Abstract

In 1990, Japan agreed to provide financing to support the IMF’s technical assistance to developing member countries to strengthen their capacity to formulate, implement, and maintain macroeconomic and structural adjustment programs. Since then, Japan has been, and continues to be, the largest source of external donor support for the IMF’s technical assistance (TA) activities.1 Japan’s contributions are provided through the “Japan Administered Account for Selected Fund Activities (JSA).”2 In addition, Japan also finances two scholarship programs, one under the JSA and the other under a separate account.

In 1990, Japan agreed to provide financing to support the IMF’s technical assistance to developing member countries to strengthen their capacity to formulate, implement, and maintain macroeconomic and structural adjustment programs. Since then, Japan has been, and continues to be, the largest source of external donor support for the IMF’s technical assistance (TA) activities.1 Japan’s contributions are provided through the “Japan Administered Account for Selected Fund Activities (JSA).”2 In addition, Japan also finances two scholarship programs, one under the JSA and the other under a separate account.

This report consists of a brief description of the IMF and its activities, and particularly its technical assistance activities, the JSA — its objectives, size and scope, and use — with a focus on fiscal year 2002 and the scholarship programs.3

The IMF: Purpose and Activities

The IMF, an international organization of currently 184 member countries, was established in 1946 to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to provide temporary financial assistance to countries with balance of payments difficulties; and to foster economic growth. To achieve these objectives, the IMF carries out three types of operational activities, sometimes referred to as “the three pillars” of IMF work: surveillance, financial assistance, and technical assistance.

Surveillance is the process by which the IMF appraises country and global macroeconomic conditions with particular focus on the maintenance of appropriate exchange rate policies. The IMF carries out its surveillance (or oversight) responsibilities through, among other things, consultations with individual countries, and globally in the context of producing the IMF’s World Economic Outlook.

Financial assistance includes credits and loans extended by the IMF to member countries with balance of payments problems to support policies of economic adjustment and reform.

Technical assistance consists of expertise and training provided by the IMF to its member countries in the areas of its core mandate, namely macroeconomic policy; monetary and foreign exchange policy and systems; fiscal policy and management; external debt; and macroeconomic statistics.

IMF Technical Assistance: Demand and Supply

The IMF began to extend technical assistance to its member countries in the early 1960s in response to requests from newly independent nations in Africa and Asia. By the mid-1980s, resources devoted to technical assistance had nearly doubled. As a result of the expansion of the IMF’s membership and the adoption of market-oriented economies by a large number of countries worldwide, IMF technical assistance activities grew even more rapidly in the early 1990s. In addition, in recent years, the IMF has had to mount significant coordinated efforts to provide prompt policy advice and operational assistance to countries emerging from conflict situations. Currently, the IMF devotes some 300 staff years to technical assistance activities, plus some $10 million for training and scholarships annually.

As the IMF seeks to meet its mandate, the demand on its technical assistance resources is expected to increase in a variety of areas, including helping countries to build capacity for their anti-money laundering and combating financing of terrorism (AML/CFT) efforts; to adopt and adhere to international standards and codes for financial, fiscal, and statistical management; to help Heavily Indebted Poor Countries (HIPCs) design and manage debt reduction programs; and to help low-income countries formulate and implement poverty reduction strategies.

In light of these demand pressures and competing needs, the IMF has taken steps to prioritize technical assistance to reflect the IMF’s core areas of specialization in fiscal, monetary and statistical areas, and in main program areas such as crisis prevention, debt relief and poverty-reduction, fostering macroeconomic stability, post-crisis management, and regional capacity building.

The IMF finances its technical assistance for its member countries mainly from its own budgetary resources, but also receives external financing from bilateral and multilateral partners. The IMF currently spends some $125 million annually on its technical assistance work, accounting for around 18 percent of its annual administrative expenditures. Of this, approximately 55 percent is spent on TA delivered in the field by experts or by IMF missions, and the rest is spent on TA-related work at headquarters. In FY2002, external financing from bilateral and multilateral donor partners accounted for about 25 percent of total TA and about 45 percent of field TA. By far the largest source of external financing was Japan. In FY2002, JSA financing accounted for 30 percent of the IMF’s field-delivered TA. The JSA share of financing for the IMF’s field-delivered TA over the period FY1997-FY2002 is shown in Figure 1.

Figure 1.
Figure 1.

