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Japan Becoming Biggest Aid Donor to Third World

June 9, 1988

TOKYO (AP) _ Japan soon will surpass the United States as the world’s biggest donor of foreign development aid. It is both proud and wary of its new role.

The strength of the yen helped to propel the country toward leadership in the broad category of aid called Official Development Assistance. ODA, as it is known, does not include military aid, and Japanese officials like to call it ″pure″ aid.

″The Japanese are not yet used to the position of a country which is expected to (provide) - and which is providing - the largest ODA,″ said Masamichi Hanabusa, the Foreign Ministry’s top aid official.

″With that status substantial responsibility will follow.″

About 70 percent of Japan’s aid goes to Asian countries. The biggest recipient is China, a country that does not receive U.S. development aid.

As often was the case with the United States as the leading aid donor, the Japanese government has been criticized at home on grounds that through aid it is buttressing dictators or fueling corruption. At the same time, aid recipients have pleaded for more grants or complained about loan terms.

Until about 10 years ago Japan’s development aid served mostly to promote its own exports and assure its supply of raw materials, Juichi Inada writes in the current issue of the scholarly semi-annual, Japan Review of International Affairs.

Resentment of too much Japanese self-interest led to a change in policy, Inada adds, and in 1977 the government announced it would triple aid in three years, with emphasis on the general promotion of peace and prosperity.

By 1985 Japan’s development aid had grown to $3.8 billion, trailing only France at $3.99 billion and the United States at $9.4 billion.

Late that year the Western powers agreed to cut the value of the dollar. The yen soared more than other currencies, and the dollar value of Japan’s aid rose 47 percent in 1986 to $5.6 billion, second to the United States’ $9.8 billion.

When the 1987 disbursement figures are in, Japan’s aid will have grown to about $7.4 billion, Hanabusa said, and the budget for the Japanese fiscal year that started April 1 calls for spending $10 billion.

Since U.S. aid is held down by Washington’s budget restraints, the Japanese feel they will overtake the United States in this fiscal year. The United States spend $8.8 billion on development aid in 1987.

The U.S. government has encouraged Japan to expand its development aid.

The U.S. deputy defense secretary, William Howard Taft IV, told the Senate Defense Appropriations Subcommittee May 26 that Japan not only will surpass the United States this year, it also can afford a further ″dramatic increase.″

Measured against the size of the economy, Japan’s aid is not outstandingly generous. This year it will be about 0.3 percent of the gross national product, higher than the U.S. rate of 0.23 percent but below the average of 0.36 percent among major Western donor countries.

Japan is expected to announce a further increase in aid at the Toronto summit of the seven big free-market democracies June 19-21.

More than 40 percent of the increase in Japan’s aid is due to the higher value of the yen, said Hanabusa, who is director-general of the Economic Cooperation Bureau in the Foreign Ministry.

He pointed out that the aid outlay also has risen in yen, even though the overall government budget is frozen. This, he said, demonstrates a strong commitment to development aid.

The yen’s strength has caused trouble for countries that took yen loans and now have to repay by earning devalued dollars.

″This is not our fault,″ Hanabusa said. Japan has provided new loans to such borrowers and reduced interest rates to an average of 2.6 percent.

″But here it is a bit difficult for us to satisfy those borrowers completely,″ he said in an interview.

Giving aid can be a vexing responsibility, Hanabusa added, citing as an example the Philippines, where Japan is the largest single donor to the government of President Corazon Aquino.

″We have doubled our assistance last year, but we are a little ill at ease,″ he said. ″We are not controlling that country, which we shouldn’t. We really don’t know that what we do is actually taking effect.″

Some critics in Thailand claim Japanese aid is intended mostly to benefit Japanese contructions companies. Hanabusa denied the charge. Japanese aid helped build a concert hall in Thailand.

Japanese aid was a major factor in Indonesia’s becoming self-sufficient in rice, Hanabusa said.

Hanabusa acknowledged that Japan, like other countries, has an element of self-interest in giving aid.

But, he said, ″Japanese aid is purer than the others in that we have no colonial inclination, we have no strategic consideration, we have no wish to impose our will on others.″

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