowly, in the coming years.

– Adam Jancsek
Photo: Flickr

Development AssistanceThe Development Assistance Committee (DAC) is a division of the Organisation for Economic Co-operation and Development (OECD). It facilitates economic development worldwide, partly by providing financial assistance to developing countries. The DAC currently has 30 members, including the U.S., Japan and the European Union. According to analysis organization DevelopmentAid, 155 countries received development assistance from these members and of other non-member donors in 2018.

Development Assistance Programs

Official Development Assistance (ODA) distributes financial assistance annually to low-income, lower-middle- and upper-middle-income status countries. Eligibility is based on national per capita income. Countries transcend eligibility once they exceed the high-income threshold set by the World Bank for three consecutive years.  The highest Gross National Income (GNI) was $12,376 as of 2018.

Many countries have graduated from being ODA recipients to become donors themselves. Researchers from the Overseas Development Institute found countries become donors when possible both out of morality and the recognition that aid can “lubricate commercial, trade and investment opportunities” for a donor country. But, it’s not just high-income countries that recognize this. Some nations have become development donors even while still being ODA recipients. Below are five such countries that are both aid donors and recipients simultaneously, proving foreign aid is often a two-way street.

Five Countries That Prove Foreign Aid is a Two-Way Street

  1. Brazil. With a 2019 GNI of $9,130 dollars, Brazil is an upper-middle-income country. It is an ODA recipient, receiving about $430 million in net ODA and official aid in 2018. According to the data organization Development Initiatives, Brazil’s biggest donors are Japan, Norway and Germany. Most of its ODA capital is directed to improving water and sanitation, agriculture and food security and infrastructure. However, Brazil has long been a donor nation, too. In 2010, the Brazilian government found that from 2005-2009 the country invested “more than $1.8 billion dollars into international development” efforts. In 2010 alone, Brazil disbursed $1 billion in aid abroad. One year later, it received that same amount itself in ODA financing. Brazil’s donations largely go to Latin America, the Caribbean and sub-Saharan Africa, particularly for peacekeeping and humanitarian purposes.
  2. South Africa. South Africa is an upper-middle-income ODA recipient with a 2018 GNI of $5,750. It received about $915 million in net ODA and official aid in 2018. In 2011, it received $1.5 billion, but it disbursed $209 million, according to Development Initiatives. Accurate assessments of total contributions and contribution breakdowns are hard to acquire because South Africa’s foreign aid programs are managed by various government organizations. Nevertheless, the country has several successful programs like the African Renaissance and International Cooperation Fund, which have steadily increased contributions since launching in 2001. South Africa’s foreign aid primarily fosters development across Africa. Conversely, as an ODA recipient, the country gets most of its ODA aid from the U.S., EU Institutions and Germany. It is directed primarily toward health issues.
  3. India. As of 2018 data, India is considered a lower-middle-income country. Its GNI for 2019 was $2,130, an all-time high for the country. However, as a nation far from the high-income threshold, it still receives substantial foreign aid. In 2018, it received $2.45 billion in ODA and official aid. The biggest ODA donors to India are the International Development Association, Japan and Germany. These funds are primarily spent on improvements in infrastructure, health and education. However, in 2011, while India took the third-largest share of ODA aid with $5.4 billion received, it also became the sixth-largest non-DAC member donor country. It disbursed $787 million toward international development cooperation. India’s contributions primarily support technical and economic development in Africa. 
  4. Chile. Chile was removed from the ODA eligibility list in 2018, having reached high-income status. It remained at $14,670. However, before achieving this status, Chile’s international development cooperation had been bilateral. The country was helping other nations throughout the world. Though its main beneficiaries are in Latin America and the Caribbean, Chile disburses money to a variety of areas for various purposes as needed. For example, it contributed $100,000 toward the crisis in Syria. The OECD estimated that in 2010, Chile’s overall contributions reached $42 million. However, it still received ODA at that time. In 2012, Chile was an upper-middle-income country and received $126 million in net ODA, largely from France and European Union institutions.
  5. Indonesia. With a 2018 GNI of $3,840, Indonesia is a lower-middle-income country that received just under $950 million in ODA and official aid in 2018. In 2011, Indonesia received $3.7 billion, making it the tenth-largest recipient of ODA. Japan is its largest donor. Almost 25% of all aid goes toward improving the country’s infrastructure. Despite still receiving such a large amount of foreign aid, Indonesia is seeing some growth. ODA’s share of national GNI has steadily decreased while government spending has increased. Moreover, in 2019, Indonesia created the Indonesian Agency for International Development to ramp up the country’s own participation in foreign aid. The agency will manage a $283 million endowment fund the government has set aside for development cooperation.

