La'o Hamutuk Bulletin Vol. 3, No. 6 August 2002

Japan is the richest nation in Asia and the second richest in the world. Since the early 1970s, Japan has been a major global economic power, challenging U.S. domination over global investment and markets. Japan is one of the five largest contributors to the IMF and World Bank. As such, it has one of the largest voting shares in these two international financial institutions. Japan is also the top regional power in the Asian Development Bank (ADB), sharing equal power with the United States, one of the ADB’s non-regional member states.

Japan has been the largest contributor of multilateral and bilateral aid to East Timor since September 1999. The government of Japan contributed US$100 million to Interfet and $30 million in humanitarian assistance during the emergency phase after the referendum. Much of this money was disbursed through multilateral agencies such as the World Food Programme (WFP) and the UN High Commission on Refugees (UNHCR), to the UN Consolidated Appeal and International Committee of the Red Cross Appeal, and to Japanese NGOs. At the December 1999 Tokyo Donors’ Conference for East Timor, Japan pledged $100 million for the rehabilitation and development of East Timor over a period of three years. 90% of this first pledge has already been administered. At the last Donors’ Conference for East Timor held in Dili the week before official independence ceremonies, Japan pledged an additional $50 million over the next three years.

While East Timor certainly deserves this level of financial assistance from members of the international community, it is important to examine some of the influences Japanese aid could have on the future development of East Timor. This article will put Japanese aid to East Timor in the context of Japanese assistance to other countries. It will first define how the government of Japan provides aid, and then look at some of the ways in which the structure of Japanese aid is linked to the health of the Japanese economy. This article will also examine the Japanese government’s relationship to East Timor with particular attention to the rehabilitation of infrastructure in East Timor. Two related articles appear in this edition of the bulletin: one dealing with the rehabilitation of electrical power in East Timor, a project to which Japanese aid has contributed a great deal of funding (see "Special Report on Electricity") and another looking at with the Japanese Self Defense Force presence in East Timor (see below).

Japan is currently the largest aid donor in the world. While it gives more aid dollars than any other country, this money represents only a small percentage of Japan’s actual wealth. In 2000, Japan gave only 0.27 percent of its Gross National Product (GNP) to other countries as overseas development assistance, far below the 0.7 percent target set by the United Nations.

Japanese aid provides assistance to more than 140 countries and is distributed in three main ways: bilateral grants, bilateral loans (direct to countries) and contributions to international organizations (such as to UN Agencies and the World Bank). The government of Japan provides aid to developing countries based on four principles cited in the Official Development Assistance Charter created in Tokyo in 1992:

The administration of Japanese aid is usually negotiated directly between the government of the recipient country and the government of Japan. Prior to the transfer of powers on 20 May 2002, however, the procedure of administering projects in East Timor was more complicated due to the absence of an independent government. During the transitional period, negotiations involved the Government of Japan, UNTAET, and the East Timor Public Administration (ETPA). In addition, the United Nations Development Programme (UNDP) and the United Nations Office for Project Services (UNOPS) have been involved in the administration and implementation of some Japanese-funded projects. Since independence, the government of Japan is now waiting for the new East Timorese government to begin negotiating bilateral aid projects between the two governments.

Since the 1990s, Japan has shown a renewed interest in exerting political influence in the Asia-Pacific region. Not surprisingly, this interest in its neighbours coincided with an increase in Japanese aid to countries in the region. In 1996, over 50% of Japanese aid went to Asia and Oceania. In 1994, 51.8% of overall aid to Asia came from Japan. Japan is the biggest contributor of aid to Asia, and Asia is a priority for Japan in terms of how it distributes its own aid.

Japan tries to create a good environment for its own businesses in a recipient country. In this way, the health of the Japanese economy is related to how Japan distributes its aid. This happens in two ways. Firstly, Japanese aid is often ‘tied’, meaning that it comes with certain conditions. For example, Japanese aid to a country for the purpose of building roads might only be given with the condition that Japanese consultants and engineers are hired. By giving ‘tied’ aid, the Japanese government is ensuring work for its own citizens. This also means that, through wages, consultant’s salaries, and contract fees, most of the aid money comes back to Japan. The second way that Japanese business influences aid is through the implementation of capitalist market economies allowing Japan to help its own businesses. For example, Japan might direct aid towards the rehabilitation of infrastructure (roads, power, water, ports) in order to gain better access to natural resources that a recipient country might have. Another form of Japanese aid might also be directed to technical and economic assistance in order to stabilize the economy and to thus provide a market for Japanese industrial products such as electronics, transport and telecommunications. A large percentage of Japanese overseas development assistance is in the form of loans. Loans account for approximately 40% of Japan’s bilateral assistance. These loan accounts are handled by the Japan Bank for International Cooperation (JBIC) and used mainly for infrastructure projects such as roads, dams and power plants. Indonesia is the largest recipient country of Japanese loans, and this has contributed to Indonesia’s accumulated foreign debt.

