VZCZCXRO5692
PP RUEHFK RUEHKSO RUEHNH
DE RUEHKO #0841/01 0870501
ZNR UUUUU ZZH
P 270501Z MAR 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 2924
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 2448
RUEHRL/AMEMBASSY BERLIN PRIORITY 1365
RUEHBR/AMEMBASSY BRASILIA PRIORITY 0405
RUEHJA/AMEMBASSY JAKARTA PRIORITY 4342
RUEHKL/AMEMBASSY KUALA LUMPUR PRIORITY 1876
RUEHLO/AMEMBASSY LONDON PRIORITY 1999
RUEHME/AMEMBASSY MEXICO PRIORITY 0497
RUEHMO/AMEMBASSY MOSCOW PRIORITY 2187
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 8479
RUEHOT/AMEMBASSY OTTAWA PRIORITY 9622
RUEHFR/AMEMBASSY PARIS PRIORITY 6029
RUEHSA/AMEMBASSY PRETORIA PRIORITY 0275
RUEHRO/AMEMBASSY ROME PRIORITY 2063
RUEHUL/AMEMBASSY SEOUL PRIORITY 8489
RUEHFK/AMCONSUL FUKUOKA PRIORITY 6904
RUEHNH/AMCONSUL NAHA PRIORITY 9287
RUEHOK/AMCONSUL OSAKA KOBE PRIORITY 0571
RUEHKSO/AMCONSUL SAPPORO PRIORITY 7500
RHEHAAA/NSC WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 9038
RUEHGV/USMISSION GENEVA PRIORITY 3280
UNCLAS SECTION 01 OF 03 TOKYO 000841
SIPDIS
SENSITIVE
SIPDIS
STATE PASS TO S/F AND AID ADMINISTRATOR FORE
USAID FOR AFRICA/AA ALMQUIST AND ODP/AA TURNER
NSC FOR BROWN
STATE ALSO FOR EEB, EAP/J, E AND F
E.O. 12958: N/A
TAGS: PGOV PREL ECON EAID JA
SUBJECT: SCENESETTER FOR G-8 DEVELOPMENT MINISTERS MEETING
APRIL 5-6
1. (SBU) Summary -- Japan is the world's third largest
national aid donor, despite on-going budget cuts. The GOJ
has been able to keep the ODA budget between $10-$13 billion
using an increased reliance on yen loans to compensate for
large cuts in grant aid (40 percent over the past eleven
years). Despite domestic fiscal pressures, the GOJ wants to
remain a significant actor in international development, both
in terms of programs - whether in Asia, (its traditional
focus), Iraq and Afghanistan, or in Africa where it is
looking to increase its role in light of growing Chinese aid
activity -- and as a foreign policy tool. Japanese officials
note their desire to engage China as an emerging donor,
trying to compare notes with Chinese officials as to best
practices and, quietly, helping China understand and accept
policies and practices that have been agreed to over the
years among the U.S., Japan, EU and other established donors.
Japanese officials expect this point to be one of the themes
for the April 5-6 Development Ministerial in Tokyo. In
addition to the discussions with the G8 and outreach
countries, Administrator Fore's visit is an opportunity to
explore with Japanese counterparts, in MOFA and in the
soon-to-be-reorganized Japan International Cooperation Agency
(JICA), how the U.S. and Japan can expand or enhance
development cooperation programs through mechanisms such as
the Strategic Development Alliance. End summary.
Japan's ODA Strategy
---------------------
2. (SBU) Japan considers ODA to be one of its main foreign
policy tools. In the 1990s, Japan was the world's largest
provider of development assistance, primarily targeting Asia
through loans, grants and technical assistance. Towards the
end of the 1990s, despite Finance Ministry (MOF) pressure to
reduce ODA, Japan continued to take bold steps, providing
support for Southeast Asian countries during the Asian
financial crisis, leading the initiative during the G-8
Okinawa Summit to target infectious diseases -- out of which
the Global Fund (GFATM) was born -- and founding the Tokyo
International Conference on African Development (TICAD), that
brought together for the first time African heads-of-state to
discuss development issues.
3. (SBU) Over the last decade, Japan's ODA strategy has
sought to both promote national interests and to address
global issues. The GOJ is focused on poverty reduction
through economic growth, human security (health, water and
education), consolidation of peace, and environmental
challenges including climate change. In addition, while
current interpretation of the Japanese constitution limits
the deployment of troops to conflict areas, Japan is the
second largest aid donor after the U.S. for Iraq
reconstruction and post-Taliban Afghanistan. The GOJ has
also contributed to rebuilding efforts in Timor Leste, Sudan,
and the Palestinian area.
