Evaluating Development Assistance: Comparing the Goals and Effectiveness of the Foreign Aid Policies of Japan to Asia and the EU to Sub-Saharan Africa

Author: Iman Ahmed, December 2020

“Development aid effects are difficult to quantify and the metrics that have been employed so far suggest that there is much work left to be done in terms of alleviating poverty and ensuring the rights of the poor. Although over time both models conformed to global trends, the Japanese and EU aid models originated out of different historical power dynamics.”

Image by Wikimedia Commons

Introduction

Official development assistance (ODA) is defined by the Organization for Economic Cooperation and Development (OECD) as grants and soft loans, administered with the intent of improving economic development and social welfare in developing nations (“Is it ODA?” 1). Today, the European Union (EU) is the largest donor of development aid in the world (“Intn’l Development Aid”), and the largest recipient of aid is India, which receives most of its funds from Japan (Routley). However, despite the global proliferation of development aid, which reached new heights in 2018 in surpassing $165 billion (Routley), the effectiveness of foreign aid remains a controversial issue in today’s development discourse. Successive generations of academics have disagreed on how development aid should be distributed, to whom, with what conditionalities, as well as how to evaluate aid success. For example, earlier iterations of development studies that tracked econometric factors based on aggregate data, like growth according to GDP and GNI, were largely inconclusive (Quibria, 2014). A 2009 review analyzing 97 studies which examined the relationship between aid and growth, found only a small positive effect – that was ultimately statistically insignificant (Doucouliagos et al. 435). Recently, the academic debate on development has suggested that aid success needs to be measured in terms of poverty reduction, specifically reducing economic inequality (Gore 791). This emerging paradigm in development counsels selectivity in which states receive aid, where aid should be targeted towards the least developed low-income countries (LICs). Therefore, to determine whether foreign aid has worked, this paper will conduct a comparison of the goals and effectiveness of the ODA projects of Japan and the EU in Asia and Sub-Saharan Africa respectively. This paper will demonstrate that the two aid models employ divergent mechanisms to achieve similar goals, which conform to global trends in aid discourse. To that end, the Japanese aid model overcomes the shortcomings of coordination, coherence, and legitimacy that plague EU aid policy, but not to the extent that it can be declared as conclusively more effective, due to weaknesses in aid disbursement that stem from Japan’s historical aid trajectories.

Brief History of Japanese vs. European Union Foreign Aid Policy  

Due to their historical relationships with aid recipient countries, the Japanese and European approach to foreign aid diverged fundamentally at the onset of official development aid in 1945. European colonial administrations had control over the political and economic institutions in their colonial holdings, control that was carried through the decolonization process by development aid mechanisms. The colonial patterns of control, especially in Africa, which were divided between many different colonial empires, prescribed the decolonization process; ultimately further confining Africa to the periphery of international trade and politics (Engel & Olsen 5). The EU’s official development policy thus took its cues from its colonial past, by playing down the underlying national interests to project a broader and more nurturing policy. For example, the language originally used as a cover for the unequal relationship within the colonial enterprise of the British empire included the idea of “partnership in development,” which is used to this day by development experts and policymakers (Seddon 44). Some, like Easterly, would argue that this language has not evolved from its original role as a cover for personal interest based behavior. This is demonstrated by the prevalence of development experts’ cooperation with corrupt and dictatorial governments; rather than promoting human rights and good governance, they have tended to provide technical assistance devoid of human rights conditionalities, to promote economic growth that inevitably favors the already wealthy and privileged (Easterly and Pfutze 33).  

Japan’s more recent and short-lived imperial endeavors suggest a very different development outlook that focuses on its economic future, rather than covering up its imperial past. Japan’s regional empire was dominated by ideas of economic diplomacy and an “Asian mission,” and while it was sustained similar to the European colonies on exploitive relationships framed in the language of equality, it was constructed to directly oppose western dominance (Seddon 45-46). Beasely argues that Japanese policymakers conceived their foreign policy to eventually replace the influence of Western colonial nations in East Asia (176). This original goal of Japanese imperialism permeates their modern development program, which in many cases is directed as a foil to China’s increasing political and economic influence (Routley). Over the years, Japan has become a leading provider of ODA, especially in central and East Asia, where it had been motivated by mercantile economic interests in its aid allocation (Nester 34; Scheyvens 91). 

Initially, Japanese aid loans were disbursed strategically: to open markets and to facilitate the creation of a “strong economic base,” from which to then expand international trade (Seddon 48). In 1989, when Japan officially became a foreign aid superpower, it was besieged with criticisms of the quality of those aid loans (Yasuba and Yamamura 28; Potter 13 Arase 91). This led to the Japanese foreign ministry publishing an official ODA charter in 1992, committing themselves to sending aid for the amelioration of social, political, and humanitarian concerns instead of just economic feasibility (Hook & Zhang 1050). However, empirical analyses of Japanese aid policy in the 1990s suggested that this was more an evolution in rhetoric than in practice, and Japanese ODA continued to flow disproportionately to places with higher levels of trade with Japan rather than countries that fit with their espoused social and political conditions and needed help the most (1060). Furuoka notes that where economic interests were at play, the Japanese government would overlook a bad human rights record and continue to allocate aid (144). 

