Interactions of Japanese Aid and Direct Investment in Indonesia

Abstract

This article discusses a form of Japan's official development assistance (ODA), specifically the relatively small but growing part of Japan's ODA which is directed at promoting more Japanese direct investment in the recipient developing countries. The article provides a brief account of the various activities of Japan's major aid agen cies, and argues that this new form of Japan's ODA is quite welcome, as the Indonesian Government has been keen to attract more foreign, including Japanese, direct investment to Indonesia, particularly in export-oriented industries. In addition, while Japanese direct investment is generally viewed in a favourable light in Indonesia, Japanese investors should put higher priority on more effective technology transfer to their Indonesian employees.