Reassessing Japan’s Development Assistance

The Little-Known Fruits of Japanese Assistance

What country is a major salmon producer and exports this fish in large quantities to Japan? The answer is Chile. And what country, also in the Southern Hemisphere, grows large amounts of soybeans? The country in question is Brazil. But 40 or 50 years ago, Chile produced not a single salmon, and Brazil was not a major producer of soybeans. So who started raising salmon in Chile, and who started growing soybeans in Brazil’s cerrado, a vast savanna thought to be barren? Japanese people and JICA, the Japan International Cooperation Agency. These accomplishments, however, are little known in Japan or elsewhere. The World Bank often refers to Chile’s salmon and Brazil’s soybean production as success stories, but it shows no sign of recognizing Japan’s contributions.(*1)

Another question: Why is it that Thailand has become a major manufacturer of automobiles, to the point that it has been dubbed the “Detroit of the East”? What made this possible was guidance from Japanese sources, including companies in Japan’s auto industry. Another major hub of automobile manufacturing is the Pearl River Delta area of southern China. Here too, it is said that this was made possible by input from Japan, namely, training of the personnel required by carmakers.

A Honda joint venture plant in Guangzhou, China. The Pearl River Delta is the site of an automobile and parts manufacturing cluster, including operations of Japanese affiliates. (© Jiji Press)

Japan and Asia’s Green Revolution

Japan can take pride in the fact that its official development assistance played a key role in all of the above success stories. One case that I am quite familiar with myself is Asia’s Green Revolution. As of the 1960s, food production in tropical Asia was increasing at a much slower pace than population, because there was little room for expansion of the areas under cultivation and the productivity of existing farmland was not improving significantly. It was feared that major food shortages would occur. What averted this prospect was the development of new, higher-yielding varieties of rice by the International Rice Research Institute in the Philippines, the use of which was supported by investment in irrigation.

This led to what came to be called the Green Revolution. From the 1970s to 2000, the yield per unit area of rice in tropical Asia approximately doubled, and total production of rice roughly tripled. As a result, people stopped warning of the danger of famine in Asia. Researchers from Japan played a major role in the IRRI, and the Japanese government provided generous financial support for the institute’s research and for the training of its personnel. Japan also joined with the Asian Development Bank in supporting investment in irrigation. This is another example of Japan’s ODA producing a game-changing advance. But in this case as well, few ordinary people are aware of Japan’s contribution.

Japanese development assistance has produced other major advances in Asia and elsewhere. But the track record of Japan’s ODA is little known—even to people like me, a specialist in development economics. From the perspective of development economics, a key point common to all of the success stories cited above is that they involved a combination of human resources development and investment in infrastructure. The details await further study, but my current assessment is that Japan’s aid program has contributed to industrial development in many countries through this combined focus on people and infrastructure.

The Need for Effective Strategies

Japan’s ODA officers tend to think that the only purpose of the aid programs they administer is to promote the development of industries in developing countries through the provision of financial assistance. This view is not terribly wrong, but I believe it is somewhat problematic. At present, nowhere in the international community of aid donors can one find a consensus on the strategies that can promote development and reduce poverty in developing countries. Aid without a strategic basis is unlikely to produce successful outcomes. It is like kicking a ball blindly toward a goal. The key requirement is to set forth effective strategies. Doing so should be an important objective of ODA.

Japan’s ODA has lacked this aspect. Even though Japanese assistance has been effective, data has not been collected to record the results. In other words, evidence of the effects is lacking. And for this reason, Japan’s ODA has not been a source of examples for other donor countries to learn from. Now it seems that Britain and other European donors are experiencing “aid fatigue” and have lost confidence in their own aid strategies. In this context, Japan should note that intellectual support is the most valuable form of assistance.

Finding Appropriate Development Strategies

People have been calling for the reduction of poverty for years, but the discussion of development strategies to achieve this has failed to achieve much progress. About the only points on which a consensus is emerging are (1) that in order to reduce poverty, jobs for poor people need to be created and (2) that in order to create such jobs, agriculture and manufacturing need to be developed through the introduction of new technologies. Both points seem quite obvious.

The theme of the World Bank’s 2013 World Development Report was “jobs,” but the 2016 edition (to be published this autumn) will focus on “the Internet and development.” The World Bank is presumably sketching a scenario in which IT innovation leads to industrial development, creating jobs, and thereby reducing poverty. To make this happen, however, it will be necessary to have strategies for sparking innovation.(*2)

Focus First on People

The first priority should be the development of human resources. In the case of manufacturing, this means the training of executives. No amount of fine equipment and good infrastructure will help a company grow unless its chief executive knows about management and technology. Recent research has shown that executives in developing countries tend to lack management know-how and that this lack is the biggest factor preventing their companies from developing. Advanced countries have stocks of superior technologies and knowledge about management. Executives in developing countries should tap this store of intellectual resources.

My colleague Sonobe Tetsushi and I are currently working in cooperation with JICA and the World Bank on a project in Africa testing the effectiveness of kaizen, the Japanese management technique of pursing continuous incremental improvement. So far the results look good. Infrastructure improvements and loans will produce more positive results after corporate management has become more efficient, so that is when they should be timed. It is particularly effective to support up-and-coming companies through the construction of plants in industrial zones where the necessary infrastructure is in place. This is our idea of a good development strategy for manufacturing.

Similar thinking can be applied to agriculture. The key here as well is human resources, meaning researchers and extension agents to promote the spread of new technologies. Farming technologies depend on climate and local ground conditions, so they cannot simply be imported from other countries. Applied research is needed to adjust advanced technologies from elsewhere so that they will work under local conditions. But I was surprised to learn that in the case of rice growing, Asian technologies can be used in Africa without modification. So it should be possible to achieve a Green Revolution for rice in Africa with virtually no applied research.

It was on this basis that I was able to persuade JICA to organize an initiative called the Coalition for African Rice Development, which aims to double rice production in Africa over a period of 10 years starting in 2008. Unfortunately there was a lack of funding for the training of extension agents, and it is not clear whether it will be possible to achieve the quantitative goal of doubling production. But if the training of agents progresses, the new technologies will start to spread, and it will become more profitable to invest in irrigation and in transportation and communications infrastructure that will lead to enhanced marketing. As with manufacturing, investment that is timed in this way is sure to result in higher productivity for agriculture. If it turns out that farmers are unable to afford new fertilizers, the arrangements for lending can be changed at that point. These are my ideas for development strategy in the agricultural sector.

These strategies do not conflict fundamentally with the thinking Japan has adopted up to now in its ODA. The next step is to further improve development strategies through joint efforts by JICA, private-sector companies, and researchers, to test the effectiveness of these strategies, and to advertise them globally as useful development models. If this can be accomplished, it is sure to produce a major enhancement in other countries’ assessments of Japan’s ODA.

(Title photo: Indonesian farmers harvesting rice on the outskirts of Jakarta, February 2012. © Reuters/Aflo.)