Japanese personal savings fund development loan program

Founded in 1995, with operations in Japan and Britain, People Tree is an ecological fashion company that works with 70 fair trade producer partners in 20 developing countries to help marginalized communities use fair trade to escape from poverty. Affiliated with the Japan-based NGO Global Village founded in 1989 by environmental activist Safia Minney, People Tree sells its Fair Trade products to over 600 Fair Trade shops throughout Japan, Britain and Italy.

Within Japan, People Tree publishes a biannual 106-page catalogue promoting its latest fashion lines, clothing, accessories, and other fair trade products. The first few pages of this catalogue are devoted to reports on issues related to fair trade: topics such as human rights, social justice, the environment, and international development.

The following is a translation by gyaku of a report which appeared in Japanese in the Spring/Summer edition of the People Tree catalogue (publication date: March 1, 2007). The article describes the research of Tanaka Yu, environmental activist and chief director of the NPO bank "Mirai Bank", exposing a web of connections by which money from Japanese private citizens' savings accounts is used by Japan's Official Development Assistance (ODA) Program to finance yen-denominated loans to third-world countries such as Indonesia. The majority of Japanese people, as well as most foreigners living in Japan, know nothing about this "assistance", which is allocated to ODA loans on their behalf under the name of Fiscal Investment and Loan Program (FILP, in Japanese "Zaisei Touyuushi"/財政投融資).

In the article, Tanaka Yu explains that, rather than "assisting" third-world countries, this financial assistance in fact tramples over human rights, finances wars, and destroys the environment. Within Japan, alternative financial institutions have emerged in response to the involvement of mainstream banks in these kinds of "development" programs. Examples of such NPO banks are Mirai Bank in Tokyo (focusing on financing environmental projects), Hokkaido NPO Bank (focusing on development within Hokkaido) and Community Youth Bank Momo in the Tokai Region (focusing on sustainable community development).

For more information, see People Tree's English-language website, and the original Japanese version. There is also a short summary in English at interlocals which has also been translated into Chinese.

The connections between developmental assistance and Japanese savings accounts

Financial assistance that we believe to be for the benefit of developing nations in fact plunges these countries deep into debt, while destroying the natural environment within Japan. The source of this financial assistance, moreover, is your very own money. How are we to respond to these facts? In today's article, we speak with Tanaka Yu, chief director of the NPO bank "Mirai Bank," about the circumstances surrounding developmental assistance and what we can do, using our own money, to change this situation.

Japan's Official Development Assistance (ODA), increasing suffering in the world's Developing Nations

Financed through Japan's Official Development Assistance (ODA) Program, construction of the gargantuan Asahan Dam on the island of Sumatra, Indonesia, was completed in 1984. The Asahan Dam, however, was not constructed with the aim of supplying energy to the citizens of Indonesia, but rather, under the pretext of developmental assistance, was built to enable the import of aluminium from Indonesia to Japan. The price of extracting aluminium ore domestically in Japan, a country scarce in natural resources, had steadily increased due to rising energy production costs. The project originated in efforts to escape these costs by shifting production to cheaper developing nations.

Nominally donated as developmental aid, construction expenses were in fact financed by means of yen-denominated government credits ― in other words, a loan to Indonesia. At the time, this amounted to a loan of 45 billion yen. Of the energy produced by the dam, roughly 99% was directed to aluminium production, with the remaining 1% flowing to urban areas. Even after completion of the dam, villages in the area for a long time remained without access to electrical power. To make space for the dam and the construction of factories, fields belonging to the local inhabitants were razed, forests chopped down, and lives forever changed.

The benefits of the electricity produced by the dam went entirely to the production of aluminium, with all products exported to repay loans. The majority of this aluminium was bought by Japanese corporations at low prices, used to produce things like drink cans, window frames and car wheels. Thanks to this dam constructed in Indonesia, Japanese consumers were able to obtain new products made of aluminium at very cheap prices. This was the scheme.

The market price of aluminium later decreased sharply, and even now Indonesia continues to suffer without end in sight, trapped in deep debt. In January, 2006, Indonesian Vice President Jusuf Kalla argued that Indonesia should not receive any more of Japan's developmental assistance, which overemphasizes loan-based donations from which Indonesia cannot not derive any benefit.

The ODA is the root cause of Japan's garbage problem!?

On the other hand, speaking of problems facing Japan, garbage comes up as a major one. The Japanese people have worked hard to separate and recycle their garbage. Tanaka Yu explains that the original spark which drew him to community activism was his involvement in recycling programs. In order to raise funds for groups such as the Junior Sports-Club Association and the Children's Club (Kodomo-Kai), he participated in clean-up operations which involved collecting empty aluminium cans.

