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Statement by Japan, at the 65th WB/IMF Development Committee (Washington, D.C. / Apr. 21, 2002)

Statement by Haruhiko Kuroda,
Vice Minister of Finance for International Affairs, Japan
At the 65th Meeting of the World Bank/IMF
Joint Development Committee

Washington, DC, April 21, 2002

 

Development Effectiveness, Partnership, and Challenges for the Future

The momentum of cooperation in the progress towards the Millennium Development Goals (MDGs) is growing in the international community following the agreement on the Monterrey Consensus at the U.N. International Conference on Financing for Development in Monterrey, Mexico. In this regard, it is indeed timely to recollect the efforts of development over the past 50 years and to explore the future direction of development in this Joint Development Committee.

There has been substantial progress in development issues during the past 50 years, including the reconstruction and development of my own country. There has also been progress in other Asian countries under their own leadership in cooperation with the World Bank, the Asian Development Bank, and bilateral donors including Japan. However, there still remains the fact that a large part of the world's poverty exists in Asia. It is therefore important to continue to advance the achievements of these countries, and also to put those countries, such as the Sub-Saharan African countries, whose progress so far has been limited, on the track of sustainable development.

It is evident from experience that both sound policies and good institutions are crucial for sustainable development. Moreover, years of experience have shown that ownership by developing countries is also essential. At the last meeting of the Joint Development Committee, Japan emphasized the importance of building partnerships on a foundation of sound policies and good governance in view of the upcoming discussion in the U.N International Conference on Financing for Development. I welcome that this message was shared widely among the participants at the Conference.

Building on that, it is imperative that the international community strongly support the self-help efforts of developing countries. While the growth of world ODA has slowed down since the end of the Cold War, Japan has made serious efforts to address development issues as the world's leading ODA-donor country. With respect to countries with inadequate capacity to formulate and implement policies, it is indispensable for the international community to strengthen its support for these countries through technical assistance and assistance in human resource development. While I strongly support performance-based allocation of aid, we also need to stay engaged with countries with weak implementation capacity.

In addition, I would like to call your attention to the importance of achieving private-sector-led growth for sustainable development. Promoting trade and foreign direct investment (FDI) is the key to such growth. Regarding the issue of market access and other trade issues, I hope that an appropriate conclusion will be brought about at the negotiation of the WTO, based on the idea presented by the Doha Declaration, which seeks to place the needs and interests of developing countries at the heart of the Work Program. It is also important that developing countries become enabled to benefit from trade by improving trade policies and expanding export bases. Moreover, efforts toward maintaining stable and predictable investment climates, including international rules for investment and good governance such as rule of law, will play an important role in attracting increased investment into developing countries.

The primary vehicle by which developing countries can actually take ownership of their own development is the Poverty Reduction Strategy Paper (PRSP). It is important for the international community to support the preparation of PRSPs, paying due respect to the ownership of the developing countries. International financial institutions, U.N. agencies, and bilateral donors should help with the implementation of the PRSPs, taking advantage of their respective comparative strengths and taking into account different stages of development in each country. Above all, to ensure that a PRSP becomes an effective and sustainable strategy, it is crucial that it be prepared through broad-based participation, including that of civil society. With this in mind, Japan has contributed 10 million US dollars to the Poverty Reduction Strategies Trust Fund recently established at the World Bank, and intends to support preparation and implementation of PRSPs, with emphasis on ensuring appropriate participatory processes. Another relevant issue to be considered is how to apply the principles of PRSPs, that is, ownership and participation, to non-PRSP countries.

 
Education for Dynamic Economies: Action Plan

Education is the key to reducing poverty and achieving sustainable growth over the medium and long term. Since the Dakar Conference, work towards the achievement of Education for All (EFA) has grown more active, and fruitful discussions were held on the subject this month in Amsterdam. I welcome the opportunity to discuss an Action Plan for EFA in the Development Committee.

First, I would like to emphasize that to achieve EFA the strong commitment of the developing countries supported by the mobilization of domestic resources, and good policies and institution building by those developing countries with appropriate assistance from the international community are indispensable. It is important that educational policies are clearly stipulated in countries' PRSPs and other overall development strategies.

It is imperative that the international community actively provide required support based on countries' efforts. From the perspective of resource mobilization, it is necessary to examine how to finance effectively and efficiently, based on constraints such as the absorbing capacity of the recipient countries. Regarding pooled assistance and direct budgetary support, I believe that prerequisites for those issues such as public expenditure management and budgetary implementation capacity building must be first addressed. After those hurdles are cleared, such multiple aid modalities should be utilized. Furthermore, direct donor support for recurrent costs should require cautious examination before we move forward.