JSA Share of Financing for Technical Assistance, FY1997-FY2002

The Japan Administered Account for Selected Fund Activities (JSA)

Activities funded: Technical Assistance, Regional Office for Asia and the Pacific, and Scholarship Programs

The Government of Japan has provided grant contributions to support the IMF’s technical assistance to member countries since 1990. In 1997, this administered account was amended in order to widen the scope of activities for which contributions could be made to finance other IMF activities in Asia and the Pacific carried out through its Regional Office for Asia and the Pacific in Tokyo.

The responsibilities of the Regional Office in Tokyo include collaboration between the IMF and Japan that would strengthen economic prospects in the Asia Pacific region; support of various regional policy fora such as Asia-Pacific Economic Cooperation (APEC), the Association of South East Asian Nations (ASEAN), and the Pacific Islands Forum; public relations; and technical assistance benefiting developing countries in the region. Examples of the latter include conferences on macroeconomic policy and on financial sector reform (see Box 1). The Office helps to improve understanding of the international financial system in Japan and the region through public relations events as well as by releasing publications in the Japanese language. It also seeks to increase the representation of Japanese and other Asian nationals on the staff of the IMF by encouraging qualified applicants to apply for employment, and supporting the recruitment efforts of IMF headquarters through conducting interviews and holding informational seminars.

In addition, the Government of Japan also provides grant contributions for two scholarship programs. The Japan-IMF Scholarship Program for Advanced Studies, which is administered by the IMF Institute, supports nationals of IMF Asian member countries who undertake doctoral studies in economics in North America in order to pursue a career in international financial institutions, such as the IMF, or in their home administration.

The Japan-IMF Scholarship Program for Asia supports a 12-month course of graduate studies in Japan in macroeconomics or related fields for students from Asia and the Pacific and Central Asia, and is administered by the Regional Office in Tokyo.

Regional Office for Asia and the Pacific: Conferences and Seminars

The IMF’s Regional Office for Asia and the Pacific (OAP) supports the efforts of the countries in the Asia-Pacific region to develop technical skills and institutional capacity to implement sound macroeconomic policies. This goal has been pursued largely via administration of the Japan-IMF scholarship program and the hosting of conferences and seminars, which in FY2002 included the following:

Seminar on IMF Conditionality (July 10, 2001, Tokyo)

In recent years, IMF has sought views on making its conditionality more effective. As part of its outreach and in collaboration with the Japanese Ministry of Finance, OAP sponsored a seminar on IMF Conditionality in Tokyo. The event brought together government officials from the region, academics, members of the private sector, aid donors, and representatives of international financial institutions in the region (Australia, China, India, Indonesia, Japan, Korea, Malaysia, Pakistan, Philippines, and Thailand). The discussion focused on the role and structure of IMF conditionality and aimed at exploring ways in which it could be improved, particularly through member country ownership of programs. Mr. Stanley Fischer, who was then the IMF’s First Deputy Managing Director, also participated and exchanged views with a wide range of Asian stakeholders.

Conference on Regional Financial Markets and Centers (November 15-16, 2001, Sydney)

OAP sponsored this conference in collaboration with the Australian National University. The conference brought together government officials, academics, members of the private sector (from Australia, China, Germany, Hong Kong, Indonesia, Japan, Korea, Malaysia, Singapore, Thailand, and the United States) and international financial institutions, with extensive knowledge and experience of financial markets. The discussion focused on how to achieve greater harmonization in the region, concretely the implication of regional financial centers for macroeconomic policy regimes and relationship between financial centers and emerging market ecomonies.

Seminar on “Designing a PRSP in Bangladesh” (February 12-14, 2002, Dhaka)

The seminar was held by OAP, jointly with the IMF’s Asia and the Pacific Department and the Dhaka Resident Representative’s office, to assist the Bangladeshi authorities formulate a poverty reduction strategy paper (PRSP). The organizers invited government officials and civil society representatives, in an effort to promote involvement by a wide range of Bangladesh institutions that would be the ultimate stakeholders in any formal program. Experts from countries that had experience in formulating PRSPs came to share their views and offer insights. Cambodia, Indonesia, Nepal, Pakistan, Sri Lanka, Thailand, and Vietnam were among the countries represented. Multilateral institutions and donor groups—including the World Bank, the Asian Development Bank, JBIC, and the UNDP— also made presentations.

Level of funding

Since the establishment of the JAA/JSA in 1990, Japan has made annual contributions totaling some $178 million ($168 million for technical assistance activities and $10 million for the Asia Scholarship Program).4 In addition, since 1996, Japan has also contributed some $9 million for the Advanced Scholarship Program. Annual contribution figures for technical assistance and the two scholarship programs, for the period FY1990-FY2002, are provided in Table 1. Figure 2 shows the annual contributions for technical assistance under the JSA since its inception.

