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 Aid
to Africa and the UK's '2005 Agenda': Perspectives of European Donors
and Implications for Japan
Executive Summary
The '2005 Agenda' and the UK's role
2005 was widely seen as a pivotal year for international development
policy in general, and Africa in particular. The focus on the region
was part of a wider momentum that included: the G8 Summit in Gleneagles
in July (where Africa has been identified as one of the two priorities);
the Millennium Development Summit in September in New York (where
the first five-year review of progress towards the Millennium Development
Goals - MDGs - were discussed); and the WTO Ministerial Meeting
in Hong Kong in November.
The UK had a particular role here. The Commission for Africa (CFA),
chaired by Tony Blair, published its findings in early 2005. The
UK made African development the primary focus of its G8 presidency.
As Chair of the European Union (EU) in the second half of 2005,
the UK was keen to make development issues, and Africa in particular,
a priority. The UK's agenda for 2005 was therefore likely to have
additional significance. But what was the UK government trying to
promote? What do other stakeholders think? What are the potential
implications for Japan?
This paper presents a synthesis of ODI work, funded by the Japan
International Cooperation Agency (JICA), to address these questions.
The paper outlines the UK's '2005 Agenda' on Africa: the key issues
that will inform the UK's dual presidency in 2005 of the G8 and
the EU. It assesses the perspectives of France, Germany and the
EU on these issues, along with areas of agreement and momentum versus
areas of divergence. It concludes with the implications for Japan:
the key decisions for 2005 and the implications for reform
in the longer term.
The conclusions drawn here are based on a review of academic literature
and donor policy on development assistance. Particular focus is
on 'big analyses' of 2005: the Commission for Africa Report Our
Common Future and the UN Millennium Project Report Investing
in Development. The project also prepared seven Background
Papers:
- Understanding British aid to Africa: an historical perspective
- Tony Killick
- A summary of the consultations of the Commission for Africa
- David Sunderland
- The UK's policies towards Africa: a snapshot of current positions
and debates, with suggestions and implications for Japan - David
Sunderland
- The French perspective on UK aid policies for African development
in the run-up to the 2005 G8 Summit and their implications for
Japan - Vincent Géronimi
- German policy towards Africa - Sven Grimm
- EU policy towards Africa - Sven Grimm
- The International Finance Facility (IFF): progress, challenges
and options - Andrew Rogerson
The preliminary findings of the research were discussed in a
one-day workshop (click for workshop report pdf) with senior
Japanese researchers, Japanese aid officials and other UK stakeholders
on African development. The sections on Japan's aid to Africa draw
on presentations by Professor Izumi Ohno and Professor Motoki Takahashi.
The final report is also informed by the visit
to Tokyo by a team from ODI. This included extensive discussions
with many of the key aid stakeholders - including JICA, JBIC, the
Ministry of Foreign Affairs and major think tanks - as well as three
public events on development policy issues. Nevertheless, the findings
come with a warning: positions change and it is difficult to be
comprehensive regarding such an extensive topic.
What did we find? In terms of many of the overall objectives and
priority issues, there is little disagreement as to what is important.
The focus on poverty reduction is common, although Japan is increasingly
focusing through a human security lens. The arguments are much
more to do with the most effective modalities of development assistance.
Is doubling aid necessary? Should there be 100% debt relief? Should
we provide aid directly into recipient budgets or have projects?
Like other donors, Japan's aid policy is changing. But Japanese
stakeholders feel that they are facing many challenges - and some
opportunities - in coping with this 'new aid agenda'.
Perhaps the biggest opportunity for Japan is the renewed emphasis
on infrastructure (and more broadly, economic growth and the
productive sector) in the development mainstream. Japan is seen
as having extensive experience and comparative advantage in this
area. But the changes implied in the 2005 agenda are likely to
provide substantial challenges to Japan's Official Development Assistance
(ODA) policy to Africa.
Five Decisions for 2005
Based on the issues the UK is going to push in particular, and
on an assessment of the responses of major European donors, five
issues have been identified on which Japan is going to need to make
decisions at the G8 Summit (and then at the MDG Summit). These issues
are outlined below.
- Increasing aid volume to Africa: The CFA has called
for an additional US$25bn a year for Africa - of which the Japanese
share is estimated at US$4bn per annum. Aside from the US, other
donors are committing to meeting targets to increase ODA as a
percentage of national income. Prime Minister Koizumi recently
committed to doubling aid to Africa over three years - an additional
US$0.8bn per annum. Despite this, the external view is that Japan
does not pull its weight in terms of development finance in general,
to Africa in particular, so there will be pressure on Japan's
position. Internally, a decision on increasing aid to Africa will
need to work its way through the overall and ODA budget systems
in the Ministry of Finance and Ministry of Foreign Affairs. Given
Japan's fiscal constraints, this is likely to mean some reallocation
(mostly from the East Asia) and some additional ODA.