However, while both the EU and Japan’s aid policy have been heavily influenced by national economic interests, recent paradigmatic changes in the development discourse have caused significant shifts in both aid policies. Post-1990s appraisals of Japan’s ODA disbursement note increasing attention given to humanitarian concerns, such as the use of aid sanctions to promote democratization, human rights, and nuclear non-proliferation (Long 321). A prominent example of this is Japan’s suspension of aid to China in the wake of the Tiananmen Square incident (Takamine 11). A less fruitful example is in Japans aid relationship with India and Pakistan, where forceful condemnations and aid sanctions did not induce India or Pakistan to sign the Non-Proliferation Treaty, leading Japan to eventually back off, and search for other routes to limit their nuclear arsenals (Long, 339, 341). Similarly, the EU development policy started to evolve in the 1970s as they adopted a more globalized approach, cultivating genuine North-South relationships based on mutual treaties and negotiations (Reisen 43).

However, the goal of these relationships was one still rooted in enhancing the international economic order, with objectives of export diversification and economic growth (Kaya 186) at the forefront. In the 1990s, the EU’s outlook changed fundamentally with the newfound inclusion of countries such as Sweden, Austria, and Finland; these countries wanted to prioritize poverty reduction and send aid to various countries in need – and not just to places that EU member states have historically had colonial relationships with (186). As a culmination of global aid trends, the EU development policy in the 2000s gave explicit reference to human rights, democratic principles, good governance, and the rule of law as important determinants for aid allocation. The EU followed through on these conditions, albeit inconsistently, with an analysis of human rights violations by aid recipient countries showing that former colonial holdings of France and Britain are given more leeway in terms of their human rights records (Vanheukelom et al. 47). 

EU Aid Model 

The modern European Union aid model, epitomized by the Cotonou Partnership Agreement (CPA) and based on political conditionality, technical assistance, and reciprocal trade agreements, has had limited effectiveness in terms of reducing poverty and promoting good governance. Promoting good governance through political conditions on aid politicized the EU’s development relationships in Sub-Saharan (Smith 61), introducing uncertainty and harming ‘aid ownership,’ two important elements of aid effectiveness (Laporte 29). Lensink and Morrissey emphasized that uncertainty negatively influences investment, especially in the countries of Sub-Saharan Africa which are historically more vulnerable to shocks (34). Likewise, mutual ‘aid ownership,’ where recipients and aid providers alike have a say in aid allocation increases aid credibility and legitimacy, which conversely “reduces the likelihood of resistance and reversion,” from local populations (Edwards 28). Thus, the EU has had limited impact in implementing democratic reforms as aid conditions, with its success hinging on how dependent the recipient country is on aid, such as in the case of Ethiopia (Borzel 537). 

Furthermore, member states’ economic interests in recipient countries also changes the power relations, and makes the EU hesitant to enforce compliance, as is the case of Angola (537). The EU’s one-size-fits-all approach to implementing governance reforms and enforcing political conditionality thus falls apart in practice, with differential approaches in each country based not on the recipient countries’ needs, but inevitable power asymmetries born out of historical inequality and oppression. 

Meanwhile, poverty reduction is meant to be achieved in the CPA through economic partnership agreements (EPA), where trade liberalization attracts investment which ultimately lifts all tides -if only that were the case. Numerous reviews have found only tenuous connections between development and economic growth, when measured by econometric factors like GDP and GNI (Rajan and Subramanian 643; Collier and Dollar 245). Furthermore, the EU discourse on this matter is at odds with developing country understandings of development, where skepticism of the relationship between opening markets or trade investment and poverty reduction remains rampant (Sheahan et al. 360). Kaya concludes that the EU’s increased attention to reciprocal trade agreements is another avenue of strengthening global trade rather than a real commitment to alleviating poverty (188). The EU’s tendency towards mismatching rhetoric and practice is also observed in the individual EPA’s signed with African countries, which lack custom development assistance projects tailored to the needs of each African populace (Sicurelli 182). Addressing rural poverty in Africa is dependent on “raising the output of small and marginal farmers,” and the EU’s current approach to such farmers, such as providing food aid, leads to greater dependency and undermines local production systems (Berger et al 25). This poor coordination with recipient countries is mirrored by a lack of coherence between EU member states. Carbone documents a “coordination fatigue” on the ground due to increasingly complex aid architectures composed of multiple national aid bureaucracies with divergent aid preferences (348). Sustainable poverty alleviation, thus, while being a stated goal of the EU development, remains elusive.