Consultations

Consultations between the IMF and the Japanese authorities usually take place in March each year and cover the following issues: (i) the regional and/or subject area utilization of JSA resources to be targeted in the next financial year; (ii) the likely costs of project inputs; (iii) the likely magnitude of Japan’s further contribution to the JSA; (iv) the organization of field visits by the Japanese authorities and the IMF; and (v) any special projects or issues which are foreseen as likely to arise during the next financial year.

Figure 2.
Figure 2.

Annual Contributions by Japan, FY1990-FY2002

Annual, In millions of U.S. dollars

Table 1.

Contributions by Japan, FY1990-FY2002

(In millions of U.S. dollars)

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Includes the Regional Office for Asia and the Pacific.

Technical assistance funded by JSA

JSA resources can be used for the costs of short and long-term TA experts and those associated with providing seminar and workshops. JSA funds may not be used to finance IMF staff costs (including salaries, per diem or travel expenses). JSA funds are not tied to the use of Japanese nationals, but Japanese nationals are considered for expert assignments whenever possible.

While TA activities financed by the JSA can be in all areas of the world, the Japanese authorities placed high priority on funding TA activities in Asia and the Pacific, Central Asia, Central and Eastern Europe, and countries of the former Soviet Union. The Japanese authorities also placed high priority on assistance for countries that have demonstrated strong efforts and good track records in the implementation of economic reform policies. Four ongoing ISA-supported projects, selected from the different TA subject areas, are described in Boxes 2-5.

Case Studies

Modernizing Banking Supervision in Indonesia

From the start of the financial sector crisis in Indonesia in 1997, it was apparent that the bank supervision function of Bank Indonesia needed a variety of reforms and improvements to bring its regulations and procedures in line with international standards. An important element of the IMF’s program in Indonesia has been to restore confidence in the banking system. In order to assist in the development of new supervisory standards and regulations, and to bring bank supervision practices in line with best international practices, long-term experts have been assigned to Bank Indonesia since 1998, with financial support from JSA.

The early work focused on preparing a core set of regulations that would clearly lay out the role of Bank Indonesia as a bank supervisor. In early 2000, with the assistance of IMF staff, Bank Indonesia adopted a Master Plan to improve bank supervision. This was followed by a Basel Core Principles assessment, which resulted in modifications being made to the plan. At the request of Bank Indonesia, and with continued financial support from JSA, the number of advisors was increased to three. One advisor has focused on regulations and financial reporting issues, a second on on-site inspections, and the third on off-site supervision. Significant progress has been made in developing regulations and training the bank supervision staff. With enhanced prudential regulations, the condition of the banking sector has improved markedly.

In addition, the regulatory framework has advanced in line with the Master Plan and bank financial reporting has improved and the data is available on the central bank’s website.

The JSA supported technical assistance has enabled Bank Indonesia to make significant progress in meeting many of the goals in the master plan. It has had an important impact on the regulatory’ framework and the capacity of Bank Indonesia to properly supervise banks and address many of the complex risks faced by banks. Bank Indonesia inspectors are well informed as to examination practices and work is progressing on the use of more sophisticated off-site monitoring tools. To further enhance its implementation of the Master Plan, Bank Indonesia, with guidance from the advisors, is restructuring the management of the bank supervision process.

At the request of Bank Indonesia, and with the continued financial support from JSA, the advisors were extended through early 2003, and at least one advisor will continue through mid-2004. This assistance will further strengthen and modernize bank supervision with a focus on consolidated supervision and risk-based examinations. In addition, at the request of Bank Indonesia, and with continued financial support from JSA, an advisor will be provided to assist the bank supervision function to address its responsibilities in enforcing anti-money laundering laws.

Revenue Administration Reforms in the Democratic Republic of Congo

The Democratic Republic of Congo (DRC) has suffered from war and recurrent macroeconomic instability over recent years. In early 2001, when the Congolese authorities reinvigorated the peace process, and took steps to resume cooperation with the international community, the tax to GDP ratio had fallen to about 5 percent, one of the lowest in Africa. Since May 2001, the IMF’s Fiscal Affairs Department (FAD) has provided substantial technical assistance to DRC to help implement a comprehensive revenue administration reform program that includes the establishment of a large taxpayer unit (LTU) and creation of a pilot customs office to introduce modern revenue administration procedures and systems. In January 2002, with financial support of the JSA, FAD assigned two resident advisors, initially for six months, respectively to assist the customs and tax departments in implementing priority measures of this program. At the request of the authorities, and financial support of the JSA, the assignments of the resident advisors were extended for six months from July 2002.

