Using people’s money

HIROSHIMA: Before leaving Manila last week sources told me that Japan was planning to reduce by a drastic 40 percent its official development assistance or ODA to the Philippines. The reason? Partly corruption, and partly the lack of counterpart funds.

The good news is that Japanese Foreign Minister Yoriko Kawaguchi, reappointed just days ago to her post together with the entire Cabinet of Junichiro Koizumi, told me in Tokyo that she had not heard of any such plan.

The bad news for weak republics like ours is that the Ja-panese are increasingly pushing for efficiency in the utilization of their financial assistance and are putting a premium on transparency. Kawaguchi made this clear when she met with me and nine other journalists from the Association of Southeast Asian Nations.

"We are using our people‚s tax and people‚s money has to be used in an efficient manner," she said.

When will we hear a Philippine government official say something like that and make us believe it?

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In August this year Japan revised its ODA charter, concentrating the bulk of its financial assistance on ASEAN. So far, no specific ODA amounts have been proposed for each of the 10 ASEAN members. But Kawaguchi said Tokyo wants to reduce the "country-by-country differentials" or wide gaps in the levels of development among ASEAN members.

One way of bridging the development gap is by encouraging Japanese investors to go to Southeast Asia. But while Tokyo has the final say on the amount of aid for each country, it cannot tell its private investors where to put their money.

What Tokyo can do is lay down the criteria for making individual countries more attractive to investments. Kawaguchi said transparency, the rule of law, incentives to business, a level playing field and a country‚s natural resources for specific industries all add up to the decision-making of investors.

"Democracy, we feel, is important," she added. Japanese ODA to Myanmar, for example, has been suspended since July following the arrest of Nobel laureate Aung San Suu Kyi.

Security is also an "important" consideration, she said.

Kawaguchi pointed out that even Japan has to work at attracting more investments. Japanese officials know high labor costs are driving away even Japanese businessmen to neighboring countries such as China.

"There is competition among countries. There is competition even among the states of the United States (for investments). So this is really a free market," Kawaguchi said. "Each country has to have some way of overcoming difficulties, disadvantages that other countries do not have… and Japan is willing to help other countries overcome these difficulties."

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So how is the Philippines doing in the corruption and efficiency departments? Ask the Japanese ambassador, and while you‚re at it, ask him how he’s sleeping these days in Manila.

Philippine public officials can‚t even make up their minds on the site of projects. Chairman Felicito Payumo of the Subic Bay Metropolitan Authority and his predecessor, Tourism Secretary Richard Gordon, are fighting over the site of the P12-billion Subic Port Modernization Project. Earlier this month Payumo groused that the Japanese Bank for International Cooperation was ready to scrap its funding for the project because of plans, backed by Gordon, to move the site from Cubi Point to the naval supply depot in nearby Sitio Agusuin.

As for counterpart funds, this has long been a problem for ODA-financed development projects in this country. We lack counterpart funds even for the aid offered by Washington for the modernization of the Armed Forces of the Philippines. Malacañang sources told me that this was one of the items raised by the Americans during the recent "joint defense assessment" between the two countries.

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Despite all the problems, the Philippines is one of three Southeast Asian nations being eyed by Tokyo for a "comprehensive economic partnership" or CEP similar to the one Japan has with Singapore. This is something more than a free trade agreement, which covers mainly liberalization of trade in goods and services. A comprehensive economic partnership covers liberalization of almost all aspects of economic activity, including investment rules and government procurement.

Naoki Ito, director of the Second Southeast Asia Division of the Asian and Oceanian Affairs Bureau at the Ministry of Foreign Affairs, led a 35-member Japanese delegation at the second round of the "joint coordinating team" for the CEP in Manila last Nov. 13-14. The first round was held in September.

The Philippine delegation, headed by middle-level go-vernment officials, had 99 members, including representatives from the private sector. Ito said the Philippine team appeared receptive to the concerns raised by the Japanese: inconsistency in government policies, inadequate infrastructure, and the need for more transparency on rules and regulations. Ito said the Philippine team promised to study the Japanese concerns.

In turn, Manila wants to send more nurses and caregi-vers to Japan; Tokyo is studying the proposal.

"We had a really, really good discussion last week," Ito told me in Tokyo. "This is a process to develop mutual understanding."

I did not have the heart to tell the optimistic Ito that Phi-lippine officials can be an exceptionally "studious" lot, with proposals getting bogged down in study groups and task forces from one administration to the next.

Ito would not give a timetable for the talks, but said negotiations with the Philippines were proceeding at the same pace as Japan‚s initiative with Thailand and Malaysia. With Singapore the negotiations took years, he said.

The CEP is one of the thrusts Japan is pursuing to redefine its relationship with ASEAN. Foreign Minister Kawaguchi said Tokyo wanted the ties to evolve beyond a "donor-receiver" relationship into a genuine partnership.

The evolution could be frustratingly slow, considering how much many Southeast Asian countries depend on Ja-panese ODA. But the process could be speeded up if nations can become more competitive in attracting investments.

If competitiveness means more transparency and less corruption, the Philippines has a long way to go.