Japan Turns to Europe, OKs $150-Million Loan for Poland

In a modest departure from its traditional pattern of distributing foreign aid, Japan announced Friday that it will contribute a $150-million loan to a multinational plan aimed at stabilizing the Polish economy.

The loan is Japan’s first firm commitment to providing economic assistance for Eastern Europe since Poland, Hungary and other Communist countries in the region began a recent wave of political and economic reforms.

Although Japan rivals the United States as the world’s leading donor of foreign aid--with a budget of about $10 billion a year--it places priority on assisting the developing nations of Asia, a region where it casts itself in a strategic role.

But the Tokyo government sees the success of economic reforms in Eastern Europe as “indispensable for stabilization of the European situation and of East-West relations in general, with important consequences on the stability in the Asia-Pacific region as well,” Chief Cabinet Secretary Mayumi Moriyama said.

The loan to Poland, offered through the Overseas Economic Cooperation Fund (OECF), will be part of a larger package of loans and grants offered by the United States and other industrialized nations in response to a Polish plea for an infusion of $1 billion to build hard-currency reserves.

The United States will contribute a $200-million grant to Poland, while West Germany has pledged $200 million in loans, according to Foreign Ministry officials.

Japan’s contribution was unveiled simultaneously in Tokyo and Brussels as part of a larger package of Japanese measures aimed at assisting both Poland and Hungary, such as extending conventional credits through the Japan Export-Import Bank and providing emergency food aid and technical cooperation.

Representatives of 24 industrialized nations are meeting in Brussels, deliberating on ways to aid Poland and Hungary.

Final terms of Japan’s $150-million loan have yet to be worked out, and its payment will be made only on the condition that Poland and the International Monetary Fund work out an agreement for a structural adjustment plan, the officials said.

The loan will be yen-denominated but “untied,” meaning it will not be restricted to the financing of commodity imports from Japan, said Kenzo Oshima, director of the Foreign Ministry’s aid policy division. He said the interest rate is likely to be slightly less than 3% with a payback period of 25 years.

Japan first pledged to contribute toward an economic package for Poland and Hungary in July, during the economic summit of industrialized nations in Paris, but has been slow to disclose details amid reports of bureaucratic infighting over the appropriate level of aid.

In principle, Japan does not regard Poland or Hungary as suitable recipients under its Official Development Assistance guidelines because the per capita income in those countries is relatively high--slightly less than $2,000 a year for Poland in 1987, the most recent year for which World Bank figures are available.

It appeared Japan is reluctantly following the lead of the United States in joining the economic assistance program rather than significantly redefining its priorities in foreign aid. Japan is offering Poland a loan instead of a grant, which would not require repayment, because officials deemed this a more “appropriate” gesture, Oshima said.

“It cannot be denied--that part of the world (Eastern Europe) is remote,” Oshima said. “It is not something like China or Korea to Japan.”

Yet Prime Minister Toshiki Kaifu reportedly plans to visit Eastern Europe in January, shortly before he is expected to dissolve the lower house of Parliament and call a general election. Some pundits speculate that Kaifu hopes to use such a trip to boost the popularity of his new administration by playing the role of statesman.

There have been no indications, however, that Kaifu made any personal efforts to advocate an economic package for Poland or Hungary.

The only precedent for Japan’s dispersing foreign aid in Eastern Europe, Oshima said, was an OECF loan to Bulgaria in 1975 for 4.8 billion yen--worth about $34.3 million at today’s exchange rates but of considerably less value at that time.

Japan, meanwhile, has been beset by Poland’s inability to repay its foreign debt since the 1970s. Oshima estimated Poland is in as much as $1 billion in arrears to the Japan Export-Import Bank and to private Japanese creditors. As part of the new package, the Japanese government hopes to resume coverage under international export and investment insurance programs, for which Poland was disqualified in 1981.