In December 2002, a FAD mission concluded that significant progress has been made in establishing the LTU and implementing priority measures to strengthen customs operations. Modern organization and procedures supported by computer systems have been developed within the LTU, which is expected to secure about 70 percent of total domestic tax collections from early 2003. The pilot customs office has been established in the DRC’s main port of entry, and new procedures and systems—including the Automated System for Customs Data (ASYCUDA)—are being implemented.

Building on these positive outcomes, additional efforts are needed to expand the modernization reforms to the whole revenue administration. The FAD mission recommended a strategy focusing the second phase of the reform efforts on strengthening the revenue department’s headquarters functions and restructuring the network of customs and tax offices—beginning with the establishment of special units to control medium enterprises.

The Minister of Finance agreed to implement the recommended strategy. Following his request, the assignments of the resident advisors were once more extended with financial support from JSA. During this extension, it is expected that preparations for the next steps of the reforms—including establishment of a pilot tax office for medium-sized taxpayers and restructurating of the customs department—will be finalized. Over the longer-term, the objective is to continue expanding new organizational principles, procedures, and systems to other tax and customs services.

Strengthening Macroeconomic Statistics in Bosnia and Herzegovina

Since May 1999, the IMF’s Statistics Department (STA) has provided technical assistance to Bosnia and Herzegovina through a resident multisector statistics advisor, based in Sarajevo, with financial support from JSA. The advisor facilitates the development of a sound institutional structure for the collection and compilation of statistics on national accounts, prices, the balance of payments, monetary and financial statistics, and government finance statistics. This task is particularly challenging because of the political and ethnic divisions present. Statistics are collected separately for the two major political entities—the Federation of Bosnia and Herzegovina and the Republika Srpska—plus the Brcko District. The advisor has focused on institution building and on national accounts and balance of payments statistics. His activities have been supplemented by annual missions from IMF headquarters in monetary and financial statistics.

During the tenure of the two advisors who have served successively to date, the economy has been transformed from a centrally-directed to a market-determined economy. Commercial banks have replaced payments bureaus, and a unified central bank has assumed responsibility for monetary management.

The current advisor has introduced a uniform methodology that all statistical agencies have accepted for estimating GDP and prices. He pursued an initiative to estimate the size of the “gray” economy, which would otherwise be unreported. For external trade data, the advisor has arranged the use of the computerized ASYCUDA customs clearance system as the source. He has been coordinating with other donors and technical assistance providers to bring about a survey of household income and expenditures. Such a survey is essential for updating the weights of the consumer price index (CPI) and of the deflators used to derive real growth.

For the balance of payments statistics, improved estimates of smuggled and undervalued imports have been developed. The Balance of Payments Division within the Central Bank has been expanded, and hiring has been initiated on the basis of individual qualifications, rather than ethnic quotas.

With the assistance of the advisor, the Central Bank has established a unit to collect and compile government finance and public external debt statistics. Reporting of macroeconomic statistics to the IMF has expanded dramatically, and International Financial Statistics now includes a country page for Bosnia and Herzegovina.

The advisor assisted with the drafting of a modern statistics law that was promulgated late in 2002. His activities will be critical in implementing this act, particularly the establishment of a unified statistics agency that will consolidate the activities of the separate entity agencies, and the formation of a council of official and private statistics users to support and guide the new unified agency.

Strengthening AML/CFT in the Pacific Islands

Many of the members of the Pacific Islands Forum, including the Cook Islands/NZ, Fiji, Kiribati, Nauru, Niue, Vanuatu, and Samoa, have experienced difficulties in establishing a comprehensive legal, supervisory, and operational framework to ensure that financial sector fraud and money laundering do not compromise the integrity of their financial systems. Financial sector supervisory authorities have been unable to provide financial institutions with guidance on the prevention of fraud and money laundering that are appropriate to the unique problems of the region, and, where guidance exists, to effectively supervise the implementation of that guidance. Supervisors have also had inadequate means to verify identities and backgrounds of applicants for banking and other licenses. In addition, financial institutions have had insufficient information to undertake adequate due diligence checks both with respect to potential customers and to those advancing investment opportunities. Also, in many cases there is no adequate way of collecting, tracking, analyzing, and reporting suspicious transactions that might indicate fraud and money laundering, or to use such information in the prevention and prosecution of crime. Apart from a lack of financial and human resources, these deficiencies stem from the inadequate domestic legislation with respect to financial system fraud and money laundering.

