Japan aid offer to 'broke' Afghanistan

Aid agencies say Afghanistan will need many billions of dollars in aid over the coming decade and beyond

By CNN's Masato Kajimoto
CNN Hong Kong

(CNN) -- Japan is expected to contribute a massive aid package to Afghanistan, as the central Asian country teeters on the edge of formal bankruptcy.

The United Nations says Afghanistan is now close to bankruptcy and needs funds immediately.

Ahmed Fawzi, spokesman for the UN special representative for Afghanistan, said the national kitty was now below $10m -- less than the annual salary of many sportsmen in the West to assist more than 20 million people.

Japan is considering offering as much as $500 million (66 billion yen) in aid to help the international effort to rebuild Afghanistan, the Tokyo Shimbun newspaper reported Tuesday.

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The news emerged during preparations for a ministerial conference on Afghan reconstruction scheduled to take place in Tokyo on January 21-22.

Japan's comprehensive support package, which includes refugee relocation, medical and sanitation care and landmine removal, will be announced at the conference.

Foreign ministry officials would not confirm the newspaper report and told CNN that the final amount of Japan's contribution would not be finalized before the conference began.

Decade of aid

As a co-hosting nation of the meeting along with the United States, Saudi Arabia and the European Union, Japan is expected to contribute about 20 percent of the total amount of financial assistance, local media said.

Initial estimates of what it will cost to kick start the Afghan reconstruction over the next two years and half range from $2 to $3 billion, according to a joint assessment by the United Nations and World Bank.

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The report also says the war-torn nation will need another $9 to $15 billion in aid and assistance over the coming decade.

The two organizations are likely to give a final assessment at or before the conference when major donors announce and finalize their aid packages.

U.S. Secretary of State Colin Powell, Afghan interim leader Hamid Karzai and U.N. Secretary General Kofi Annan are among those attending the conference.

Tight budget

The Afghan aid package would far exceed $150-200 million assistance pledged by Japan for the reconstruction of Cambodia in 1992 and $120 million for East Timor in 1999 -- both were about 20 percent of total aid.

"It would be difficult to break with precedent," commented the Tokyo Shimbun.

However, the Japanese government is in the midst of a radical cost-cutting exercise to deal with the problems of the country's ailing economy.

Prime Minister Junichiro Koizumi has pledged to keep the issuance of government bonds to less than 30 trillion yen.

In the fiscal 2002 budget, overall funds for official development assistance (ODA) were cut by about 10 percent, according to the Nikkei Shimbun newspaper.

Most of the ODA funds are set aside for refugee protection and aid in neighboring countries, which do not include Afghan reconstruction costs, the business daily reported last week.