Overview of Japan's ODA on Water Sector in Indonesia And

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OVERVIEWOFJAPAN’S ODA IN INDONESIAAND STRATEGICFRAMEWORKOFODA

KEISUKE SUMIKAWA

Executive Sr. Managing Director Nippon Koei Co., Ltd. , Japan

Masahiro MURAKAMI

Professor for Social System Technology, KochiUniversity of Technology

OVERVIEW OF JAPAN'S ODA IN INDONESIA

Function of Public Works

In the surrounding of us, we find provision of ‘Public Works’, such as electricity, water supply, roads and bridges, which contribute to support our living and productive activities. When we travel around or stay in some foreign country, we can notice difference of public works between our own and other country, which eventually relates to the difference in socio-economic development between the countries.It is said that the socio-economic development of a country depends on the quantity and quality of the three factors, namely, ‘capital’, ‘labor force’ and ‘total factor productivity’, and the development support the nation’s living and productive activities, as seen on the Figure1.

Figure 1. Function of Public Works

Total factor productivity (TFP) is defined that TFP is the remainder other than the factors such as input of capital and input of labor force which contribute to the socio-economic development of the country, and the effect of TFP depends on the quality of four elements in terms of ‘Public works’, ‘Human resource’, ‘Research’ and ‘Economic system’.

‘Public works’, once provided, are able to offer long-term services to the nation, and contribute to the improvement of TFP by constituting a part of the nation’s capital as an external economy to the productive activities of the private sectors. ‘Human resource’ means betterment of labor force capacity with trainings and/or experiences, ‘Research’ means activation of technology/skill development by research activities, and ‘Economic system’ means improvement of social system related to economic activities.

ODA OF JAPAN IN INDONESIA

ODA for Public Works

Most of the public works require relatively large investment and long period from its identification to its completion for the public use, therefore, the Government takes usually the responsibility of its study and implementation, for which the facility called ‘Official Development Assistance, or ODA’ has played appreciably important role in the developing countries.

ODA in Indonesia

1.Basic Policy and Water Policy

Basic policy (1): Country policy of Japan’s ODA in Indonesia was originally prepared in 1999, in which Indonesia’s priority areas for ODA are recognized in brief as such that: on the basis of studies and research concerning development conditions and tasks in Indonesia and its development plans, as well as policy dialogues between Japan and Indonesia, including the High-Level Mission on Economic and Technical Cooperation sent to Indonesia in February 1994 and subsequent policy dialogues, Japan has given priority to assistance in the areas of 1) Achieving equality, 2) Human resources development and education, 3) Environmental conservation, 4) Support for industrial restructuring, and, 5) Industrial infrastructure (and economic infrastructure).

It is noted that the policy above is being updated, since the specific strategy is time dependent with an assumption of its adaptability for about 5-years.

Water policy (2): In ‘The 3rd World Water Forum’ held in March 2003, Japan presented an ‘Initiative for Japan's ODA on Water’, in which ‘Comprehensive approach’ states that Japan will continue efforts, in particular, focus on the following 3 salient measures, 1) Providing drinking water and sanitation to poor countries and regions, 2) Addressing the needs to provide large-scale financing to urban areas, 3) Assisting capacity building, and ‘Concrete actions, relative to Indonesia’, are stated as follows.

Concrete Actions (relative to Indonesia): For its comprehensive approach to materialize, and in the context of the efforts to achieve international targets, Japan will promote economic cooperation in the water sector under the pillars of: 1) Safe drinking water supply and sanitation (Strengthening the development and operation/maintenance on water supply system and sewerage system), 2) Improvement of water productivity (Reinforcement of Government policy and implementing capacity to improve water productivity, Increase of agricultural productivity by improving irrigation system and technique, and Construction of irrigation facilities and reinforcement of local community organizations through participatory development of water resources), 3) Addressing the problem of water pollution and ecosystem conservation (Package cooperation on institutional measures and cleaner production technology to prevent industrial pollution, and, Water quality improvement to conserve the environment and aqua-ecology), 4) Disaster mitigation (Comprehensive development plan, equipment and technology for flood control), 5) Water resources management (Planning on water resources development and management and capacity building of implementing agencies, and,Promotion of effective use and capacity building of management for existing infrastructure and strengthening of operation/maintenance capacity).

1. JICA and JBIC Assistance Record (3)

Japan has two kinds of ODA channels, one by ‘Bi-lateral’ and the other by ‘Multi-lateral’, amount of which since 1991 are seen on Figure 2, total about 1,400 billion yen, a dropdown at mid-time of 90’s due to the effect of the financial crises in Asian region, and about 80 percent by Bi-lateral channel chiefly through the executing agencies of JICA and JBIC.

Figure 2. Japan ODA Record

(1)JICA assistance record

JICA assistance record is seen on Figure 3 (1), broadly categorized into ‘Grant aid’ and ‘Technical cooperation’, an amount of total about 30 billion yen in 1991, being decreased to about 20 million yen, except in 1998 immediately after financial crisis.

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Figure 3. (1) JICA Record-Total
(Indonesia)

Figure 3. (2) JICA Record-Water Section
(Indonesia)

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Assistance record in water sector is seen on Figure 3 (2), an amount of total about 1,400 million yen in 1991 being decreased to 380 million yen in 2002, drawdown ratio being large to be compared to the total ODA amount (Figure 2). Trend is in more detail seen as, 1) River management and irrigation have been the major items since 1991, 2) Water supply, Sewerage and Water-power occupied appreciable amounts in the first stage of 90’s, and 3) Water resources development including groundwater has been occasional.