Financial institutions and their supervisors are, therefore, in need of a new legal and institutional framework that would address these deficiencies. In particular, they need a legal, supervisory, and operational framework that would be able to: (i) provide uniform guidance to financial institutions with respect to the prevention of fraud and money laundering that is appropriate to the region and that permits adequate cooperation among jurisdictions; and (ii) collect, analyze, and disseminate essential financial information for use of supervisors, law enforcement, and regulated entities. Such a framework must be both effective and affordable.

A group of Pacific Islands Forum financial services supervisors have proposed that these problems be addressed in part through a regional approach. In particular, they proposed that the problem of inadequate financial information be solved through the creation of a regional Financial Intelligence Unit (FIU). This proposal was endorsed by the attending heads of state and representatives at the Thirty-First Pacific Islands Forum on October 27, 2000.

The IMF’s Legal Department (LEG), together with experts financed by the JSA, undertook in FY2002 to assist participating member countries of the Pacific Islands Forum in establishing the legal and institutional framework necessary to ensure that fraud and money laundering do not compromise the integrity of the financial system. This technical assistance involves:

  • evaluating the conformity of existing anti-fraud and anti-money laundering laws (including regulations, other rules, and supervisory guidance) with respect to: (i) accepted international standards; and (ii) the need for an appropriate FIU, including institutional and capacity issues (e.g. political feasibility, governance, financing/budgeting, location);

  • drafting anti-money laundering laws and/or amendments to existing anti-money laundering laws, and ancillary assistance with respect to anti-money laundering institutions and capacity building:

  • evaluating the feasibility of establishing a regional FIU, including: (i) assessing the appropriate legal structures (e.g. uniform enabling legislation and/or bilateral or multilateral treaties), and (ii) institutional and capacity issues; and

  • should a regional FIU be agreed on, drafting enabling legal framework to create a regional FIU, including internal governance and operational rules.

In order to achieve these objectives, the participating member countries have agreed to establish a Coordinating Office for the Participating Countries Anti-Money Laundering Initiative (COAMLI), to be supported by the Pacific Islands Forum Secretariat and the Asia Pacific Group on Money Laundering Secretariat.

Project submission and approval

Activities to be funded from the JSA, as well as all other IMF TA activities, are planned in advance each year. At the beginning of each fiscal year, the IMF provides Japan with a list of projects that it intends to submit for consideration in the course of the year. Thereafter, individual projects are submitted on a monthly basis through Japan’s IMF Executive Director’s Office for approval. Requests for technical assistance are received from governments. These are carefully considered by the IMF’s functional and area departments concerned. Following the screening process, the IMF’s Office of Technical Assistance Management (OTM) further reviews these requests for conformity with the JSA Guidelines. The requests are then considered for approval by the Japanese authorities.

Project assessment and evaluation

Within four weeks of a project’s completion, the IMF is required to submit a project assessment (utilizing a standard format) to the Japanese authorities. Any request for an extension of a project also requires an assessment. Recipient institutions are required to conduct an evaluation of the TA provided, utilizing a questionnaire provided to them, within five weeks of the completion of a project. The results of these evaluations are provided to the Japanese authorities. In addition, JSA projects in two or three countries are visited and reviewed annually by a joint Japan-IMF mission (see Annex 2).

Commitments and disbursements

At the end of FY2002, cumulative commitments for technical assistance under the JSA reached $141 million for a total of 1,080 projects, of which $131 million had been disbursed.5 During FY2002, $16.7 million was committed for 103 projects. A short description of each of the 103 projects approved in FY2002 is given in Annex 1.

Because of the time required for contracting and fielding of experts and payment of invoices, there is a time lag between commitments and disbursements. The duration of a JSA-funded TA project is normally between six months and a year. Table 2 and Figure 3 show the annual and total commitments and disbursements, as well as the number of approved TA projects, over the period FY1993-FY2002.

Figure 3.
Figure 3.

JSA Annual Commitments and Disbursements for TA, FY1993-FY2002

Table 2.

JSA TA Annual Commitments and Disbursements, FY1993-FY2002

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Regional distribution of funds

To date, 122 different member countries of the IMF have been beneficiaries of JSA-funded technical assistance. Countries in the Asia and Pacific region, Central Asian countries, and the transitional countries of the former Soviet Union have together received over $80 million from the JSA for approved TA projects during FY1993-FY2002, which represents 57 percent of TA projects approved during this period. Countries in Africa received the next largest share, totaling some $30 million or 21 percent of total approvals during FY1993-FY2002. Of the remaining amount approved during this period, 6 percent were for projects in Latin America and the Caribbean, 6 percent for projects in Central and Eastern Europe, 3 percent for projects in the Middle East, and 7 percent for multi-regional projects.6 The regional distribution of commitments in FY2002 was as follows: Asia and Pacific countries, $6.2 million or 37 percent; Central Asia countries and countries of the former Soviet Union, $1.4 million or 9 percent; Africa, $4.8 million or 28 percent; Central and Eastern Europe, $1.6 million or 10 percent; Latin America and the Caribbean, $0.6 million or 4 percent; the Middle East, $0.4 million or 2 percent; and multi-regional projects, $1.7 million or 10 percent. Table 3 shows the annual and total commitments by region in dollar terms. Figures 4 and 5 show the regional percentage distribution for the period FY1993-FY2002 and for FY2002 respectively.

