Third World Wary of Japan’s Offer to Debtor Nations

Japan’s offer to use a slice of its enormous savings to help debtor nations has drawn a cool response from Third World states at a major international conference on trade and debt, delegates said Sunday.

A plan to recycle $20 billion of Japan’s current account surplus over three years is a modest concession to poor nations, compared with the $90-billion surplus posted for 1986, developing state delegates said.

Japan’s failure to provide details of how it will lend the money to indebted nations has also been discouraging, delegates to the three-week ministerial United Nations Conference on Trade and Development conference told Reuters.

“Several requests have been made by developing countries for specifics of the recycling plan. If Japan fails to provide them, then its credibility will be in doubt,” a West African delegate said.

A West German diplomat said the plan was “propaganda and designed to reduce international pressure on Tokyo to lower its surplus.”

“There are so few details, it is difficult to take it seriously. But it looks like an export finance plan to enable Third World nations to buy Japanese goods,” he said.

Japanese Foreign Minister Tadashi Kuranari is scheduled to address a plenary session of the conference today.

However, a Japanese delegate said the minister was unlikely to disclose more details of the plan because officials were still wrangling over how the cash would be carved out of Japan’s domestic budget.

With estimates for growth in 1987 being revised downward, some Western economists fear a recession in the industrial world could prompt Third World nations to stop paying interest on debts and plunge the world banking system into crisis.

Brazil, which has a foreign debt of some $100 billion, and Ivory Coast recently halted interest payments to commercial banks.

Following the failure of the 1985 plan by U.S. Treasury Secretary James Baker to make available new loans to Third World nations and case-by-case reschedulings, economists have urged Japan to take the lead by providing fresh capital.

The World Institute for Development Economic Research has said Tokyo should take bolder action and recycle $125 billion to developing countries at an annual rate of $25 billion for five years.

Japan, the world’s largest creditor nation, wants to use its offer of $20 billion to co-finance new Third World loans administered by the World Bank and regional development bodies.

It hopes that by linking lending to long-term development programs, commercial banks will regain confidence in the ability of developing states to repay loans and resume lending, Japanese diplomats at the conference said.

Indonesia and the Philippines have been named as recipients of the recycled savings. Several Latin American countries are considered possible candidates, they added.

Developing countries welcomed Tokyo’s separate offer to double development aid payments over the next three years.

Despite its riches, Japan spends just 0.3% a year of its gross national product on development aid. Japanese officials say they have no plans to meet an official 0.7% United Nations target.

WIDER board Chairman Saburo Okita told an plenary session last week that the debt problem could be solved only if governments, agencies like the International Monetary Fund and commercial banks cooperate in a “patchwork approach” to provide new capital for developing countries.

The $20-billion recycling scheme was announced in May when Japanese Prime Minister Yasuhiro Nakasone met President Reagan in Washington to reduce trade tensions and stabilize the dollar.