TOKYO Officials from the Asian Development Bank and the OECD urged Japan on Tuesday to resist pressure to slash overseas aid, saying a proposed cut could prolong Asia's economic ills and backfire on Japan.
A key policy-maker in Japan's dominant Liberal Democratic Party (LDP) called on the Finance Ministry last week to cut Official Development Assistance (ODA) by 30 percent for the fiscal year starting next April.
Japan is the world's biggest ODA donor due to decades of reliance on checkbook diplomacy, but the country is now reviewing its aid policy with an eye to greater efficiency.
"A significant reduction of the ODA budget of Japan would have the immediate impact of continuing or prolonging the financial fragility in the region," said Ulrich Hiemenz of the Organization for Economic Cooperation and Development, a Paris-based policy think tank for industrialized countries.
"That would be counterproductive for Japan itself as a country," Hiemenz, director of the OECD's Development Center, told a briefing in Tokyo.
Exports to Asia have helped fuel a recovery in Japan that has been driven largely by export-oriented manufacturers.
In the six months to September, Japanese exports to Asia rose 21 percent from the same period a year earlier.
In contrast, exports to the United States only rose 2.3 percent in the same period, and those to Europe increased by a meager 0.3 percent, according to Ministry of Finance data.
Hiemenz said ultimately Japan would pay a price for any cut in aid.
"If you look at trade figures, if you look at investment figures, there is a very high relationship between Japan and the region, and if the region is worse off, Japan is worse off." Foreign Minister Yohei Kono has so far refused to bow to pressure from the ruling tripartite coalition for the proposed sharp cut in ODA, the most powerful instrument of Tokyo's foreign policy in the post-World War II period.
Foreign policy panels in the LDP rejected the cut at a Tuesday meeting and said they would communicate this stance to SWizuka Kamei, the LDP official who proposed it, within several days, Kyodo news agency said.
Tokyo's Role Questioned Japan's overseas aid surged 43.4 percent in 1999 to $15.4 billion, largely reflecting aid to victims of the Asian financial crisis, making Tokyo the world's biggest ODA donor for a ninth consecutive year.
The aid cut proposal has been backed by policy chiefs in the ruling coalition's two other parties. Last Thursday they agreed to call for a drastic review of Japan's policy on foreign aid.
Asian Development Bank officials, at a briefing in Tokyo on Tuesday to launch a book in partnership with the OECD, suggested that the impact from a cut in Japan's ODA could ripple across the world economy by undermining poverty-hit nations.
"I hope that Japan, and Japan's taxpayers, will understand the situation and renew support for the mutual benefit of Japan and also the world," said Yun-Hwan Kim, senior economist at the Manila-based ADB.
He said that although Japan is the world's top ODA donor, its ODA as a percentage of gross domestic product is actually lower than its own target of 0.7 percent.
Some Japanese politicians have expressed growing concern that in China, for example, ODA funds have helped Beijing boost its military might, prompting a separate review of Chinese ODA and requests that Beijing be less secretive about military spending.
Japan, along with Australia and New Zealand, is a key contributor to the ADB, which in 1999 lent $5 billion to its mostly Asian and Pacific member countries.
"If there's a 30 percent reduction in ODA this will have a very significant impact, particularly for the poor countries," said Jung-Soo Lee, the ADB's resident representative in Tokyo.
(Reuter)