[asia-apec 1162] AMPO e-mail bulletin Part3

[KOSHIDA Kiyokazu]

 AMPO:E-mail Bulletin Part 3
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/This article is selected from "AMPO: Japan Asia Quarterly Review"Vol.29
No. 1.
The special issue of this volume is 'Taking the Initiative: 
Okinawa's People's Movements Works toward the Future'.

/Contents fo this bulletin
1.Looking Beyond Cologne: G7 Governments Race for Debt Relief
By Inoue Reiko
2.Article 9: And Now Itユs Gone?: By Douglas Lummis
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Jubilee 2000
Looking Beyond Cologne: G7 Governments Race for Debt Relief
By Inoue Reiko

Inoue Reiko is the co-president of PARC, and now working as an active member of Jubilee 2000, Japan.

The global peoples movement named Jubilee 2000, which was launched in the UK in 1994 and spread to other European countries, Africa, the United States, Latin America, Japan and other countries, with the aim of cancelling the unpayable debts of the poorest countries before the end of this century, has successfully pushed G7 governments into a sort of mutual competition to offer better-looking debt reduction proposals for the coming G8 summit to be held in June in Cologne, Germany. 

The Debt Relief Race  
Germany, the host of this yearユs G8 summit, has proposed the cancellation of all debt from development loans (aid debt or concessional debt) and the full cancellation of export credit debt in exceptional cases, plus three years instead of six years of structural adjustment for the Heavily Indebted Poor Countries (HIPCs). Under the HIPC Initiative of the IMF and World Bank, a country can only become eligible for debt relief if it can carry out three years of implementing Structural Adjustment Program, and even then a decision is made and another three years has to pass before the debt reduction is implemented). It also suggested the sale of gold as a source of funding for debt reduction, an idea which the Kohl administration had always opposed, together with Japan. 
In February, the United Kingdom proposed that all 41 HIPCs receive debt reductions by the end of 2000, and in March, US President Clinton announced the メUS New Initiative on Debtモ, which proposed a total debt cancellation for bilateral ODA and a 90% reduction of non-concessional debt for all HIPCs. Since the US was offering only 50 million US dollars as its contribution to Trust Fund of IMF/WB, its proposal has been considered a メgenerous offer funded by other creditors.モ 
France, Canada and Italy have followed with their own debt relief proposal. The French government, which is the largest holder of debt next to Japan (see table 2) has emphasized equal burden-sharing among creditors.

Japanese Government Proposal
Finally the government of Japan, the biggest bilateral creditor, which had kept silent until the last moment, issued a メComprehensive Plan for Development and Debt Relief for Heavily Indebted Poor Countriesモ on April 28. 
The proposal included the following concrete points: 
・ Increase the current Paris Club debt relief ceiling of 67% for bilateral ODA loans to 100% (Japan would provide grant assistance for debt relief, a measure which effectively results in the cancellation of debt. Japan introduced voluntary debt relief measures equivalent to over 80% debt reduction in 1998.)
・ When necessary, go beyond the debt relief ceiling of 80% for non-ODA claims.
・ Enhance the relief measures of international financial institutions for loans extended to HIPCs in order to revive their debt burden, while at the same time giving due consideration to ensuring a fair sharing of the bilateral burdens of debt relief. For this purpose, member countries should make fair contributions to the debt relief trust fund for the HIPC Initiative in the IMF and World Bank, guaranteeing their total contributions to the overall initiative are fairly shared. The IMF will secure the resources by selling gold.
・ Ensure flexibility under the HIPC Initiative for indebted countries which have made clear and demonstrative achievements toward reform, or for those which are in urgent need of assistance.

Beyond Cologne
We at Jubilee 2000 Japan appreciate the acceptance of 100% debt reduction by Japanese government as a step forward toward the relief of the debt burden of poor countries. But at the same time, this proposal is not real debt cancellation as we proposed. The Japanese government has rescheduled and provided Grant Assistance for Debt Relief in past debt reduction initiatives, including the Naples Terms (Paris Club agreement for debt reduction up to 67%, which was agreed at the Naples G7 summit in 1995).
The idea of the Japanese plan for Grant Assistance for Debt Relief will be to provide each year a grant which is equivalent to the amount of principal and interest due on the yen loan. But this grant will have to be spent for the purchase of commercial commodities from abroad (imports). Furthermore information on purchased commodities, such as category, names of manufacturers and the names of countries, will not be disclosed at all, though Japanese government says they will be untied. 
Since the fund source of Japanese yen loan is the trust fund of Japanese Ministry of Finance which come from pensions, post office savings, etc., the Japanese government has applied the rescheduling as a means of debt reduction as agreed under the Toronto Terms or Naples Terms. In the case of Bolivia, for example, they have agreed to reschedule the overdue principal and interest on December 12, 1995 to メ30 years repayment with a 10-year grace period.モ 
Thus this debt relief arrangement involving rescheduling plus grants is different from the cancellation of the debt stock itself, though the government insists it is a measure which will effectively result in the cancellation of debt.  First, indebted countries will still be kept under the chain of debt for 40 to 50 more years in future. Second, the grant for debt relief is a part of Japanese ODA, which means that new ODA money might be reduced for those who receive this grant.
Additionally, the proposal says メthe debt relief measures must be extended only under the condition that recipient countries will make active efforts to effect structural reform and that they will result in positive outcomes.モ Though the Japanese government, especially the Ministry of Finance made critical remarks on the effects of Structural Adjustment Program on the occasion of Asian financial crisis, there is no critical review to be found in its HIPC framework.
In June in Cologne, a more or less 100% cancellation of ODA debt for HIPCs will be agreed to, but a more important issue will remain: the mechanism for implementation, including a review of HIPCs, of the structural adjustment program, the role of IMF/WB, and especially importantly for Japan, the reform of ODA itself. The voices of people of indebted countries need to be heard, and cooperation between NGOs and peoples organizations of both creditors and debtor countries needs to be strengthened.                                                 n
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The New Miyazawa Initiative
By Kanda Hiroshi

Kanda Hiroshi is the director of Institute for Alternative Community Development (IACOD), which has long researched and criticized on Japanese ODA.

