ODA suspension claims downplayed

After a meeting between Vietnamese officials and Japanese officials early last week, there have been rumours that Japan will suspend all development aid to Vietnam because of the bribery allegations implicating Japan Transport Corporation (JTC). Is that true?

At the latest meeting between Vietnam and Japan held in Hanoi on June 2 to discuss the bribery allegations, the two sides agreed upon the following measures. Firstly, the Japan International Cooperation Agency (JICA) will suspend ODA disbursement to the contract packages that are mentioned in the JTC’s third party committee report. Meanwhile, Vietnam will keep on investigating other JTC-involved projects which are invested in by Vietnam Railway.

Secondly, Japan will consider accepting proposals for new projects to be executed by Vietnam Railway if Vietnam completes three conditions, namely investigating as to whether there has been any corruption in the alleged cases; taking strict measures against officers who have taken part in corruption if any corruption cases are found and excluding them from involvement in the projects; and drawing up effective measures to prevent a recurrence.

Thirdly, Japan will consider accepting proposals for new projects to be executed by other agencies if the Vietnamese government assures the government of Japan that it will investigate the alleged corruption cases and deploy effective measures to prevent a recurrence.

Does that mean Japan will not suspend disbursement at ongoing projects which are not related to the bribe allegations at JTC?

That’s right. I want to make it clear that at present JICA will only suspend ODA disbursement to the contract packages that are mentioned in the JTC’s third party committee report. The disbursement at other ongoing ODA projects/contract packages without JTC that are not mentioned in the JTC’s third-party committee report will be continued. This includes grant assistance and commercial loans.

So, what will Vietnam do to meet the conditions of Japan?

Actually, we did not have to wait until the recently held meeting. The Vietnamese government immediately began investigating the bribe allegations right after receiving information from Japan. So far, we’ve arrested six people relating to the allegations, while the Ministry of Public Security is looking into the involvement of other people in this case.

Vietnamese and Japanese agencies have been working closely  to uncover the truth behind these bribery allegations and will take strict measures against the guilty individuals and organisations. The two sides have held a series of meetings to find effective measures to prevent this from happening again. The most recent meeting was on June 2, and another one is scheduled to take place at the end of this month. Our goal is not to allow this case to affect the good relationship between Vietnam and Japan. From November 1992 to March 2014, Japan provided $24 billion in development aid to Vietnam, which has been used for the development of the transport infrastructure, energy and agriculture sectors, as well as developing rural areas and private enterprises.

Do you think the decision to suspend a small part of its ODA to Vietnam this time is another motivator to urge Vietnam to implement effective measures to prevent a recurrence within a short period of time?

Yes, this is a factor that encourages Vietnam to foster the measures to prevent corruption at ODA-funded projects and make the implementation of projects more transparent. In the past, Vietnam has tried to complete legal regulations related to ODA usage and boosting the disbursement of development aid. For example, in Japan’s financial year of 2013, ¥162 billion or $1.58 billion of Japanese ODA was disbursed in Vietnam, equivalent to 20.3 per cent of Japan’s total ODA commitment to Vietnam.

However, to further improve the effective usage of ODA, we are going to issue a “Procurement Code of Conduct/Ethics for Japan-funded ODA projects”. Another measure is third party evaluation in procurement process in Japanese ODA projects. We will also co-operate with JICA for ex-post procurement audit at several contract packages of Japanese ODA projects. In addition, the Ministry of Planning and Investment will draw up a process for inspecting and examining all ODA-funded projects. Right now, we are amending a series of laws that will improve the effective usage of ODA, including the Investment Law and the Law on Enterprises.

JTC case timeline

- On March 20, Tokyo-headquartered Japan Transportation Consultants, Inc. (JTC) President Tamio Kakinuma admitted to bribing Vietnamese officials to win a contract for a Japanese ODA-funded railway project in Hanoi.

- On March 23, Vietnam’s Ministry of Transport (MoT) hosted a meeting of all related parties in the project to discuss the allegations. On the same day, the MoT announced the suspension of all officials related to the project, including those that had left the project pending interviews related to the accusations. Retired officials were also asked to answer questions.

- On March 24, Deputy Prime Minister Nguyen Xuan Phuc on behalf of the government ordered the Ministry of Public Security, the Ministry of Foreign Affairs, the MoT and the Supreme People’s Procuracy of Vietnam to undertake an immediate investigation into the allegations.

- In May, the Ministry of Public Security announced the arrest of six civil servants related to railway projects, including deputy director of Vietnam Railways Tran Quoc Dong and deputy director of a management board responsible for railway projects Pham Hai Bang.