Japanese Aid Model

While Japan’s aid model overcomes many of the ownership and uncertainty problems that the EU’s development policy is plagued by, its roots in protecting national economic and security interests has led to an aid allocation regime that is ineffective in facilitating significant poverty reduction. Japanese development aid is dominated by loans to facilitate effective technical cooperation, with programs designed for recipient states to ‘self-help’ themselves (Potter 19). Technical assistance is designed to take into account political and environmental factors, as well as to promote democratic reform and discourage military spending. The overarching goal is that of reducing poverty – mirroring global aid trends, as well as the EU’s goals for its foreign aid program (Seddon 68). Dominated by loans for economic infrastructure development administered through the Japan International Cooperation Agency (JICA), Japan shares the EU’s logic on poverty reduction through economic growth, causing its aid model to be dominated by “government-led, large-scale infrastructure projects designed to promote industrial growth,” (Potter 18). Rix notes that Japan expects potential recipients to request aid for specific projects that the recipient governments conceive, in order to reduce political repercussions (173), and administrative burdens (Potter 20). 

Therefore, Japan sends loans and technical experts to facilitate implementation of the project and train locals to sustain the institutions that are built. This ‘request principle,’ in the Japanese aid model facilitates a feeling of ‘aid ownership’ in developing countries, an important element missing from the EU aid model. Being a single country, Japan’s aid model is also more coherent, and thus more stable in comparison with the EU. In terms of democratic reforms, Japanese bilateral aid has been found to have a unique impact in reducing corruption, especially in ‘highly corrupt countries’ –  this is largely attributed to the lack of colonial relationships between Japan and most of its aid recipients (Okada & Samreth 242). Despite overcoming these shortcomings of the EU aid model, studies show that Japanese aid allocation has been ineffective in significantly reducing poverty (Sawada 175). 

Japanese aid, in line with its national economic interests, has gone predominantly to middle income countries, where poverty can be addressed with economic growth due to the presence of already strong institutions and governance mechanisms. In 2018, only 9% of Japanese ODA went to low income countries (LICs), far below the Development Assistance Committees’ average of 21% (DonorTracker). Japanese aid success is well documented in middle income countries like Malaysia, where poverty is uniquely sensitive to economic growth, leading sufficient infrastructure investment to have a significant impact (Kohama & Kenkyujo 65). Where aid has been targeted at LICs, such as in India, Japanese financing of infrastructure projects has created jobs and thereby improved living standards (Sahoo & Bishnoi 71), but not nearly as dramatically as in Malaysia. A similar trend is found in Japanese aid to Indonesia, which accounts for 70% of Indonesia’s aid income, and where economic growth has been associated with low if any levels of poverty reduction (Chowdhury and Sugema 192). 

Furthermore, Indonesia’s aid relationship with Japan cannot be termed altruistic, as it is dominated by ‘tied aid’ and technical assistance, where benefits flow predominantly back to the donor country (203). The literature on aid and its relationship to poverty has been inconclusive (Milovich 1). However, one thing that academics can agree on is that aid needs to go where it is needed most (Potter 27), where it constitutes an effective aid channel when devoid of political objectives and economic co-benefits (Easterly and Pfutze 29). This is where the Japanese aid model, potentially more effective than the EU model, falls short. 

Conclusion

Development aid effects are difficult to quantify and the metrics that have been employed so far suggest that there is much work left to be done in terms of alleviating poverty and ensuring the rights of the poor. Although over time both models conformed to global trends, the Japanese and EU aid models originated out of different historical power dynamics. These trends included emphasizing human rights conditionality and promoting democratic reforms, with the stated aim of reducing poverty. The EU and Japanese models employ different aid mechanisms under the umbrella of technical assistance, where the EU negotiates EPA’s with each recipient country and Japan operates using the ‘request principle’.

 The Japanese model is more theoretically sound; it institutes aid ownership within recipient countries, thus reducing uncertainty and creating legitimacy, which are crucial elements of aid effectiveness. In contrast, the EU model, due to the lack of cohesion between the different member states and the variety of aid bureaucracies that recipient countries have to negotiate with, causes coordination fatigue which greatly limits its effectiveness. However, Japan’s more stable and participatory aid model has only had limited overall success in Asia, due to its tendencies to utilize tied aid and to depend on technical experts. Similarly to the EU’s aid model, Japan’s has struggled with implementing human rights conditionality consistently, causing both models to inadvertently legitimize authoritative regimes that harm the marginalized poor who were supposed to be uplifted through foreign aid. Foreign aid has become a billion-dollar industry that seems averse to learning lessons from the past. Perhaps by including the elements that previous models have shown to be effective – such as aid ownership, participatory regimes, and consistent conditionality – while at the same time abandoning those that have not been effective – such as tied aid, technical assistance, and food aid – this industry can finally target and improve the conditions of those who need it most. 

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