Closeup Japan
ODA decline marks Japan's dwindling influence
THERE was a time not long ago when Japanese investors were roving restlessly around the world with pockets-full of money, and many in Japan believed that the inflated purse the country was holding would allow them to get hold of everything they desired. While corporate Japan was busy buying all it could, ranging from landmark buildings to movie distribution companies, top executives of many Japanese companies were pondering upon art and culture with the hope of getting hold of everything they thought rare and valuable. The result was a skyrocketing of price in art auctions being held regularly in major cities around the world.
The government, too, was not sitting idle. The bubble in the country's economy generated enough money in the hands of the Japanese government, and policy-makers in Tokyo came to the conclusion that the best way for Japan to expand her diplomatic influence was to use part of that cash to compensate for what the country could not gain or get otherwise. So, when Japan was virtually rebuked by the US administration for her failure to participate in Papa Bush's grand coalition against the rag-tag army of Saddam Hussein, which was already exhausted fighting a futile eight-year war against Iran, the Japanese government didn't waste time in signing and handing over a cheque worth $13 billion for the war effort.
It was also a time when Japan's disbursements figures for Official Development Assistance (ODA) climbed further and further with the passage of every consecutive year, bypassing by far that of the United States, and, by the mid-1990s, reaching an all time peak in the history of ODA. It was a time when policy-makers in Japan were seriously thinking about the possibility of purchasing dreams with the excess money, never having the slightest idea that the car they were driving was about to run short of gasoline, compelling them to walk the rest of the journey to reach the destination as no gas station was in sight anywhere nearby. And when the fall came, it looked like a sudden awakening of a nation that was forced to adjust to the reality of life after a long night of sound sleep full of fairy dreams. With the end also came the lost decade, the impact of which is yet to be overcome by Japan.
It is common understanding that when money runs short generosity takes a back seat. With the bursting of the bubble economy, Japan, for the first time in years, was in a situation where people were compelled to feel that money was really running short. The first victims of such a situation were obviously the art galleries -- that had mushroomed during the bubble to convert each and every super millionaire into connoisseurs of the world of art and getting hold of a part of their millions -- which started shutting their doors one after another; the expensive drinking houses and clubs that catered for exhausted executives and company officials tired of running after money all the time suddenly turned their glittering lights off and plunged into darkness; even not-so expensive places of evening entertainment found it difficult to keep their doors open as people suddenly turned cautious and began showing extreme restraint in their daily expenditure.
A thick cloud of deflation covered Japan as consumer price index started to show continuous decline and retailers were forced to cut prices of everything to attract cautious consumers. Even that tactic didn't work out well, and bankruptcy jumped to a record high level. The gap was filled-up by the mushrooming of the so-called "Hyaku-en," or 100-yen shops, that sold everything from toothpicks to teapots at a flat rate of 100 yen. The gold-eaters of the glittering bubble era suddenly found themselves standing in a barren land and pondering upon what really went wrong. With that came the period of austerity when the country was compelled to think that unless it changed its pattern of behaviour associated with the bubble, further slip would simply be unavoidable. Everywhere, there was a ringing call to downsize and downgrade expenses, and the government too was not an exception.
That was also the time Japan started to decrease her ODA budget, and ever since, for nine consecutive years, the country's allocation for helping the developing world has been following a declining trend. The ministry of finance has just announced that it was planning to cut ODA spending by 4 percent in the next fiscal year that starts in April 2008. Budgetary negotiations between the finance and foreign ministries over ODA allocation are heading towards the final stage, and it's unlikely that a last minute change of decision would put the plan on hold. A 4 percent drop in ODA budget would bring the total allocation to around $ 6.2 billion, a far cry from the period when the amount reached almost $15 billion.
For more than 50 years, ODA has been an important means of Japan's international contribution. Tokyo's generous assistance also helped the country to become an important player in global politics, as many developing countries were willing to extend support to various initiatives being taken by Japan to promote peace and development in the international community. Though Japan has been campaigning rather unsuccessfully until now to become a permanent member of the United Nations Security Council, the regional Asian block did not hesitate to select the country as its non-permanent representative to the council for a record number of times.
It is mainly because the countries of the Asia-Pacific region consider Japan to be in the best position to serve their common interest, and this has become possible because of Japan's firm commitment to help the neighbouring regions move forward to a desired path of economic development, and assisting them in all possible ways to reach that goal. Hence, ODA can be considered as one of the basic pillars on which Japan's international image is getting a strong footing. Hence, any drastic decline in that allocation could erode that unquestionable trust in Japan at a time when the emerging Asian giant China is aggressively pursuing the policy of winning over support of the developing world by extended her helping hand in a generous way.
A number of recent studies suggest that Japan, once the number 1 provider of ODA, will likely to drop to sixth place in 2010 if the recent trend of ODA allocations remains unchanged. The Development Assistance Committee (DAC) at the Organisation for Economic Cooperation for Development (OECD) in its forecast ranked Japan sixth in ODA spending by 2010, behind the United Sates, Germany, Britain, France and Italy. The DAC made the estimate by reviewing the past ODA figures, including their numerical targets for increased spending and other statistics for each of the 22 members. According to the estimate, Japan's ODA is expected to stand at $10.09 billion in 2010, down by $1.1 billion from 2006. Japan's ratio of ODA to gross domestic products (GDP) could also decrease to 0.21 percent in 2010, from 0.25 percent in 2006. This would be a far cry from reaching an important target of the Millennium Development Goals, under which the donor countries are obliged to increase their ODA allocations to 0.7 percent of GDP by the year 2015.
So, something must be going wrong with the ODA matters in Japan. The country is claiming to have come out of the worst recession it faced during the post World War II period. This has been achieved through various measures of austerity and cost cutting initiatives taken by both the government and the private sector. As we have already seen, ODA was also not immune to that downsizing trend. But once economic health has been restored, further cut in ODA budget probably does not fit in to the image of Japan, that owes much of its high stake in international diplomacy due to a generous ODA policy. Or has Japan taken it for granted that a dwindling influence is a fate accompli, and it cannot be reversed by increasing ODA budget? It is up to the policy makers of Japan to focus upon this crucial issue and provide an answer to the enthusiastic onlookers both within and outside the country.
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