- Supporting the International Finance Facility: Of particular
significance in 2005 is the proposal for the IFF, aimed at doubling
aid volume to achieve the MDGs. The UK, particularly Chancellor
Gordon Brown, is strongly pushing this initiative, which will
provide a way to frontload aid to help meet the MDGs. Divergences
remain in the G8 as to the full scheme and there is also little
enthusiasm in Japan. There is much more widespread support for
the International Finance Facility for Immunisation (IFFIm). It
is likely that Japan will be encouraged to join the pilot scheme
and give qualified verbal support to the full scheme, even if
financial support is not possible at this stage.
- Debt relief: The CFA Report has called for 100% debt
relief. The UK was pushing a multilateral debt relief initiative.
Despite major divergences within Europe and the G8 (Japan, Germany
and France preferred a debt sustainability initiative), the G8
Finance Ministers agreed to a multilateral debt relief initiative.
This will be endorsed in Gleneagles - although there still remain
some implementation issues to be sorted out.
- Trying different approaches: untying, harmonisation
and budget support: The CFA Report argues for: 'more grants, more
predictable and untied aid, and donor processes that are less
burdensome … it must also be better harmonised with the aid
of other donors and better in line with the priorities, procedures
and systems of African governments. Above all, it must be given
in ways that make governments answerable primarily to their own
people.' The key issues for Japan here are untying, harmonisation
and budget support. Japan is going to be under pressure to make
commitments on untying its aid to Africa. Although harmonisation
and direct budget support imply greater effectiveness of the overall
aid system, they would require new approaches from Japan and imply
less visibility. Japan will need to confirm that it supports these
approaches in principle and move towards implementation. While
Japan already provides direct budget support to some countries
in Asia, there seems limited scope to extend the approach in Africa
beyond the current pilot in Tanzania.
- Mutual accountability: In order to provide a mechanism
for monitoring and accountability, the CFA Report calls for an
independent mechanism, perhaps led by two influential figures
and supported by a small secretariat. UK Prime Minister Tony Blair
will push for the influential figures approach, linked to the
G8. A number of donors, including Japan, have reservations about
the proposed approach to mutual accountability, but it is almost
certain that the G8 will sign up to some kind of mutual accountability
mechanism in July. There are implications here for Japan: this
will open the door for annual public assessments of Japan's aid
to Africa, so Japan will need to identify the options it supports.
Japan's aid to Africa: longer-term issues
The focus on Africa in 2005 and the decisions made on international
development policy will have a legacy. The Commission for Africa
(CFA) Report provides a landmark analysis of the development context
in Africa and should inform discussions of Japan's strategy.
Japan's aid to Africa seems set to increase - perhaps double - over
the next few years. Japan's aid system has seen reform in recent
years - with a new ODA charter in 2003, new initiatives in poor
countries, formation of country assistance programmes in alignment
with PRSPs (and direct budget support in the case of Tanzania) and
agreement to the Paris Declaration on Harmonisation. However, Japanese
stakeholders feel that they are facing many issues regarding the
2005 Africa Agenda and the 'new aid agenda' more broadly. We have
identified eight issues - both challenges and opportunities - for
Japan's aid policy towards Africa. Some have implications that are
technical, others are more political.
- Africa and Japan's aid quantity - development vs. national
interest: International development assistance efforts have
become increasingly focused on Africa, and Japan is going to remain
under pressure to do more for the region. The major political
challenge within Japan will be how to increase aid to the region
when Africa is basically marginal to Japan's economic and political
interests (and public interest). Overall, fiscal restraints in
the short term are likely to mean that any aid increase to Africa
come partly from reallocation - a China or East Asia dividend
- rather than new aid. This makes the key arena the negotiations
within and between the Ministry of Finance and Ministry of Foreign
Affairs - as well as the implementing agencies of JICA and JBIC.
In the short term this may be difficult, but as East Asia is graduating
from aid, there may be more scope over time.
- Greater selectivity - and reaching the poorest: There
is much discussion about selectivity in both the CFA Report and
the UN Millennium Project Report (and it is being operationalised
in US aid via the US Millennium Challenge Account). This involves
identifying selected countries and making a large amount of money
available. There is a technical question regarding the identification
of African countries where increases in aid would be used effectively.
There is increasing emphasis in the UK (though much less from
the big European donors) on focusing on the poorest countries
and also on fragile states. However, in Japan's evolving aid strategy
towards Africa, Japanese stakeholders suggest that Japan may want
to concentrate on a few countries with which it is more familiar.
Such a strategy would be more pragmatic, politically acceptable
within Japan, and could provide a demonstration effect. It has
been commented that Japan has not conducted a thorough analysis
of many African countries (Tanzania is one the few exceptions).
There will, however, be issues of donor coordination - or some
countries in Africa will get 'missed out'.
- The opportunity of infrastructure: One of the biggest
development stories of 2005 so far has been the rediscovery of
infrastructure (as part of a broader emphasis on economic growth
and the productive sector). The CFA calls for the doubling of
aid to infrastructure in Africa. This is a big opportunity for
Japan: it is an area where Japan has a comparative advantage and
an issue to which it can bring its experience from East Asia.
There is already discussion between JBIC, the World Bank and African
Development Bank regarding an infrastructure study for Africa.