Table 3.

JSA Annual Commitments for TA by Region, FY1993-FY2002

(millions of U.S. dollars)

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Figure 4.
Figure 4.

Distribution of JSA TA Commitments by Region, FY1993-FY2002

Figure 5.
Figure 5.

Distribution of JSA TA Commitments by Region, FY2002

Distribution of funds by subject areas

In FY2002, the IMF utilized approximately 350 person-years of staff and expert time for technical assistance work. Some 75 percent of this TA was for work carried out by the three major IMF functional departments—Monetary and Exchange Affairs (33 percent), Fiscal Affairs (29 percent), and Statistics (14 percent).

The distribution in the use of JSA funds among the three main subject areas has generally reflected the foregoing distribution in the overall use of IMF resources for TA. In FY2002, the distribution of JSA commitments for TA was as follows: Monetary and Exchange Affairs, $6.6 million (39 percent); Fiscal Affairs, $4.7 million (28 percent); and Statistics, $2.7 million (16 percent). This distribution has been fairly consistent over the past five years. Table 4 shows the annual distribution of commitments in dollar terms by subject area. Figures 6 and 7 also show the percentage distribution by subject area for the period FY1993-FY2002 and for FY2002.

In FY2002, the proportional allocation of JSA funds by functional work areas within the above three areas has also been roughly consistent with the overall breakdown in the allocation of IMF resources. In the monetary and exchange area, 54 percent of JSA funds were committed to TA for banking and supervision, 30 percent for monetary policy and operations, and 10 percent for strengthening payment and accounting systems. In fiscal affairs, 52 percent of JSA funds were committed for public expenditure management, and 40 percent for tax policy and tax and customs administration. In the statistics area, 40 percent of ISA funds were committed for multi-sector statistical TA, 20 percent for work on national accounts, and 10 percent each for balance of payments statistics and monetary and financial statistics.

Table 4.

JSA Annual Commitments for TA by Subject Area, FY1993-FY2002

(millions of U.S. dollars)

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Figure 6.
Figure 6.

Distribution of JSA TA Commitments by Subject Area, FY1993-FY2002

Figure 7.
Figure 7.

Distribution of JSA TA Commitments by Subject Area, FY2002

Effectiveness of JSA-funded TA

Since 1996, 8 joint Japan/IMF evaluation visits have been carried out to gauge the effectiveness of JSA-funded technical assistance activities. These have covered 14 beneficiary countries in Africa, Asia and the Pacific, Central Asia, and Central and Eastern Europe, as well as the regional training institutes in Singapore and Vienna. These joint evaluation teams have reported that TA activities financed by the JSA were in the mainstream of the IMF’s work, the projects were well formulated and implemented, and that the assistance was appreciated by recipient governments, which in several cases noted that the JSA-funded advisors were instrumental in establishing critically needed capacity. The teams also reported that the JSA-financed training and seminars were of high visibility, tightly focused, and highly appreciated by participants. A summary of the findings of the joint evaluation visit carried out in FY2002 is provided in Annex 2. Starting in calendar year 2000, beneficiary authorities of all completed JSA-funded projects are requested to provide an assessment of their projects. Completed evaluation questionnaires received to date from these authorities have overall been very positive.

Scholarship Programs

Japan-IMF Scholarship Program for Asia

The Japan-IMF Scholarship Program for Asia is a program for graduate studies in macroeconomics or related fields at various universities in Japan. The Program is aimed at promising, young officials in central banks or in ministries of finance, economy, or planning in the Asia, Central Asia and Pacific regions.7 The Program, which is operated under the JSA, offers a full 12-to 24-month scholarship and is currently being expanded from the previous 25 scholarships per year to about 50 scholars each year starting in 2001. There are two forms of scholarships. Scholars accepted under the “partnership track” participate in specially designed courses offered by one of four participating universities,8 while the “open track” is available to candidates who have already been accepted to a graduate-level program in macroeconomics or a related field at any leading university in Japan. The Program is currently administered by the IMF’s Regional Office for Asia and the Pacific in Tokyo.

