Supporting MDGs through Growth-Driven Poverty Red

uction

Japan’s ODA and Asia

October 9, 2002 Izumi Ohno

National Graduate Institute for Policy Studies

Background• Ongoing global poverty reduction

partnership– World Bank’s CDF/PRSP(1998/99- )– UN’s Millennium Development Goals

(2000/01-)– Poverty-terrorism nexus (2001.9.11)

• EU and US pledge to increase ODA• Japan’s policy silence (and ODA cut)

– But, new engagement is beginning

MDGs: Significance

• Reaffirming the shared goals among development partners – “Symbolic” significance

• Containing “aid fatigue”

• Unresolved tasks (on substance)– How to operationalize MDGs/PRSP?

Japan and MDGs/PRSP• Opportunity for reshaping Japan’s

ODA policy• Opportunity for promoting Japan’s

engagement in global development agenda

• Japan’s crucial role in Asia’s development– Leading donor, more than 60% of

bilateral ODA directed to Asia – Various aid schemes (grants, loans, TA)

Donor Composition

Vietnam: Major Donors1998-2000　 Average

IDA13.5%

ADB12.0%

Germany3.6%

Japan46.3%

Denmark2.8%

France4.6%

Others17.2%

Donor Composition

Uganda: Major Donors1998-2000 Average

UK20.3%

IDA14.1%

Denmark9.2%EU

7.4%USA6.9%

Netherland5.0%

Others38.0%

Tanzania: Major Donors1998-2000　 Average

UK13.2%

Japan12.4%

Denmark7.2%

Germany7.0%

Others41.0%

IDA12.2%

Netherland8.0%

ODA Composition: Grants vs. Loans

0% 20% 40% 60% 80% 100%

Tanzania

Uganda

Bolivia

Vietnam

Grants

Loans

MDGs/PRSP: Issues for Asia

• Coverage mismatch– MDGs (global) > PRSP (limited to IDA c

ountries): China, India?

• Even for PRSP countries, slow start in Asia (except for Vietnam)– Importance to reflect the lessons from ear

ly PRSP countries (e.g., Africa, LAC)– Opportunity to improve the current appr

oach by incorporating Asia’s development experiences

Regional Distribution: Population in Extreme Poverty

ECA 1%MENA 1%

South Asia42% (490)

Sub-SaharanAfrica 26%

(300)

East Asiaand Pacific

23% (260)

Total: 1,151millionsSouce: World Bank

Latin American andCaribbean 7% (77)

PRPS Countries by Progress (Aug. 2002)

4

1

1

1

11

1

7

1

3

17

2

3

2

7

No. of countries

Full- PRSP

Interim- PRSP

before Interim- PRSP

Africa (35)

East Asia (6)

South Asia (4)

Europe &Central Asia (10)

Middle East & North Africa (2)

Latin America &Caribbean (4)

Asian Perspectives

• Differences from early PRSPs– Linkage with HIPC debt relief

– Stages of development, relationship with int’l financial community

– History of aid coordination (e.g., role of new aid modality, existing development plan)

PRSP Countries by HIPC Status (Aug. 2002)

1

5

3

17

1

7 2

1

1

10

4

4

1

4

No. of Countries

HIPC Completion Points reached

HIPC Decision Points reached

HIPC Decision Points not yet reached

HIPC Sustainable Cases

Non-HIPC

Africa (35)

East Asia (6)

South Asia (4)

Europe & Central Asia (10)

Middle East &North Africa (2)

Latin America &Caribbean (4)

Asian Perspectives• Growth-driven poverty reduction--particularly i

n East Asia:– Halving income poverty in 90s

(--key target already achieved before MDGs launch)

– Development driven by trade & investment– Participation in regional/global production networ

k through int’l division of labor

• Beyond MDGs/PRSP– Narrow “poverty reduction” approach, not enough

East Asia Reduced Poverty Despite Currency Crisis

27.6

47.7

16.8

44.0

15.114.2

36.9

46.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

East Asia andPacific

Latin Americanand Caribbean

South Asia Sub-SaharanAfrica

1990

1999

Population　in　Extreme　Poverty　(%)(%)

Source: World Bank

Share in World Export

0

2

4

6

8

10

12

14

16

18

60s 70s 80s 90s

(%)

Per Capita GNP Growth

0

1

2

3

4

5

6

7

60s 70s 80s 90s

(%)

East Asia

Sub Saharan Africa

Source: Ministry of Economy, Trade and Industry, White Paper on International Trade 2001, p.78.

East Asia

Sub Saharan Africa

Vietnam’s Experience

• Asia’s first CDF/PRSP pilot country– Full PRSP completed in May 2002

– Establishment of localized VDTs

• Recognized internationally as “good practice”: strong country ownership

– Building on the existing development vision (i.e., 10-Year Strategy, 5-Year Plan)

Vietnam’s Experience

• Growth orientation: PRSP renamed to “Comprehensive Poverty Reduction & Growth Strategy” (CPRGS)– East Asia’s aspiration for catch-up – National goal: “Modernization &

Industrialization” by 2020– Growth and equity– Sustainability of poverty-reduction

efforts

New Trend? (Post-Monterrey)

• WSSD (Johannesburg Summit) – Expressed interest by African leaders in

East Asian development experiences (IDEA: Foreign Minister Kawaguchi)

– Prof. Jeffrey Sachs: importance of trade & investment in African development (METI seminar)

• IMF/World Bank Annual Meetings– Trade as a vital engine for poverty-

reducing growth

New Trend? (Post-Monterrey)

• Relevance not just in Asia….

• Move for the next generation of PRSP beginning in African countries– From “PRSP” to “PRS”

– Adding growth agenda (“scaling up”)

• Forthcoming int’l conferences– SPA, TICAD 3 etc.

Likely Future Developments• Emerging consensus: growth-driven pov

erty reduction• Remaining unresolved issues:

– “Framework vs. ingredient” approach (Prof. Yanagihara): Japan’s real-sector concern, not just framework

– The role of government in industrial support in the age of globalization

• Revival of policy debates in the early 90s? (e.g., East Asian Miracle 1993)

Implications for Japan’s ODA

• Excellent opportunity for active engagement in improving the current MDGs/PRSP approach

• To this end, however, Japan’s ODA needs reform:– Stronger country-focus– Partnership approach, particularly in deep

ening growth agenda in the multilateral framework

Implications for Japan’s ODA

– Field delegation

– Reinforcing intellectual network

– Focusing on “core competence” and positively participating in aid modality discussions, etc.

• Importance to take advantage of the ongoing ODA reform momentum

Recommendations

• Starting from Asia…– Full-fledged PRSP implementation

expected in Asia (e.g., Indonesia, Cambodia, Lao PDR, Bangladesh…)

– Country Assistance Program to be revised/formulated (Vietnam, Sri Lanka)

• Building on the recently initiated Japan’s efforts (particularly on external initiatives)– IDEA, TICAD3 (MOFA)

Recommendations– Efforts to reinforce Japan’s relationship

with World Bank (MOF)– Study on East Asia’s development & coo

peration, “Asian Dynamism” (METI)

… THE ENDFor our support to ODA reform, please see websi

te of GRIPS Development Forum:http://www.grips.ac.jp/forum/ (Japanese)

http://www.grips.ac.jp/forum-e/(English)