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Statement by Japan, at the 67th WB/IMF Development Committee (Washington, D.C. / Apr. 13, 2003)


Statementby the Hon. Masajuro Shiokawa
Minister of Finance of Japan
At the 67th Meeting of the World Bank/IMF
Joint Development Committee
Washington, D.C., April 13, 2003


First of all, I would like to report to the Committee that, prior to thismeeting, the Government of Japan obtained parliamentary approval for itssubscription for the thirteenth replenishment of the International DevelopmentAssociation (IDA), and deposited its Instrument of Commitment for IDA13. It is agreat pleasure that Japan's deposit of its instrument of commitment hastriggered effectiveness of the replenishment. I believe that the effectivenessof the IDA13 is among the most significant actions taken recently for achievingthe Millennium Development Goals (MDGs), which is one of the items on the agendaof this meeting.


I. Achieving the MDGs and Related Outcomes

I welcome this opportunity to discuss a framework for monitoring policies andactions needed to achieve the MDGs and related outcomes, as agreed upon at thelast meeting of the Development Committee. It is very important to identify andregularly monitor policies and actions necessary for the progress toward theMDGs and other development goals. We hope that the World Bank, the IMF andRegional Development Banks, in cooperation with other internationalorganizations, will play leading roles in this exercise based on theircomparative advantages.
To ensure the exercise will be truly effective, the following three points mustbe noted:
First, I would like to emphasize that we should not overlook theimportance of sustainable economic growth in developing countries in achievingthe MDGs. It would be virtually impossible to achieve these goals by focusingsupport only on areas related to social service delivery, such as education andhealth. The key to making sustainable progress in the medium term toward theMDGs is to generate a self-sustaining cycle: the income level of the poor rises,allowing them to make necessary human-capital investments, and further expandingtheir income opportunities. To realize such a cycle, it is necessary to sustainbroad-based economic growth that will benefit poor people.
Infrastructure investments, private sector development, and improvement ingovernance and institutional capacity play crucial roles in attainingsustainable economic growth. Therefore, it is imperative to monitor policies andactions in these growth-inducing areas. In this sense, we commend the monitoringframework presented for this meeting, as it places emphasis on the central roleof economic growth in achieving the MDGs and related outcomes. We call on theWorld Bank to reflect the idea of prioritizing sustainable economic growth forachieving MDGs on its operations through Country Assistance Strategies (CASs),allocation of budget and human resources, and staff incentives.
Secondly, in identifying and implementing policies and actions needed toachieve the MDGs and related outcomes, it is essential to adopt acountry-specific approach in which country-owned development strategies,including Poverty Reduction Strategy Papers (PRSPs), play a central role. Inother words, it is important to set national development goals in countrydevelopment strategies by localizing the MDGs in the context of country-specificconditions, and then to identify and implement policies and actions needed toaccomplish these localized goals. In this regard, while staff papers highlightcase studies in four specific areas related to social service delivery 末primary education, health, HIV/AIDS, and water and sanitation 末 such asector-focused approach should be taken only as a supplementary to thecountry-specific approach.
Thirdly, in considering the role of development assistance in achievingthe MDGs, I must stress that simply increasing the volume of aid regardless ofabsorptive capacities in the recipient countries will not work. For trulyeffective use of aid, it is essential that good policy and institutionalenvironments be established in the recipient countries. In this regard, it isuseful to make reference to the results of the Bank's Country Policy andInstitutional Assessment (CPIA), as mentioned in the staff paper for thismeeting, and we would like to see further improvements and increasedtransparency of the CPIA exercise. On the other hand, improvement in publicexpenditure management has been one of the major challenges in building capacityin the public sector in developing countries. We call on the World Bank and IMFto cooperate and continue their support in this regard.
Furthermore, we must bear in mind that mobilization of both domestic resourcesand foreign private capital plays a vital role in realizing sustainable economicdevelopment driven by the private sector. Aid must play a catalytic role topromote effective use of these non-aid resources. In this connection, the 3rdWorld Water Forum and Ministerial Conference held in Japan last month called forefficient and effective use of all financial resources, including domestic andprivate ones, as well as the importance of governance and capacity building.Japan has considerable experience in such areas as river management, waterquality control, and water supply and sanitation systems. We also have advancedtechnologies in seawater desalination and wastewater management. Japan hasprovided official development assistance of as much as $1 billion annually inwater supply and sanitation. This volume accounts for about one third of theworld's total ODA in these areas. We will continue to contribute tointernational efforts to address global water issues with our experience andadvanced technologies.
Another important means to increase aid efficiency is harmonization of aidprocedures among donors and international organizations. In promotingharmonization, due consideration for country ownership, a country-specificapproach, and diversity of aid modality is essential. In light of the outcomesof the High-Level Forum on Harmonization held in Rome last February, it isimportant to monitor the progress to this end.
I would like to conclude my remarks on this agenda item by introducing twospecific actions our Government has taken recently for helping achieve the MDGs.
The first one is related to the debt problems of developing countries末 a major challenge that needs to be addressed for achieving the MDGs.Japan has been engaged in the Enhanced HIPC Initiative as the largest bilateralcreditor, accounting for about one fourth of the total bilateral contribution ofthe G7 countries. Previously, Japan's debt relief for HIPCs and otherinternationally-agreed eligible countries had been implemented by providingdebt-relief grants in return for debt repayments. Under the new method, debtrelief is provided directly through cancellation of relevant ODA loans owed tothe Japan Bank for International Cooperation, once the HIPC countries meetspecific criteria such as HIPC completion points. This change becomes effectivethis April. I hope this change will reduce the administrative burden ofdeveloping countries, and lead to earlier resolution of debt problems, thuspromoting poverty reduction.
The second is a trade-related measure. For achieving the MDGs, it isessential to make further efforts to improve market access for productsoriginating from Least Developed Countries (LDCs) in accordance with the WTOMinisterial Declaration in Doha. In the "Koizumi Initiative" announced atthe World Summit on Sustainable Development (WSSD) in Johannesburg last August,Japan announced its intention to make efforts toward the objective of duty-freeand quota-free market access for all LDC products. The measure taken this Apriladds another 198 items on the list of duty-free and quota-free LDC products,increasing the proportion of duty-free and quota-free products in totalJapan's imports from LDCs from 83% to 93%.


