Japan’s Plan to Reduce Aid Worries Cambodia

The Japanese government, which will pump $138 million into Cambodia this year, is considering cutting foreign aid by as much as 30 percent next year and redirecting the money to its own sputtering economy.

Cambodian officials and economists say any cuts in financial assistance to Cambodia could have negative impacts on the country’s development. But a Japanese embassy official said Tuesday it is too early to tell how big the cuts will be and whether Cambodia will even be affected.

“It is clear that the Japanese [foreign aid] is going to be cut next year,” said Eiji Yamamoto, counselor at the embassy. But, he said, that doesn’t mean Cam-bodia will be a target of the cut.

“We believe our aid to Cam-bodia has been effective so far,” he said. “I hope there will be no negative impact of the cut.”

Japan, the world’s largest donor of Official Development Assistance, gave $15.3 billion worldwide last year, the embassy said. Japan has given Cambodia more than $860 million since 1992, including $138 million pledged at the Consultative Group meeting in Paris earlier this year. Most of the money comes as grants, not loans.

But Japan has been struggling  the past several years to recharge a sluggish economy and reduce debts.

Japanese politicians have been discussing how much ODA money to cut from the budget after Shizuka Kamei, a powerful lawmaker of the leading Liberal Democrat Party, proposed slicing it by 30 percent next year, the Japanese Embassy said.

The Japanese newspaper Asahi Shimbun reported Tues-day that the government will probably propose a 3 percent cut instead. The report said it’s too late to reduce the aid by a double-digit percentage because Japan cannot abandon on-going projects in developing countries. The cut will target funds for the Japan Bank for International Co-operation, a major source of low-interest loans to developing countries, the report stated.

The debate in Japan comes as the Cambodian government prepares a budget proposal for the next fiscal year, which starts in April 2001. The Japanese government originally sought a 1.3 percent increase in ODA, but the Liberal Democrat Party opposed it, saying the tax money should be used for Japan’s domestic development.

Some economic observers here said cuts in Japan’s foreign aid would force Cambodia to use outside financial assistance more wisely and effectively.

Others say Cambodia should shift the engine of its development from foreign aid to private investment and utilize more domestic money for development. One-third of Cambodia’s annual national budget comes from international donors.

“Everybody should know that grant aids won’t last forever,” said Sok Hach, macro-economist with the Cambodia Development Re­source Institute. “That’s why Cambodia should make more efforts to mobilize domestic [financial] resources.”

 

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