However, whereas in 1989, 1 kilogram of aluminium cans could be sold for 100 yen, by 1995 this figure dropped to only 30 yen. Moreover, in terms of market value, the new aluminium cans arriving from places like Indonesia were consistently cheaper than the low-quality cans made of recycled alumium, which required a significant investment of labour for collection. Due to this cheaper cost, profit-seeking corporations had no reason to buy recycled aluminium. It is for this reason that the recycling movement never progressed in Japan. It would seem that this reasoning applies not only to the production of aluminium, but also to the production of other products such as paper.

As a result of this dam's construction, Indonesia suffers under debt while Japan struggles with a garbage problem. Who has really been helped? Who has benefitted from low-cost aluminium for construction work? In fact, the only ones who have benefitted have been the world's corporations, particularly Japan-based ones, who have gotten their hands on the profits they wanted.

According to Tanaka Yu, caused by the actions of Japan's ODA, developing countries all over the world have been trapped in debt hell. Of total donations granted by Japan's ODA, 55% take the form of yen-denominated loans; in other words, this financial assistance demands repayment. What makes this figure so conspicuous is that nowhere else in the world is there anything like it. At present, the sum total of ODA loans to the 48 countries ranked as the poorest in the world exceeds the sum total of donations to these same countries.

Obstructing solutions to the garbage problem while pluging the world's developed nations into debt hell, can we really call this assistance? Of course, there are many cases of ODA operations that have been beneficial. And yet, why then does the ODA continue these assistance programs ― assistance that causes developing nations to suffer while reaping great profits for corporations?

Why does the Japanese government press for repayment?

One question that arises is: why does the Japanese government not give financial assistance in the form of donations, the way that other countries do? The answer is that the Japanese government is investing your money in these assistance programs. The name of this fund is "Fiscal Investment and Loan Program" (FILP). These funds come from resources such as postal savings accounts, employee pensions, government pension plans, and postal life insurance, that is, the very savings that we all invest in without much attention. This money of ours is then used to fuel mounting problems created by the ODA, bringing suffering to the people of developing countries.

On top of this, aside from bilateral cooperation agreements, the FILP funds are also used to finance the World Bank and IMF (International Monetary Fund), organizations which impose further debt programs on these developing countries. When developing countries find themselves financially strapped, these institutions then implement Structural Adjustment Programs (SAP), forcing governments to re-allocate funds from education, welfare, and health toward debt repayment. They are forced furthermore to produce crops exclusively for export, and are payed only in foreign currency. Local people starve and die while only a few feet away crops rich in produce are harvested for export to developed countries. The topic of Fair Trade occasionally comes up in this context, touching on for example the production of cacao beans from Africa and bananas from the Philippines, to name a few.

Things we can all do right now: NPO Bank and Fair Trade
Today's problems and the picture of the future

Through our savings and without being conscious of it, we are all of us involved with, and investing in, various social problems. Roughly 130,000 people working in the finance departments of banking institutions, via investment in the stock exchange, make decisions that determine where the savings of 130 million of Japanese people will end up going. The thinking of just 0.1% of the total population steers the future course of Japan and of the whole world, while the money invested goes to creating a series of problems that destroy our own future.

Where then should we deposit our money so that we can arrive at the brighter future that we hope for? First of all, directly invest your money in projects or companies that engage in social activities and that you can personally trust. If you don't have any investment know-how, then deposit your money in financial institutions which themselves invest in such kinds of projects.

An example of such a financial institution is "Mirai Bank" organized by Tanaka Yu, with whom we have been speaking today, as well as other NPO Banks of its kind. NPO Banks are banks that are run by and operate in the interest of the general public. In 1994, a group of only 7 supporters put forward 4 million yen and started invested this money in groups and enterprises engaging in community-based actvities. While at first people spoke of the project as a kind of pipe dream, total investment in this bank currently amounts to over 600 million yen. Total investment by this bank, moreover, has reached a scale of 160 million yen, without a single case of bad debt. Recently, NPO Banks of this kind have steadily increased in number, spreading across the whole country.

Next, when thinking about where your money goes, it is important to stop and consider what it is you are buying. Through the action of buying something, we are choosing both the people who make the item and the company that sells it. In these cases, please choose fair trade products, goods that are produced via a process that takes into consideration human rights and environmental issues.

In the current age, money connects the whole world. Words and ideas that transform the world, however, are unfortunately nearly non-existant. If you are worried about war, or about environmental destruction, think carefully when you spend your money. If we demand high profits, then businesses that make money now will get their hands on our money and investment it in ways that will destroy the Earth of tomorrow. Futher, if we demand cheap prices, corporations will trample over the environment and over human rights to suppress costs and produce lower-priced commercial goods.

