7 - The Transformative Role of Japan's Official Development Assistance: An Economic Partnership with Southeast Asia

Summary

Japan's relationship with Southeast Asia has evolved dramatically through-out the post-war era. In the 1950s, memories of Japan's wartime aggression led Southeast Asian states to view Japan suspiciously. Most reluctantly concluded peace treaties with Japan only in response to United States (U.S.) pressure and promises of Japanese economic reparations. Political relations were strained and economic ones were extremely limited despite the complementarity between resource poor Japan and resource rich Southeast Asia.

Today, Japan is the largest provider of economic aid to Southeast Asia and its largest source of foreign direct investment. Japanese economic engagement has played an important role in the region's economic development. The legacy of these comprehensive economic interactions is a wholesale turnaround in Southeast Asian political relations with Japan. Southeast Asian views Japan as a good neighbour and an important participant in Association of Southeast Asian Nations (ASEAN) activities.

PIVOTAL ROLE OF JAPANESE GOVERNMENT ODA

This essay provides an overview of the evolution of Japanese Official Development Assistance (ODA) to Southeast Asia, which encompasses the ten ASEAN members, and now in a very small way, East Timor.

Japan's foreign aid to Southeast Asia has been, and is, an integral, synergistic component of Japan's overall economic relationship with the region. The successful economic development and growth of both Japan and Southeast Asian nations has meant that, over time, trade and Japanese business investment in the area have burgeoned, so aid has come to play a more modest role. Despite many problems and inefficiencies, Japan's aid programme has been quite successful, not only in straightforward economic development terms, but in broader terms as well, meeting the interests both of Japan and of Southeast Asia. In the first part of the essay, I consider Japan's ODA policy and its evolution, the major Japanese players, ODA flows to Southeast Asia, and aid's synergies with the economic relationships. I then document the dramatic expansion of Japanese foreign direct investment (FDI) to Southeast Asia, and note ASEAN's role. I adopt as my lens what I deem the Japanese government and business perspectives to have been.