Development assistance benefits both national and global economies because it allows countries that don’t have sufficient funds internally to build domestically as well as participate in trade with other nations. This supports the logic in development aid flowing both ways in several countries. Brazil, South Africa, India, Chile and Indonesia are just five countries that exemplify such a circumstance.

– Amanda Ostuni
Photo: Wikimedia

Fight Global Poverty ODA Spending
David Cameron will be remembered by history as the Prime Minister who called the “Brexit” referendum, but during his last days in office, Cameron sought to stress a different achievement: lifting Official Development Assistance (ODA) spending to 0.7 percent of national income.

The target was met during a time of economic austerity and in spite of intense criticism from members of Cameron’s own political party. This resolve should inspire other wealthy countries to do their part in fighting global poverty.

Looking at the data, several facts jump out. The UK has a clear lead among G7 countries and is the only one to meet the UN’s recommended 0.7 percent target. The United States, despite being both the wealthiest country in the G7 on a per capita basis and the largest economy in the world, comes in last in ODA spending relative to national income.

If America spent the average 0.35 percent of other G7 countries, it would spend an additional $33 billion a year. Reaching the level of the UK would mean over $90 billion more.

Warren Buffet and Bill Gates have given away over $54 billion total as part of their philanthropic efforts. The Giving Pledge, Gates’ and Buffet’s initiative to encourage the wealthy to give away their fortunes, has so far attracted total pledges of around $360 billion from 139 of the wealthiest individuals in the world.

The yearly contribution America could give by rising to the UK’s level of ODA spending is larger than the total lifetime donations of two of the richest men in world and a third of the total amount pledged by 139 billionaires. This is a powerful reminder that the political process is a central part of the struggle against poverty.

The first of the post-2015 Sustainable Development Goals is to “end poverty in all its forms everywhere.” This ambitious goal calls for a concerted effort on the part of wealthier countries. Since the UN adopted the resolution in 1970 which stated ODA spending in developed countries should be at least 0.7 percent of their gross national product, only a handful of countries have risen to that level.

Aid skeptics often point out that waste, fraud and corruption mean that much of the aid meant for poor beneficiaries ends up lining the pockets of kleptocrats. This problem is exaggerated, but it should serve as a call to action for reforming aid distribution practices, rather than a reason to cut off support for those who need it most

Jonathan Hall-Eastman

Photo: Flickr

US-foreign-aid-percent-GDP.opt
Global aid, formally known as Official Development Assistance (ODA), continued to decline in 2012 as wealthy countries struggled with the global financial crisis. Global aid decreased by four percent in 2012, following a two percent decline in 2011.

Global aid totaled about $125 billion USD in 2012. Most of that came from members of the Organization for Economic Cooperation and Development’s (OECD) Development Assistance Committee (DAC), which includes most of the world’s wealthiest countries: the United States, Japan, and much of Europe. However, contributions of the BRICS countries (Brazil, Russia, India, China, and South Africa) are becoming increasingly important to poverty reduction and assistance efforts.

In 2012, Australia, Austria, Iceland, Korea, and Luxembourg increased their donations to global aid. Countries hit the hardest by the financial crisis, including Italy, Spain, Greece, and Portugal, decreased their contributions.

Donations can be measured both by total quantity of donation and percentage of gross national income (GNI). The US was among the largest donors in total monetary value, but did not reach the minimum threshold of 0.7% of GNI. Smaller countries such as the Netherlands and Denmark surpassed 0.7%. In some cases, donations from non-traditional donor countries such as Saudi Arabia and Turkey surpassed individual donations from DAC-member countries.

The percentage of OECD global aid dedicated to humanitarian causes has increased from 3.3 percent to 8.6 percent over the last two decades. Global aid is distributed to many different sectors, including economic development, social and administrative infrastructure, food aid, transportation, and agriculture.

Global aid distribution has also shifted in recent years. The share of aid going to sub-Saharan Africa, traditionally the largest beneficiary, decreased from 47.8% to 41.8%. Meanwhile, aid to South and Central Asia increased from 11.5% to 19.8%.

The OECD’s official report on global aid trends can be found here. Call your senator or representative and let them know that you’d like to see the US contribute more, not less, to global aid.

– Kat Henrichs

Source: IRIN
Photo: The Fact File