Japan has been East Timor’s largest bilateral donor since September 1999. Why so much assistance to East Timor? Some Japanese activists view this assistance as a form of reparations for Japan’s past support for the repressive Suharto regime and for Indonesia’s occupation of East Timor. The Japanese government, they explain, supported Indonesia’s occupation, voting against or abstaining on every UN General Assembly resolution supporting East Timor from 1975 through 1998. Japan’s economic interests in Indonesia, its largest trading partner in Asia, were the primary reason for their position on East Timor.

Representatives of the Japanese Embassy explained to La’o Hamutuk in July that the primary reason for Japan’s current support for East Timor is the need for economic stability in Asia. “As the biggest economic power in Asia, Japan must support its neighbors,” explained Shinichi Kusano of the Japanese Embassy’s Economic Section. “The Japanese economy is dependent on the stable flow of international trade and on general stability in the region. The stability of East Timor is particularly important as it is the closest neighbor of Indonesia, one of the largest trading counties in Asia.” In fact, East Timor is also emerging as a trading partner for Japan as four major Japanese companies have made significant investments in East Timor’s Timor Sea oil and gas reserves. Osaka Gas owns 10% of the Sunrise and Evans Shoal fields; Inpex, another major Japanese petroleum company, owns 11.7% fo the Bayu-Undan field as well as shares in other fields. And Phillips Petroleum recently announced that Tokyo Electric Power Company and Tokyo Gas will buy most of the gas from the Bayu-Undan field (for more details, see La’o Hamutuk Bulletin Vol. 3, No. 5).

During the UN Transitional Administration in East Timor, the Japanese Government provided bilateral grants and contributed to multilateral organizations such as UNDP, UNICEF and WFP, as well as the World Bank and Asian Development Bank (ADB) administered Trust Fund for East Timor (TFET). Japan also contributed significant funds to the transitional East Timorese government through the Consolidated Fund for East Timor (CFET).

As the representative of the Japanese Government in East Timor, the Japanese Embassy in Dili is in charge of all direct government aid to East Timor. The Embassy, functioning under the Japanese Ministry of Foreign Affairs and Ministry of Finance, carries out bilateral negotiations, although at present they are still waiting on the initiative of the new East Timorese government.

The Japanese development organization known as the Japan International Cooperation Agency (JICA) administers the majority of Japanese overseas aid to East Timor. This includes technical cooperation, which includes training programs in Japan and overseas, the dispatch of Japanese experts, the provision of equipment and development studies. JICA is not technically part of the government, although it receives funding from it and is supervised by the Ministry of Foreign Affairs. JICA also works closely with the Japanese Ministry of International Trade and Industry and the Japanese Ministry of Agriculture, Forestry, and Fisheries. The only aid which is directly administered by the Japanese Embassy is a program in grants to non-governmental organizations and local government authorities in a variety of small-scale development projects.

The Japanese Government has not yet given any loans to East Timor. However, with independence, this could change. In other Asian nations, initial grants are often used to carry out feasibility studies, which lay the groundwork for future loans from Japan. For example, in East Timor a large part of the money devoted to the rehabilitation and maintenance of infrastructure has been spent on development studies by Japanese consultants to create implementation plans for present and future projects. It would not be surprising if these consultants recommended that the rehabilitation of the electricity sector be implemented with money borrowed by the government of East Timor from the government of Japan.

AGRICULTURE AND COMMUNITY DEVELOPMENT	IMPLEMENTING AGENCY	AMOUNT (MILLIONS OF US$)
Rehabilitation of irrigation system in Manatuto	UNDP	3.4
Seed project (rice and corn)	FAO	0.8
Community activation project (over 5 years)	CFET	5.0
JICA's Community Empowerment Project (CEP)	JICA with NGOs	2.5
Grant assistance to grassroots projects (18 different community bases projects)	Japanese Embassy	1.5
TOTAL		13.2

Since September 1999, when the Indonesian military and their militias destroyed most of East Timor’s infrastructure, there has been an urgent need to rehabilitate basic services such as power, water and roads. Much of this rehabilitation has been concentrated in Dili, and there is still much work to be done in the districts where some major towns still have little to no power or clean water. One of Japan’s major aid contributions is to the rehabilitation of physical infrastructure in East Timor. As of April 2002, the Government of Japan had given US$31.9 million for the rehabilitation of infrastructure (see Table Infrastructure Rehabilitation).

