Japanese ODA and India

The concept of Development Assistance has it roots in the aftermath of the Second World War, when USA poured in billions of dollars into Europe and Japan, for rebuilding shattered economies, and for creating friends and allies in a bipolar world.

As soon as the economies recovered, countries at the top of the heap formed the Organization for Economic Cooperation and Development (OECD) they, among other things, committed themselves to a certain level of assistance to the underdeveloped world – this was called the Official Development Assistance (ODA).

OECD has 30 full-time members, of which, 24 are classified as “high-income” countries. Within OECD, the Development Assistance Committee (DAC) sets the guidelines for ODA. Japan has been a member of DAC since 1961.

The objective of Japan’s ODA is “to contribute to peace and development of the international community, and thereby to help Japan’s own security and prosperity”. Since there is no pretence to altruism, during the past few years, stagnation of Japanese economy has resulted in a steady decline in its ODA. In 2004, the dip was 6.5%.

Two arms of the Japanese Ministry of Foreign Affairs (MoFA) implement ODA project – Japan Bank for International Cooperation (JBIC – yen loans) and Japan International Cooperation Agency (JICA – technical coop, grant aid). Both these agencies are set to merge under the JICA umbrella, by 2008.

Japan’s total ODA in 2003-04 was Yen 963 billion ($ 8.9b), about 0.19% of Gross National Income. Of this, India received $ 704 million and stood 5th among the top ten recipients. China topped the list at $1.4 billion.

India absorbs a little over 9% of Japanese ODA and its outstanding liabilities is Yen 1166.3 billion, as on March 2004 (Rs. 46,640 Crores / US$ 10 billion).

The OECD figure of $ 704 million to India translates in to about Rs. 3000 Crores. However, the “MoFA White Paper 2004” puts the total disbursement at $325.79 billion (~Rs. 1400 Cr). Where did this money go? – Mostly into Yen Loans (93.5%), and the rest into technical cooperation (5%) and grand aid (0.7%).

Over the past two years, there has been a steady increase of yen loans to India. In 2005, nine loan agreements were signed for Rs. 5200 Cr. ($1.15b). In 2006 10 ODA loan agreements increased to Yen 155.458 billion (Rs. 5910 cr; $ 1.3b) – a record hike of about 15%.

The yen loans come at a rate of interest (RoI) of 1.3% per annum (30 years payback) for general projects, and at 0.75% RoI for environment sector projects (40 years).

Currently 28 projects are being implemented in India, which includes major initiatives such as - Delhi metro, Vizag port expansion, improvement of Bangalore water supply & Severage (Rs.1078 cr), Bangalore metro (Rs. 1699 cr), cleaning of Hussain Sagar lake in Hyderabad (Rs. 294 cr), and a project for waste management in Kolkata.
......................................................................................

For more information, pls see - Yen Loan Projects in India (16 Sep., 2008) -  http://dinakarr.blogspot.com/2008/09/yen-loan-projects-in-india.html
......................................................................................

References:

Japan - Aid At A Glance Chart
http://www.oecd.org/dataoecd/42/5/1860382.gif

Organization for Economic Cooperation & Development (OECD)
http://www.oecd.org/about/0,2337,en_2649_201185_1_1_1_1_1,00.html

Ministry of Foreign Affairs (MOFA), Japan
http://www.infojapan.org/