Since the first students were awarded a scholarship in 1993, a total of 244 scholarships have been awarded and until now 138 scholars have graduated from the participating universities. Table 5 and Figures 8 and 9 show the distribution of scholars by their nationality and organizational affiliation. The scholars continue to indicate that they have greatly benefited from the training and that they are better prepared to discharge their official duties upon returning to their work, which is regularly confirmed by the wish of several participating countries seeking to have the number of officials awarded a scholarship increased.

Japan-IMF Scholarship Program for Advanced Studies

The Government of Japan is also providing financial support to a scholarship program for qualified Asian nationals who want to study economics at the doctorate level at one of the leading universities in North America in order to pursue a career in their governments or in international financial institutions, such as the IMF. The program covers reasonable costs for the first two years of study, while scholars are expected to secure another source of funding to cover the remaining years of study.

Table 5.

Affiliation of Scholars, 1993-2002

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Figure 8.
Figure 8.

Japan-IMF Scholarship Program for Asia: Distribution of Scholarships by Country, 1993-2002

Figure 9.
Figure 9.

Japan–IMF Scholarship Program for Asia: Affiliation of Scholars, 1993–2002

The first group, consisting of nine scholars, were admitted to the program in 1996. Since 1997, 15 scholars have been admitted annually to pursue their Ph.D’s. Table 6 and Figure 10 show the distribution of scholars by country since the beginning of the scholarship program. Table 7 lists the universities attended by the scholars and the number of scholars that have attended or are attending each of these institutions. The number of applications received for the program has steadily increased over the years, with over 100 applications received in each of the past two years. The quality of the applicants continue to be very strong and selected applicants have typically achieved high academic standards prior to joining the Program. An annual orientation seminar is held at the IMF in Washington, D.C. to expose incoming scholars to the work of the IMF and to provide an opportunity to meet other scholars before embarking on their studies. At the end of the third year of study, scholars are expected to complete an internship with the IMF. Thus far, all eligible scholars have successfully completed their internships.

Figure 10.
Figure 10.

Japan–IMF Scholarship Program for Advanced Studies: Distribution of Scholars by Country, 1996-2002 Programs

Table 6.

Japan–IMF Scholarship Program for Advanced Studies: Number of Scholars by Country, 1996-2002 Programs

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Table 7.

Japan-IMF Scholarship Program for Advanced Studies: Number of Scholars by University, 1996-2002

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Table 8 and Figure 11 show the employment of the scholars from the first two intakes, 1996 and 1997. As the first two groups of scholars have completed their studies it has been encouraging to note that the majority are choosing to apply for the IMF’s Economist Program (EP), which is the main entry point for economists seeking to join the organization after completion of their studies. This is a welcome outcome, since one of the objectives of the program is to increase the number of Asian nationals on the staff of international financial institutions. The success rate among scholar EP candidates has been 25 percent (two accepted offers out of eight applicants), which is considerably better than the success rate of all EP applicants, demonstrating the high academic achievements of the scholars.

Figure 11.
Figure 11.

Japan-IMF Scholarship Program for Advanced Studies: Employment of Graduates from the 1996 and 1977 Programs

Table 8.

Japan-IMF Scholarship Program for Advanced Studies: Employment of Graduates from the 1996 and 1997 Programs

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Annex 1 JSA TECHNICAL ASSISTANCE PROJECTS APPROVED IN FY2002

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Annex 2 JSA Joint Japan/IMF Field Visits

Purpose

The purpose of these visits is to provide the Japanese authorities with a first-hand view as to how JSA funding is being used in the field. These visits are designed to assess: (i) how the authorities value the work of experts funded; (ii) whether the authorities are making effective use of the assistance; and (iii) whether the technical assistance is making a contribution to the reform process. Discussions also sometimes touch on more generic TA policy and operational issues such as: (i) the relative effectiveness of long-term and short-term expert assignments; (ii) identification of TA needs; (iii) integration of TA into IMF-supported programs; and (iv) the role of resident representatives and TA experts in coordinating assistance from other donors.

Format

The joint mission usually comprises two Japanese officials (a representative of the Ministry of Finance, and a representative of the Japanese Executive Directors’ Office) and an IMF staff member.

Countries and projects selected for review are based on a number of considerations to be illustrative of different levels of economic development and structural reform and variation between regions and subject areas.