In order to implement an Action Plan in the most productive way, we need to promote collaboration and cooperation among various institutions engaged, based on their respective roles. Considering UNESCO's critical role in the field of education, it is essential to coordinate the Bank's activities with those of UNESCO and to adjust the Bank's work in education to activities of UNESCO without any duplication. Furthermore, from the viewpoint of Education for Dynamic Economies, I would like to emphasize the importance not only of primary education, but also of post-primary education including adult literacy. It is indispensable that efforts in primary education are made consistently in line with efforts in post-primary education. In this connection, I would like to add that Japan has been making efforts to contribute to bridging the international digital divide as announced at the Kyushu-Okinawa Summit 2000.

 
Heavily Indebted Poor Countries (HIPC)

Under the Enhanced HIPC Initiative, 26 countries have reached their decision points and 5 of those countries have reached their completion points thus far. I welcome the steady progress being made since the last Joint Development Committee meeting. However, among the countries that have not yet reached the decision point or that have already reached it but not the completion point, some are faced with difficulties. For these countries to make a smooth transition to the next phase, it is vital that the World Bank and IMF provide necessary support, taking into account the principle under the Initiative of rewarding good performers.

In addition, I would like to emphasize that continued efforts will be required even in countries that have reached their completion points in order to realize poverty reduction. It is necessary for these countries to make their own efforts to address their medium-term challenges such as enhancing capacity in debt management and diversifying export basis to transform their vulnerable economic structures, while continuing to implement appropriate macroeconomic policies based on their individual PRSPs.

 
Harmonization of Operational Policies and Procedures

Regarding progress on the harmonization of operational policies and procedures since the April 2001 meeting of the Development Committee, I welcome concrete efforts based on the Comprehensive Development Framework (CDF) and PRSPs made at the country and regional level through cooperation with the DAC and individual donor country aid institutions. I also welcome the conclusion of the MOU (memorandum of understanding) between the World Bank and regional development banks on the division of labor, knowledge sharing, and cooperation in operational procedures.

As the terms of cooperation found in the MOU are steadily implemented, it will be necessary that their implementation be reviewed at certain intervals. Additionally, harmonization of MDBs, not only of operational policies and procedures, but also of country assistance strategies, is essential. United Nations institutions also carry out their work closely related to that of the World Bank, and cooperation between such institutions and the World Bank should be further strengthened in various channels.

 
Anti Money Laundering Action Plan and Fighting Terrorist Financing

I welcome the active involvement of the World Bank and IMF in the fight against money laundering and financing of terrorism. Tackling these issues is indispensable to sound economic activities and hence an important development issue.

I also welcome the progress made toward establishing a common approach to the assessment of TATF 40+8, based on the principles of a ROSC. The international community needs to be ready to provide technical assistance in response to the requirements of developing countries. I commend the already strengthened cooperation among the institutions in charge. It is essential that the World Bank and IMF also respond appropriately to the need for technical assistance.

 
Reconstruction Assistance to Afghanistan from the International Community

Finally, I would like to address the international community's reconstruction assistance to Afghanistan.

As a responsible member of the international community, Japan will continue to tackle the challenges of the international community with enthusiasm and ownership to enable Afghanistan to achieve reconstruction and stability in people's livelihoods as soon as possible. With this in mind, Japan hosted the International Conference on Reconstruction Assistance to Afghanistan in Tokyo last January. At the Conference attended by ministers and representatives from 61 countries and 21 international organizations, a political message to support Afghanistan's peace and stability was expressed by the international community, and pledges and commitments totaling more than 4.5 billion US dollars were announced, including Japan's contribution of up to 500 million US dollars over two and a half years. Once again, I would like to express my sincere gratitude to those countries and institutions that participated.

At the Conference, the World Bank proposed more than 500 million US dollars over two and a half years in concessional assistance as well as grant assistance to Afghanistan. As the first step, the Board of Directors at the Bank recently approved the Transitional Support Strategy for Afghanistan. I welcome this step, and look forward to the Bank's further active support of Afghanistan's own efforts for reconstruction, in cooperation with donor countries, the Asian Development Bank and other relevant institutions, making use of its experience in post-conflict reconstruction assistance.