II. Enhancing the Voice and Participation of Developing and TransitionCountries

Without country ownership of the Bank and Fund programs, successfulimplementation of the programs and effective promotion of economic developmentand poverty reduction would be unsecured. Therefore, it is important for theBank and the Fund to be more attentive to the voice of developing countries. Onthe other hand, one should bear in mind that a voting mechanism based onrelative positions in the global economy has played a crucial role in ensuringeffective management at both institutions. In this regard, I would like toemphasize the significance of the good tradition the Boards of ExecutiveDirectors at both institutions have cultivated 末 on most occasions inpractice, the Boards have been managed on a consensus basis in spite of theircontribution-based voting mechanisms.
Some options presented in the staff note, such as a possible increase in thebasic votes and extensive use of special majorities, require amendment of theArticles of Agreements, and do not seem very attractive. Likewise, options toincrease the numbers of Development Committee members or Executive Directors donot seem desirable, as the benefit of efficient and effective decision-makingwould be sacrificed.
Instead, supposing the current number of Executive Directors remains unchanged,measures intended to promote more effective functioning of each constituencyshould deserve due consideration. From this point of view, we can support anincrease, to a certain extent, in the number of advisors and assistants assignedto the African constituencies with a large number of countries. We can alsosupport options to facilitate improved communications between Executive Directoroffices and their respective capitals, while taking account of theircost-effectiveness.
In addition to these options, there are alternative ways to enhance the voice ofdeveloping countries at the country operation level. Strengthening ownership ofdeveloping countries through a participatory process in formulating PRSPs, ordeepened engagement of developing countries in formulating CASs shouldcontribute directly to enhancing the voice of developing countries in the Bankand Fund programs. Decentralized country offices of the World Bank can also playan important role in reflecting voices on the ground on its programs.