There are also ongoing discussions regarding use of a consortium
as a way to manage resources effectively among the major players
in this area. It will be difficult to provide large spending quickly
owing to the extent of project lead times. Given the naivety in
the current international debate, and Japan's extensive experience,
Japan's technical input would be extremely valuable on this issue.
There will be many challenges, since successful additional support
for infrastructure in Africa will be complicated and risky - it
is important to address institutions as much as the infrastructure
itself. There are also issues here regarding grants vs. loans,
recurrent costs, maintenance, and sequencing. In sum: Japan can
certainly add to the debate as well as to funds here.
- The central importance - and challenge - of governance:
The importance of governance for development and aid policy was
central to the 'big analyses' of 2005 (UN Millennium Project and
CFA reports). The Commission for Africa highlighted that 'The
issue of good governance and capacity building is what we believe
lies at the core of all of Africa's problems.' This has significant
implications and challenges for Japan's ODA. Whereas other donors
have invested heavily, Japan's aid system has limited capacities
in this area with regards to Africa. Given the emphasis in the
CFA Report on governance issues as the key issue for Africa, Japan
is going to need to find a means to engage in new and different
ways on governance issues. There are various types of approaches:
greater country selectivity; more support for governance reforms;
working with civil society; greater emphasis on international
agreements. Key is to undertake rigorous governance assessments
and to use a mix of approaches which best fit the context. This
is no easy task, although it is one where Japan can add some value,
given its experience of working with development states in East
Asia. However, the technical challenges of a greater emphasis
on governance considerations in aid programmes may clash with
foreign policy or commercial imperatives.
- Capacity and technical assistance: Japan will feel much
more comfortable and able to respond on the technical issues of
capacity building rather than (political) governance. Issues of
capacity are also at the core of both the CFA and Millennium Project
reports, so there is an opportunity here for Japan (particularly
JICA) to engage. But a challenge here is that momentum to reform
technical assistance is growing. A key issue on the agenda is
how to make technical assistance more demand driven and coordinated
by the recipient government.
- Aid effectiveness and the 'new aid agenda': There is
increasing momentum for reforms to enhance aid effectiveness -
internationally as well as within Japan. The traditional aid effectiveness
agenda, e.g. around untying, remains pertinent and Japan will
remain under pressure to deliver here. However, a number of issues,
which are part of the new aid agenda, may have implications for
Japan. This means efforts towards coordination under recipient
government-led strategies (PRSPs) and working within recipient
government systems. For Japan, this means engaging with discussions
on: (i) governance issues - discussed above; (ii) harmonisation
(common arrangements and simple procedures) and alignment (behind
partner agendas and systems); and (iii) direct budget support
(DBS). Japanese insights would be very valuable inputs to the
debates since this is an interesting but challenging set of innovations.
However, they do have implications. The technical merits in terms
of aid effectiveness may clash with domestic political pressures
regarding visibility. They imply thinking in different ways about
accountability.
The new aid agenda also implies institutional reform regarding
Japan's ODA procedures, capacity and structures. The challenges
are probably greatest regarding grant aid provision by the Ministry
of Foreign Affairs (MOFA). MOFA would need to change ODA procedures
(e.g. regarding budget support). It would also help to expand
its human resource capacity, which is seen as weak compared to
other DAC members. The quantity of staff, experience in development
issues and the system of rotation are all areas where reform is
implied. In terms of structure, the new aid agenda implies reforms
towards greater capacity and decision making power for country
offices.
- How to loan to Africa?: A large part of Japan's aid
system is geared towards loans and Japan's loan aid has a different
accounting system from grant aid. However, as of 2003, Japan was
receiving more in repayments from Africa than it was disbursing
in new loans. There will be external pressure regarding this situation.
More generally, a key issue regarding increasing Japan's aid to
Africa will be around finding ways for Japan to provide loans.
As a result of HIPC, the operational scope for JBIC to provide
loans to Africa is at present minimal. It could be possible to
reallocate aid through the African Development Bank and/or through
international institutions. Most aid and new aid is likely to
be in the form of grants and technical assistance, but there is
an opportunity for innovative thinking as to how Japan could provide
more loans to Africa.
- Better explaining the lessons of Japan's aid to East Asia:
A cross-cutting issue that has emerged is the value of Japan's
ability to explain and share the lessons of its aid contributed
to East Asia. To what extent - and in what ways - was there a
link between Japan's provision of aid and the development outcomes?
And what are the lessons for Africa? With aid policy in a state
of flux, it would really help to have an assessment of Japanese
aid to both Asia and Africa.
Conclusion: from the UK's agenda 2005 to Japan's agenda 2008
Based on the Commission for Africa process and its own aid experience,
the UK is putting a set of issues on the table regarding development
in Africa to which Japan is being asked to respond at the highest
political level. We have tried to identify some of the key issues
for Japan in 2005 as well as the longer term-implications of the
new aid agenda.
Finally, it is worth noting that in 2008 Japan is going to be in
a somewhat similar position to that which the UK is in currently.
In 2008, Japan will host TICAD IV and chair the G8 Summit. Africa
may or may not be an explicit priority at the G8, but the development
performance in the region and Japan's aid to Africa are bound to
be under the spotlight again.
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