Japan helps others to help - Japan

By , Robert Stewart Emerson is an American investment adviser in Yokohama.

Japanese Prime Minister Suzuki has been telling everyone who would listen about Japan's new five-year plan for doubling its overseas development assistance (ODA) to the third world.

To place this flow of grants in its proper perspective:

Until as recently as 1976 Japan ranked a rather poor fifth of the five major Organization for Economic Cooperation and Development (OECD) nations in terms of the percentage of its ODA grants to GNP. Between 1976 and 1981, in an attempt to hold down its steadily rising foreign exchange reserves, Japan doubled its ODA grants, and it plans to double its ODA grants again between 1981 and 1985. But stepped-up ODA grants notwithstanding, Japan's foreign exchange reserves have continued rising steadily.

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Japan has never been at all altruistic about its foreign aid programs, and one does not have to look very far for the reasons behind Japan's almost desperate generosity. Soon after the 1973-74 oil crisis, Japan's Ministry of International Trade and Industry (MITI) developed a plan to reflect Japan's energy-short, rising-cost-of-labor, post-oil-crisis situation. ''Japan's Industrial Structure - A Long Term Vision'' contemplated the restructuring of Japanese industry by ''giving away'' to appropriate third-world countries Japan's labor-intensive, energy-consuming, polluting heavy industries. Japanese industry would then concentrate on the development of high-technology, sophisticated, knowledge-intensive industries. MITI contemplated that these industries would produce against global, not domestic, demand bases and so maximize the production cost advantages from economies of scale.

This ''Long Term Vision'' has been developing smoothly enough: Japan has been assisting Indonesia in constructing an (energy-consuming) aluminum plant and is cutting back on its own production capacity. It has been assisting Brazil in constructing a (labor-intensive) steel mill, Saudi Arabia a petrochemical complex, and so on. Naturally, Japanese machinery and equipment is being exported for use in most of these projects.

Meanwhile, since 1976 Japan has been steadily expanding its foreign markets for its new high-technology products. In addition, because Japan has been ''giving away'' its raw material-intensive, energy-consuming industries, the relative cost to Japanese industry for its imported raw materials has been dropping. Which, of course, has also been contributing to Japan's steadily growing trade surplus and, despite Japan's plan for doubling its ODA grants, to its steadily rising foreign exchange reserves.

Because Japan's Western trading partners are falling further behind in their competition with Japanese industry for international markets, there has been increasing talk in the West about protectionist measures. Considered against this background, Prime Minister Suzuki's trumpeting of Japanese plans for doubling its ODA grants seems to be a bit like grasping at straws. Moreover, instead of being a cure for the problem of increasing foreign exchange reserves, Japan's doubling of its ODA grants could be making matters even worse. It is virtually impossible to make clear distinctions between Japan's foreign grant aid, its foreign trade, and its overseas investments. Each is - deliberately, so it seems - part of an interrelated, synergetic JAPAN INC. type of arrangement. Every bit of Japan's foreign aid, be it tied aid or grant aid, has always been - and still is - a carefully planned program designed to increase Japan's overall trade surplus and its foreign exchange reserves.

As matters now stand, MITI's ''Long Term Vision'' has become a machine whose capacity for earning foreign exchange far exceeds the outlays from Japan's doubling of its ODA programs. Japan's problem now is that it is becoming the largest exporter of capital in the free world.

For years now the Western democracies have been stressing the distribution of the fruits of industrial production and the expansion of the consumer sectors of their economies to the exclusion of virtually every other single consideration. Japan has not done so. Japan, instead, has been single-mindedly pursuing its objective of ''catching up with the West.'' In doing so it has not only ignored the development of the consumer sector of its economy, but has also deferred all but the most pressing improvements to its social overhead capital structure.

For example, total welfare expenditures in the United States have consistently averaged close to 20 percent of the nation's GNP. In considerable contrast to this, Japan's expenditure for welfare did not exceed 10 percent of its GNP until 1975. Both sides, it seems, have driven much too far in their respective directions.

It is in this sector, not in doubling ODA grants, that the reconciliation between Japan and its Western trading partners must be made.

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