(2)JBIC assistance record

JBIC assistance record is seen on Figure 4 (1), amount of which was about 160 billion yen, increased upto about 230 billion yen immediately after the financial crisis but decreased appreciably afterward to about 90 billion yen in 2002.

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Figure 4. (1) JBIC Record-Total
(Indonesia)

Figure 4. (2) JBIC Record-Water Section
(Indonesia)

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Assistance record in water sector is seen on Figure 4 (2), amount change being similar to the total ODA amount, maximum about 900 billion yen in 1998 with sharp drawdown afterward. Trend in detail has been, 1) priority placed on irrigation, 2) water power decreased appreciably since mid-time of 90’s and 3) water supply occasional.

3. Overview of Japan’s ODA in Indonesia

(1)Population and socio-economic indicators in Indonesia (4)

Figure 5. (1) Population ( Indonesia)

Population of Indonesia since 1991 is seen on Figures 5 (1). Total population was 179 million in 1991 and increased to 202 million in 2002, annual ratio at 1.8% in 1991/1996 and 0.5% in 1996/2002, 1.1% through the period. Migration to urban area has occurred appreciably, urban population was 31% in 1991 and increased to 43% in 2002, 10% increase in the 11 years period.

It is altogether seen that socio-economic indicators in Indonesia had been improved favorably since 1991, however the happening of the monetary and financial crisis in 1997 invited political-administrative instability accompanied with stagnant of economic situation until 90’s end when restoration had been indicated.

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Figure 5. (2) Economic Indicator (Indonesia)

Figure 5. (3) Social Indicator (Indonesia)

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(2)Unsteady and rapid change of external circumstance of ODA

Until the occurrence of monetary crisis coupled with the financial crisis in the year 1997, the ODA in terms of water resources development had been continued for the implementation of the public works including hydro-power, municipal/industry water supply, flood protection, irrigation, and so on, for the purpose of aiding the development of national level socio-economy. Since then, the context of the ODA has been changed remarkably depending on the unsteady and rapid change of external circumstance and conditions. Short-term change of the government regime, policies/provisions for the stream towards de-centralization and the poverty alleviation, etc. have caused multiplicity and diversity of the ODA including quality change from hard-form to soft form such as adopting spread, localized, community participation, and capacity building of civil service organizations, in addition, improvement and rehabilitation of the existing-aged facilities built with the ODA in the past.

Such an external circumstance change of the ODA has been taking place in every region in Asia. At the same time internal critical call for the improvement in transparency and efficiency of the ODA is getting significant, accompanied with the financial crisis. It has therefore been admitted that the ODA should be managed on a framework of a strategy ‘a set of integrated action to attain the objective sustainablly through competitive advantages’.

STRATEGY OF JAPAN’S ODA

Strategic Framework of ODA

A standing committee ‘ODA Strategy Committee’ under the coordination of the Ministry of Foreign Affaires of Japan has been established since 2002 for the purpose to discuss and recommend the policies and significance/priority of principal projects. One of its outcomes is promotion of strategic management of the ODA, in a form as seen on Figure6.

Figure 6. Strategic Framework of Japan’sODA

(1)‘Philosophy’ is positioned at top layer materialized as ‘ODA charter’ with clauses stipulating objectives and principles of Japanese government,

(2)‘Overall Strategy’ is positioned at middle layer materialized as ‘ODA policy at mid-term’ with clauses stipulating basic ideas, important issues and regional assistance guidelines, bridging between the Philosophy above and Detail strategy below, and

(3)‘Detailed Strategy’ is positioned at bottom layer to be composed of ‘Respective country plan’ as a kind of warp and ‘Respective sector initiative’ as weft.

Every ODA project is going to be drawn up with the guidance of the above formulated strategy.

Outline of Respective Strategy

Content of the respective strategy of the ODA is currently as shown in Table 1.

(1)The ‘ODA charter’ was originally prepared in 1992 and updated in 2003.

(2)The ‘ODA policy at mid-term’ was originally prepared in 1999, where mid-term is assumed to be about 5-years, therefore, is being updated.

(3)The ‘Country policy’, with 5-years prospect, has been prepared since 1999 for 15 countries and currently under procedure for additional 5 countries including Indonesia, for which policy prepared in 1999 is currently effective.

It is reported that the ‘Sector Policy has been ready for infectious disease and education to be followed with other initiatives.

Table 1. Contents of Strategic Framework of Japan’s ODA

(#1) prepared in 1999, to be replaced by new policy with contents listed above.

Project adopting ODA

When a project for adopting ODA is to be formulated, it is required to refer at first if the scope of the project would be in the context of the strategic framework or not, especially the context of the Specific Strategy in terms of the ‘Country Policy’ and ‘Sector Policy’ (if available) should be carefully reviewed. For instance, in case the project is to be categorized in water sector in Indonesia, it is known, as shown in Table 2, the country policy accommodates well with the water-sector policy, in other words, ‘Priority Areas for Japan’s ODA’ in the Indonesia country policy meet well with the ‘Comprehensive Approach’ and the ‘Concrete Action’ in the sector policy. It would therefore be assumed that the circumstance of ODA application for the same water sector project may be accepted if the proposal is in due with the detailed examination of the demand.

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Table 2. Keywords in Strategy

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REFERENCES

[1]ODA Country Policy toward East Asia, ODA by Region, MoFA-Japan

[2]Initiative for Japan’s ODA on Water (March 23, 2003), The 3rd World Water Forum

[3]Japan’s ODA Annual Reports and JICA/JBIC Assistance Records

[4]Statistic Records of Indonesian Organizations in charge

[5]Japan’s ODA Annual Report (2002)