In October, 1998, the Japanese government announced the ヤNew Miyazawa Initiativeユ as a scheme to deal with Asian economic crisis. It is unusual for Japan to announce special packages of aid destined for countries in economic crisis ム the last time occurred in 1988, when special assistance was offered to Latin American countries. The 1988 plan was ironically called the ヤMiyazawa Initiative,ユ since current Finance Minister Miyazawa Kiichi was also in the same position at the time (though under a different prime minister), and thus the new scheme has been dubbed the メnew Miyazawa Initiative.ユ
The new initiative stands out both in terms of size and in terms of the urgency it holds for Japan itself. A total of $15 billion medium-to long term financial support and $15 billion in short-term support will be disbursed. This assistance will go to Thailand, Indonesia, the Philippines and Malaysia, and there has also been a request from Vietnam for funds under the scheme. 
While the $15 billion in short-term funds will be provided when recipient countries are in need of money for trade, the other half will be given in four ways. First, aid will be provided as official cooperation through the Japan Export-Import Bank (JEXIM) or the Overseas Economic Cooperation Fund (OECF), a fund managed by the Ministry of Finance. Second, it will be disbursed in a way that supports the efforts of Asian countries to get money from the international capital markets using credit from the JEXIM or applying the trade insurance to the recipient countries. It will also be used to set up a メAsian Currency Crisis Support Facility,モ under which the crisis-hit countries will be given subsidies for paying the interest on loans. The third is co-financing with Asian Development Bank (ADB). Fourth, World Bank(WB) and ADB will provide technical cooperation using special funds from Japan. 
Many assistance agreements have been set since the first one for Thailand in December, 1998 (see the graph in the next page).  
The decisions on how to spend roughly $11.5 billion of the $15 billion have been made or planned by the end of FY1988, under the new Miyazawa Initiative. Most of the money will be disbursed by JEXIM or OECF as program loans, some co-financing loans with the WB or ADB. Unfortunately, the program loans under the new initiative will hardly bring benefit to the poor who are suffering from the economic crisis. Under the scheme, new co-financing loans will be given to Thailand, in disregard of charges that the countryユs Constitution was violated by conditionalities of agricultural sector program loan for the  by ADB.  The New Miyazawa Initiative will have significant impact on the recipient countries, and it is quite obvious that there is much time to consider the initiative. At the very least, it is the responsibility of NGOs to reveal the realities of the scheme and disclose as much concrete information as possible.   n
Translated by Ito Asahi

/New Miyazawa Initiative
The First Stage                      (monetary unit: a million U.S. dollars)
Thailand  Total ム 2,350                                    (Dec. 16. 1999)
Medium-to Long-Term Financial Support 
  JEXIM: Two-Step-Loan for Manufacturing Sector Support        750
         Economic and Financial Adjustment Loan                600
  OECF  Economic Recovery and Social Sector Program Loan       250                        
        Agricultural Sector Program Loan                       250
TradeInsuranceFacility                                         500

Malaysia  Total ム 3,220
(Dec. 16. 1999)
Medium-to Long-Term Financial Support 
  JEXIM: Two-Step-Loan for Export Industry Support               500
  OECF: Official Development Assistance Yen Loan (7Projects)   1,000
TradeInsuranceFacility                                           560
(Mar. 31. 1999)
  JEXIM: To Strengthen the Infrastructure of Physical Distribution  700
(Apr. 28. 1999)
  JEXIM: Two-Step-Loan to the Development Infrastructure Bank of     
           Malaysia for Physical Distribution                       460

South Korea  Total ム 1,000                                (Jan. 15. 1999)
The Two-Step-Loan to the Korean Industrial Bank 

Philippines  Total ム  3,000
(Jan. 15. 1999)
Medium-to Long-Term Financial Support  
  JEXIM: Power Sector Restructuring Program Loan                     300
             Banking System Reform Project Loan                      300 
             Two-Step-Loan for the Private Sector Development through 
             the Development Bank of  Philippines                    500
  OECF: Metro Manila Air Quality Improvement Sector Development 
            ProgramLoan                                              300
  (Mar. 25. 99)
Medium-to Long-Term Financial Support 
  JEXIM: Guarantees for the Public Sector Entities in the Power Sector     
                                                                     500
  OECF: Official Development Assistance Yen Loan (13 Projects)     1,100

Indonesia  Total ム 1,400
Medium-to Long-Term Financial Support               
  JEXIM:                                                           1,500
  OECF:                                                              900

Notes: To Vietnam, the  Government of Japan is ready to provide the 
          yen loan (Economic Reform Support Loan) amounting to 20 
          billion yen, in the context of the Miyazawa Initiative.

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The E-mail Bulletin of AMPO
( Vol.29 No.1 Japan Watch and ODA Watch)

/This article is selected from "AMPO: Japan Asia Quarterly Review"Vol.29 No. 1.
The special issue of this volume is 'Taking the Initiative: 
Okinawa's People's Movements Works toward the Future'.

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