These projects have been implemented based on the Memorandum of Agreement (MOA) signed between the government of Japan, UNTAET, UNDP, and the embrionic East Timorese government (then ETTA) in early 2000. The MOA states that technical assistance can only be provided by hired Japanese nationals. Therefore UNOPS, in implementing the project, hired Japanese consultants and contractors. Thus, much of the money set aside for these projects has actually gone back to Japan. Additionally, UNOPS and UNDP each receive 6% of the total cost of the project as administrative fees. Therefore, in the case of the infrastructure projects in East Timor, UNOPS and UNDP have received nearly US$1.5 million.

This aid has indeed provided significant improvements to East Timor’s infrastructure. At the same time, there have been some complications with the aid truly meeting its goals. In the district of Lautem, for example, in the village of Iliomar, Japanese aid and expertise helped to install two new generators, and yet the town still has no electricity because the aid did not include the cables or poles needed to utilize the energy of the generators. As noted in the accompanying article on electricity in East Timor, many generators, particularly those in outlying communities, are broken and unserviced for long periods of time. While these problems are complex and can not be blamed on Japanese aid alone, it is important to assess how well the goals of any aid have been met.

All aid must be scrutinized to ensure that the money benefits the people of East Timor, and not just foreign consultants and international agencies. The complex arrangement over the past years between UNTAET, the government of Japan and UNDP has meant that each group contributed administrative personnel to Japan’s aid project. These personnel require salaries and overhead costs. This money is often taken out of the aid money, leaving less money for the actual project. Additionally, the requirement for Japanese consultants can prove costly. For example, in the case of the power rehabilitation project, it has been necessary to hire Japanese technical advisors and engineers, despite the fact that these staff, while competent, may not be the most cost-effective. An open and transparent tender process for these positions would ensure that the most competent and cost-effective people were hired. In this way, more money would be available for rehabilitation.

Donor countries must demonstrate their concern for the health of the East Timorese economy, and not just their own domestic economies. Reconstruction plans must be cost-efficient with minimal expenditure on administration and consultants. In addition, they must recognize, strengthen and utilize as fully as possible East Timor’s own skilled workforce.

* All of the figures in the tables, except the details for contributions to infrastructure rehabilitation, come from an April 2002 report "Japan’s Contribution to East Timor" from the Government of Japan. Infrastructure rehabilitation details come from other Japanese Government reports.

Japanese Peacekeepers in East Timor

In March 2002, Japan dispatched 690 military personnel to East Timor. This is Japan’s largest contribution to a United Nations peacekeeping mission, which the Japanese government calls “an epoch-making initiative”. After World War II, in 1946, Japan adopted a new constitution which prohibits the establishment or maintenance of a military force and renounces the use of force to solve international disputes (see sidebar). Since 1954, however, Japan has maintained what is called the Japanese Self-Defense Force (SDF) whose mandate restricts its operations to the area immediately surrounding the island nation as a means to protect itself from attack. In 1992, despite concerns among the public and some political opposition parties, the Japanese government passed a law allowing SDF to participate in UN international peacekeeping missions. This came soon after Japan dispatched minesweeper ships and other naval vessels as part of the U.S.-NATO war against Iraq in 1991, and was intended to legitimize Japanese participation in international military maneuvers. Since then, the Japanese SDF has participated in UN operations in Cambodia, Mozambique, Rwanda, and the Golan Heights (Israel/Syria). Each mission has offered the opportunity to expand the parameters of SDF activities overseas.

Article 9 of Japan’s Constitution

“Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes. In order to accomplish [this] aim…land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be tolerated.”

In fact, a December 2001 amendment to the 1992 law expanded the scope of SDF participation in UN missions, easing restrictions on the use of weapons and participation in certain activities. In a Japan Times report on the amendment, a Defense Agency official stated that the SDF would no longer be “a force in name,” but that it had become a force to be fully activated.

Despite the amendment, Japan’s SDF participation in the UN mission in East Timor has not differed greatly from past missions, focusing on activities such as construction and transportation that are viewed as less likely to lead to armed conflict. The Japanese SDF personnel in East Timor are an engineering battalion. 680 soldiers are working in the field, primarily in the areas close to the Indonesian border (Covalima, Bobonaro, and Oecusse), and ten military engineers are based at PKF Headquarters in Dili, providing logistical support to the field staff. The work of the SDF focuses on the maintenance of the main PKF supply routes, including paving the Dili airport, and fixing bridges and holes on the Dili-Baucau road and the main road from Dili through Maubisse, Suai, Bobonaro and back to Dili.
The work of the Japanese SDF in East Timor is now coordinated by UNMISET and PKF Headquarters. The Japanese SDF plans to remain in East Timor until at least March 2004, with Japanese military personnel being rotated every six months. It is expected that the number of personnel will be slightly decreased in the upcoming September rotation, and that the Japanese SDF presence will be significantly downsized in 2003, as the overall PKF is reduced.

