Economic Policy

Preventing economic and financial crises is a key element for developing countries in reinforcing fiscal and financial structures. Many ASEAN countries suffered from the loss of their assets and employment in the Asian financial crisis that hit in 1997, causing enormous economic loss. Vulnerability in ASEAN countries' financial systems was cited as one of the main factors behind the crisis. The global financial and economic crises of 2008 also reconfirmed the need to bolster financial systems. The other important issue in this area is public financial management. Efficiently allocating budgets to priority areas of development is key to the efficient utilization of limited funds. In light of this, JICA has provided such support as the following.

(1) Reinforcement of Fiscal Systems

It is important to expand the tax base and increase tax revenues in order to realize policies in developing countries. For that reason, JICA aims to strengthen the administrative capacity of collecting agencies of national tax and tariffs. Specifically, JICA supports efforts to enhance the ability to formulate policies of central government and governmental agencies, including the Ministry of Finance, in partner countries. JICA also promotes capacity development of tax administration agencies to ensure appropriate tax collection based on laws as well as suitable management and utilization of tax revenues.

In addition, JICA provides assistance to supreme audit institutions and other inspection agencies to improve their functions since the ability to identify whether a country's finances are being appropriately managed or not is vital to the efficient allocation of capital.

(2) Reinforcement of Financial Systems

JICA provides support with regard to boosting capacity in financial supervision, enhancing financial intermediary functions, cultivating capital markets and improving small business finance. Stability in financial systems and efficient management of these systems underpins the foundations for a country's stable economic policies; therefore, JICA supports development of capacity of central banks and development banks.

(3) Development of a Macroeconomic Management Infrastructure

JICA provides support for the development of economic laws such as competition law, the formulation of macroeconomic models and the improvement of economic statistics including industry-related tables.

Since there are a number of donors with a proven track record in general budget support^[1] in the fiscal and financial sector, it is important to harmonize with their support and promote collaboration between financial support and technical assistance. Raising the profile of Japanese assistance while taking limited cooperation resources into account is a future challenge in the fiscal and financial sector.