It has only been a little over ten years since NPO banks and fair trade businesses began operating in Japan. These are still very new systems, and there are many issues that remain to be solved. For example, due to the fact that little consideration has been put into the nonprofit-based financing mechanism of NPO banks, these banks are forced to register themselves in the same way as do consumer banking instutions, according to the "Finance Industry Law". However, when these consumer banking instutions cause social problems, it is the NPO banks who deal with the repercussions.

If nothing changes, new NPO banks will not be able to open, and heavy administrative costs will prevent operations from continuing. This despite the fact that NPO banks do not collect funds illegally, far from it: their interest rates on loans are extremely low, and the groups involved do not even make a profit. For this reason, NPO banks across the country have started thinking about ways to bond together and support each other. The goal is to make it possible for citizens, outside of the context of finance industry laws, to autonomously manage non-profit banks.

Were this goal to be realized, it would become possible for any person in any area to open their own non-profit bank. By having control over their own money, people would be able to choose their own future. In this way, it would become possible to support the management and low-interest financing of businesses which advance fair principles of trade, rather than investing in corporations that maximize profits while trampling over the poor.

It is a different kind of feeling to buy a fair trade product. When buying a product in the usual way, subjects of conversations typically focus on the low price of a product or what its brand name is; in the case of fair trade shopping, however, price and brand name are irrelevant. In their place, thoughts about the person who made the product come to mind. This very different feeling is what we need to bring to all corners of our everyday lives. Once this goal is realized, it will become possible for everyone to experience this novel sensation of richness and wealth. Through this type of operation, starting from our everyday lives, we each become joined to the poor people who live amidst poverty. The hope is that in this process we can create a new kind of relationship, one that is not based on governmental assistance programs. If we can learn to spend our money carefully, we can build a world that does not need money.

Some things to think about

Our money, trampling over human rights

Thanks to the success of White Band anti-poverty campaigns, many people have taken an interest in the problem of global poverty. However, the number of people who actually understand the root causes of such poverty remains very small. What drives these people into poverty, trampling over their right to live a happy life, is the forceful demand to repay the loan ― much like those of the loan shark ― given to them in the name of assistance. Using financial resources from postal savings accounts, more money has been leant in this way to the poorest countries of the world by Japan than by any other country. If Japan had freed these countries of their debt, they would never have become as poor as they are today. It is still not too late. If Japan stops demanding repayment of these loans, countless lives could be saved.

Our money, financing wars

Money from postal savings accounts and bank accounts of Japanese citizens indirectly covers the military expenses of American war operations. Due to its budget deficit, the U.S. is struggling to squeeze out enough money to cover these military expenses. Government bonds are sold to raise funds. Supporting this fund-raising, at a scale larger than any other country in the world, is the Japanese government, which bears the costs for close to 40% of all bonds issued by the U.S. The source of funds for investment in these bonds, referred to under the title of "Short-term Government Securities," comes from money taken out of the bank accounts and postal savings accounts of ordinary citizens. Our bank deposits are used to finance the delivery of bombs to be dropped on Iraq.

Our money, destroying the environment

In 2006, despite fierce opposition, government policy in Hokkaido led to the sell-off, at a price of next to nothing, of sacred land (Nibutani) belonging to the local native Ainu population to the national government, to be used for a hydro-dam project. The dam's industrial water service, however, did not sell as much as a single drop of water to companies or citizens, but instead hoarded large amounts of money from loans. Following its completion, it didn't take long before the dam was filled with sediment, leading eventually to more money being spent in order to flood more land, the most fertile in the area. The funds to carry out this operation came from our postal savings accounts. What is left of the large debts incurred by our country will also be financed with money from our savings and through the taxes that we pay. The truth is, in fact, that the funds for all such environmentally destructive public projects come from the same source.

Profile of Tanaka Yu

30 Ways to Eliminate Poverty

Beginning with regional recycle programs and community activism against nuclear power generation, Tanaka Yu became increasingly involved in various NGO activities related to environmental, economic, and anti-war themes. Currently chief director of the Mirai Bank business association, Tanaka is also a board member of the Japan International Volunteer Center and of Sokuon-Net, as well as an advisor to ap bank. Tanaka Yu is also a part-time lecturer at Fukui Prefectural University, Rikkyo University and the Wako University Graduate School. He has written many books, most recently "30 Ways to Eliminate World Poverty" (sekai kara mazushisa wo nakusu 30 no houhou/世界から貧しさをなくす30の方法), published by Godo-shuppan.