Decline in Grant Aid Offset by Increased Loans
--------------------------------------------- --
4. (SBU) Reaching a high in 1997, Japan's grant aid has
declined nearly 40% over the past eleven years. The GOJ
again cut the 2008 grant budget 4% to $7.2 billion. This
continuous decline has been driven by Japan's financial
situation. Japan's public debt is 195% of GDP, the highest
TOKYO 00000841 002 OF 003
in the OECD. The interest payment alone to service this debt
is greater than the entire economy of Venezuela. To offset
cuts demanded by MOF, the Ministry of Foreign Affairs (MOFA)
has sought and received a supplemental budget every year to
augment the regular budget. In addition, the GOJ
significantly increased its yen loan portfolio through the
Japan Bank for International Cooperation (JBIC). Yen loans
now comprise nearly 50% of the total ODA budget. These
offsets have allowed the GOJ to keep ODA between $10-$13
billion per year. Japan has begun to explore public-private
partnerships as well as ways to get the private sector more
involved in development efforts but has had limited success
to date.
ODA Reform
----------
5. (SBU) To use its resources more efficiently, the GOJ is
overhauling its ODA decision-making and disbursement system.
In 2006, the GOJ formed the Overseas Economic Cooperation
Council -- with the participation of the Prime Minister,
Foreign Minister, Minister of Finance and the Minister of
Economy, Trade and Industry (METI) -- to set overarching ODA
policy. It consolidated the decision making process within
MOFA into the International Cooperation Bureau and charged
that bureau with linking policy to specific diplomatic goals
and guiding overall programming accordingly.
6. (SBU) Perhaps one of the most important aspects of the
overhaul, however, is the October 2008 merger of the Japan
International Cooperation Agency (JICA) with the Japan Bank
for International Cooperation (JBIC). The "new" JICA will
administer 60% of Japan's grant aid as well as all soft loans
and technical assistance. The new entity will be one of the
world's largest development organizations, with $9.5 billion
under management, nearly 3,000 employees and 97 overseas
offices.
Geographic Coverage
-------------------
7. (SBU) Traditionally, over 60% of Japan's aid went to Asian
countries. China has been a primary beneficiary, receiving
nearly $28 billion between 1978 and 2003, mostly in the form
of low-interest yen loans for infrastructure projects. Japan
discontinued its yen loan program China in 2007. Indonesia
is another large recipient, with grants, loans, and technical
assistance topping $1 billion in fiscal year 2007. The GOJ
is increasingly turning its attention to African development
and will host TICAD IV in May. Aid to Africa doubled from
2005 to 2007 and now accounts for 23% of Japan's total ODA.
Africa is seen as key to Japan's efforts to win a permanent
UN Security Council seat, a source of vital natural resources
and a battleground for contesting China's rising
international influence.
Keeping an Eye on China
------------------------
8. (SBU) China's increasing role as economic competitor,
whether for oil and other key commodities, and its growing
profile as an aid donor is a chief focus for the GOJ and a
matter MOFA will raise at various times and in various ways
at the April Ministerial. Government and private sector
officials note China's increased profile in Africa.
TOKYO 00000841 003 OF 003
Government officials often state concerns that China's
programs in Sudan and other African countries undercut
international efforts to foster development, human rights,
and peace. They also state China has not accepted the
policies, practices, and mind-set that Japan, the U.S., and
other established donors have developed and agreed upon in
the OECD's Development Assistance Committee and other fora.
Japanese officials report they have begun quiet conversations
with Chinese counterparts on these topics and expect the
Ministers to look at this question in their opening, G8-only
session.
Outlook for U.S.-Japan Development Cooperation
--------------------------------------------- -
9. (SBU) There is great interest within MOFA in expanding the
Strategic Development Alliance (SDA) launched by former
Foreign Minister Machimura (now Chief Cabinet Secretary, the
equivalent of a Deputy Prime Minister) and Secretary Rice in
2005. Currently, there are two programs, one targeting
improving the business and investment climate in Indonesia,
and the other in Pakistan focusing on workforce
development/human capacity building.
10. (SBU) In addition to SDA, the U.S. and Japan cooperate on
a number of development assistance projects. The U.S.-Japan
Clean Water for People Initiative, signed by former FM
Kawaguchi and then Secretary Powell in 2002, has provided
safe water and sanitation to the poor, improved watershed
management, increased water productivity and has created
innovative public-private financing. The U.S.-Japan
Partnership for Global Health targets infectious diseases
(HIV/Aids, TB, malaria, NTD,polio), avian influenza, maternal
child health, and health systems in Asia and Africa.
Comment
--------
11. (SBU) Japan truly wants to be a significant player in the
world of development assistance despite fiscal constraints.
China's growing presence as a donor has strengthened Japanese
desire to maintain its profile in the development world and
also to play a role in working with China's authorities to
have them adopt practices, procedures and policies long
accepted by developed country donors. There is great concern
within the GOJ, academia, and even the private sector that
Japan has slipped from first to third place (as of 2006) of
world donors and could even slip further if budget cuts
continue. The GOJ, therefore, is actively seeking ways to
use its ODA more creatively and effectively. Administrator
Fore's visit could be an opportunity explore enhancing
existing initiatives or developing new areas of cooperation
where synergies might exist with USG programs. End comment.
SCHIEFFER