Following receipt of briefing notes and/or briefing of mission members at IMF headquarters, the mission members visit recipient countries where TA is provided and, where possible, meet separately with the senior representatives of the host institution (usually the Minister of Finance, Governor of the Central Bank, or Chairman of the Central Statistical Organization), the immediate counterparts to the expert (usually department heads), and the expert himself/herself. In the case of seminars or training courses, meetings are also held with participants in the respective sessions or courses as well as officials in charge of human resources development at the relevant training institutions.

Findings

To date, 8 visits have been carried out (covering 14 countries, two regional training institutes and the Pacific Financial Technical Assistance Center) since this practice was introduced in 1996. They have found that JSA funding is well administered and effectively used in the field. In all the visits, the authorities were well aware and fully recognized the importance of, and expressed their appreciation for, Japan’s financial support to the IMF’s TA program. The positive first-hand view gained by the Japanese authorities have been contributed to the continued strong support by Japan, through their contributions to the JSA, for the IMF’s TA program. A list of all field visits carried out and the summary of the report of the field visit that took place in FY2002 are provided below.

Joint Field Visits FY1996-FY2002

1. Fiji and Western Samoa (Pacific Financial Technical Assistance Center - PFTAC), March 1996

2. Kazakhstan and the Kyrgyz Republic, June 1996

3. Zambia and Zimbabwe, December 1996

4. Russian Federation, July 1997

5. Bulgaria and Lithuania, June 1998

6. Indonesia, Singapore Training Institute, and Thailand, June/July 1999

7. Belarus and Slovenia, June 2000

8. Azerbaijan and the Joint Vienna Institute, June 2001

Azerbaijan and Joint Vienna Institute, June 2001

  1. In Azerbaijan, JSA funds have since 1994 supported TA for the Ministry of Finance in treasury operations, the Ministry of Taxation in tax policy and administration, and the National Bank in bank supervision, and payments and clearing operations. In total, up to the time of the joint field visit, some $2.3 million of JSA funds had been utilized in Azerbaijan, which has supplemented a significant TA program suppported by Fund-financing. In the fiscal area, the assistance has helped set up a State Treasury, promote fiscal transparency, prevent expenditure arrears, and improve financial reporting. On the revenue side, the TA has helped modernize and improve the effectiveness of tax administration, including the establishment of a Large Taxpayer Unit, the introduction of Taxpayer Identification Numbers, and the development of a pilot computerized tax system. In the financial sector, assistance has resulted in improved bank supervision, the implementation of programs to restructure and privatize state-owned banks, and the implementation of a broad-based program of payment system reform.

  2. The authorities concerned conveyed their full satisfaction with the TA provided, noting in particular the professionalism and responsiveness of the experts. They indicated that macroeconomic reform in Azerbaijan could not have advanced so rapidly without the TA provided. The authorities also indicated that they were well aware that Japanese funds had been used to support the aforementioned TA activities.

  3. The Joint Vienna Institute (JVI) provides training in economic and financial management and administration for officials and private sector executives from transition countries in Eastern Europe and the CIS. In addition to two 14-week applied economic policy courses, the JVI conducts more than 50 seminars a year. Since its inception in 1992, the JVI has trained more than 14,000 participants from transition countries. From 1993 to 2002, the JSA has provided the JVI with grant financing totaling $5.5 million to support both general administration and participant costs. The review mission was provided with a full briefing on the operations of the JVI and a tour of its facilities, and was satisfied with its level of operations and the effectiveness of its administration.

Annex 3 ADMINISTERED ACCOUNTS – JAPAN FINANCIAL STATEMENT FY2002

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Note: The IMF arranges for an annual audit of the JSA to be undertaken by its external auditors, in connection with their annual audit of the IMF’s own accounts, and for a separate certificate of completion to be provided to the Japanese authorities.
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    JSA Share of Financing for Technical Assistance, FY1997-FY2002

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    Annual Contributions by Japan, FY1990-FY2002

    Annual, In millions of U.S. dollars

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    JSA Annual Commitments and Disbursements for TA, FY1993-FY2002

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    Distribution of JSA TA Commitments by Region, FY1993-FY2002

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    Distribution of JSA TA Commitments by Region, FY2002

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    Distribution of JSA TA Commitments by Subject Area, FY1993-FY2002

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    Distribution of JSA TA Commitments by Subject Area, FY2002

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    Japan-IMF Scholarship Program for Asia: Distribution of Scholarships by Country, 1993-2002

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    Japan–IMF Scholarship Program for Asia: Affiliation of Scholars, 1993–2002

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    Japan–IMF Scholarship Program for Advanced Studies: Distribution of Scholars by Country, 1996-2002 Programs

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    Japan-IMF Scholarship Program for Advanced Studies: Employment of Graduates from the 1996 and 1977 Programs