Messages from Monthly Keidanren, December 1996

Towards the Use of Private-Sector Participation in ODA

Vice Chairman, Keidanren

To Japan, economic assistance is a major pillar of international cooperation and contribution. While the inclination to provide aid has been flagging in the developed countries of the West, Japan has been the world's leading donor of official development assistance (ODA) in each of the last five years. Japan's ODA budget has increased at a high rate--in the range of 7 to 10 percent annually--but it will be difficult to maintain this level in the face of fiscal restructuring that can no longer be put off. In the budget for next fiscal year, the maximum allowable increase for ODA has been set at a record-low 2.6 percent.

Under these circumstances, the 1996 White Paper on Japanese ODA issued by the Ministry of Foreign Affairs in October called for using ODA to support private-sector infrastructure projects based on build-operate-transfer (BOT), build-own-operate (BOO), and other such schemes. Infrastructural improvement has always been one of the focuses of ODA, and linkage with projects based on such schemes, which have been rapidly increasing in recent years, may be regarded as a natural progression. This direction should be aggressively promoted, with a view to promoting more infrastructural improvement projects on the limited ODA budget.

In fields other than infrastructure projects, it is vital that ODA efficiency be enhanced by making active use of private-sector experience and know-how. The Japan Federation of Economic Organizations (Keidanren) has already advocated the seconding of private-sector personnel to the private sectors of developing countries in the context of ODA, in order to facilitate the transfer of technology and Know-how under private-sector leadership. Besides the sure execution of this proposal, the future will likely demand not only the seconding of small numbers of private specialists in separate groups but also that studies be conducted on ways to implement strategies that are more systematic and have the potential for greater benefit, such as the institution of training centers that will accept a broad selection of trainees, even those from third countries.

The ODA White Paper also reaffirmed the policy of keeping yen-denominated loans untied. At the same time, interest in developing projects for such loans has fallen among Japanese companies due to the decline--down to the 20 percent level--in the share of related contracts awarded to them. We expect measures to halt the corporate drift away from ODA and expand use of private-sector in the ODA domain.

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