According to a Japanese government press release in May 2002, these “logistic and support operations for [the United Nations] … are expected to provide assistance for the economic activities and daily lives of the East Timorese people.” A Japanese government official, however, told La’o Hamutuk in July that while the soldiers work on some projects requested by local leaders, the primary assistance is to PKF and all projects must be approved by the UN. He also explained that the Japanese battalion is not fixing the roads except in a very temporary manner given a two year time constraint. “The work of building a permanent road,” he explained, “is for the East Timorese government.”

The same official explained that while SDF personnel are working in border areas viewed as security risk regions, they are mostly unarmed and unprepared for combat. He explained that the SDF personnel rely on other PKF battalions for their security, namely New Zealanders in Covalima, Portuguese in Bobonaro and Dili and South Koreans in Oecusse.
Although both the Japanese and East Timorese governments speak about the humanitarian assistance of Japan’s SDF in East Timor, it is unclear how their contribution is humanitarian in any direct way. The SDF presence does nothing to provide local employment, and in fact seems to take jobs away from East Timorese. It is also unclear why peacekeeping troops who are unprepared for combat are working in border areas where they may indeed face armed conflict.

In February 2002, as SDF dispatch plans were still being finalized, three Japanese and twelve East Timorese NGOs, including La’o Hamutuk, expressed opposition to the dispatch. Japanese activists argued that the dispatch violates the Japanese constitution (see sidebar), is extremely expensive and does not support local employment. They also wrote that it is immoral to send in troops without first resolving issues related to the Japanese occupation and demanded a formal apology and reparations for past Japanese abuses in East Timor.

East Timorese activists also demanded a formal apology focusing on “the East Timorese people’s sense of justice” and suggested that “the funds needed to send troops would be better used to compensate victims of abuses during World War II and during Indonesia’s occupation.” During Japan’s occupation of East Timor from 1942-1945, approximately 40,000 East Timorese were killed, thousands were used as forced labor by Japanese soldiers, including thousands of women as sexual slaves. In La’o Hamutuk Bulletin Vol. 3 No. 1, Nuno Rodrigues explained that “the request for the Japanese government to apologize and take responsibility is not only for the Japanese occupation during World War II; it is also for the 24 years that the Japanese government supported Indonesia’s victimization of hundreds of thousands of East Timorese. Only steps such as these will allow the development of strong bilateral ties between East Timor and Japan. East Timor needs financial assistance and assistance in rebuilding the devastated nation should be viewed as a requirement of the Japanese government.”

According to the East Timorese daily Suara Timor Lorosa’e, Foreign Minister José Ramos Horta stated that NGOs should not participate in matters of foreign affairs and should instead give this responsibility to the transitional government. He has also repeatedly stated that East Timor must forget the tragic events of World War II.

Before sending troops, Japan had already contributed US$100 million to the International Forces for East Timor (InterFET), which, along with the SDF contribution, is calculated separately from the “overseas development aid” discussed in the cover article. According to Japanese officials in Dili, the dispatch of the SDF personnel, costing US$53 million, was requested by the United Nations and East Timor. Annual expenses for the SDF presence are estimated to be US$128 million.

East Timor as a nation is a victim of international militarism and nations that prioritized economic interests with Indonesia over human rights in East Timor. La’o Hamutuk again calls on Japan to formally apologize for its part in East Timor’s suffering and to ensure that all aid it provides to East Timor truly and directly address the needs of the East Timorese people.

Who is La’o Hamutuk?

La’o Hamutuk staff: Inês Martins, Thomas (Ató) Freitas, Mericio (Akara) Juvenal, Adriano do Nascimento, Charles Scheiner, Pamela Sexton, Jesuina (Delly) Soares Cabral, Andrew de Sousa

Translation for this Bulletin: José M.C. Belo, Djoni Ferdiwijaya, Helen Donovan, Tomé Xavier Geronimo, Titi Irawati

Executive board: Sr. Maria Dias, Joseph Nevins, Nuno Rodrigues, João Sarmento, Aderito de Jesus Soares

La’o Hamutuk thanks the government of Finland for supporting this publication.

Issue focus: Japanese Aid, Electricity

Table of contents:

Japanese Aid to East Timor

Japanese Peacekeepers in East Timor

Who is La’o Hamutuk?