JAPANESE AMBASSADOR ON CORRUPTION CASE

C O N F I D E N T I A L SECTION 01 OF 02 HANOI 001413 SIPDIS E.O. 12958: DECL: 12/30/2018 TAGS: ECON PGOV PREL VM SUBJECT: JAPANESE AMBASSADOR ON CORRUPTION CASE REF: A. HANOI 1348 ¶B. HCMC 801 Classified By: Ambassador Michael Michalak for reasons 1.4 b,d. ¶1. (C) Summary: Japanese Ambassador to Vietnam Mitsuo Sakaba shared with Ambassador Michalak his concerns about the PCI corruption case (Ref A) and its possible implications for Vietnam's domestic politics. Although Vietnam was initially reluctant to cooperate in investigating the case, Sakaba said the GVN is now going along and Japan and Vietnam have agreed in principle to a new a system for selecting consultants which will be an open, transparent bidding system. On a separate issue, Sakaba said Idemitsu is involved with BP and ConocoPhillips in the South China Sea but worried about developments there. End summary. ¶2. (C) In a December 26 lunch with Ambassador Michalak, Ambassador Sakaba shared his views on the PCI corruption case, which led to the suspension of all ODA to Vietnam from Japan, its biggest donor. Sakaba said he had three concerns regarding the PCI case: first, the GOJ wanted to be sure to institute a more open, transparent methodology for selecting and paying for consultants; second, the GOJ has formally requested under their ODA grant agreement for the East-West highway that the GVN return $30 million paid to the consultant (PCI) because of the clear illegalities involved in the transaction; third, Sakaba is concerned about how the investigation of Huynh Ngoc Si, Deputy Director of the Department of Transportation and Public Works, will proceed and what will come of Si's well-known connections with Le Thanh Hai, HCMC Party Secretary and Politburo member (Ref B). GVN Conflicted About Cooperating in Investigation -------------- -------------- ¶3. (C) Sakaba noted that the Japanese press broke the story of the PCI scandal in July in Japan. Following an initial investigation, Japanese authorities came to Vietnam to pursue the investigation and gather evidence to support their case in Tokyo. They were unable to gain the formal cooperation of Vietnamese authorities and began a two month informal investigation. At the end of that period, and as a result of GOJ pressure on the GVN, the GVN announced in September that they would initiate an investigation in to the case. ¶4. (C) In Japan, PCI officials have confessed to giving a total of $2.3 million to Si for selecting PCI as the general managing consultant for the East-West highway project. Sakaba said there were several PCI interlocutors who gave money in varying amounts, but they always gave the money to the same person, Si. ¶5. (C) Sakaba said that Vietnamese Minister of Public Security Le Hong Anh was quite conflicted about making any public announcement since two months of informal investigation failed to produce any concrete results. After being pressured by the GOJ, the PM decided to announce an investigation and Anh reluctantly agreed to go along. (Bio note: Sakaba has also heard that Anh suffered a stroke some time in 1990's - other sources have said 1993 - which has left him appearing very wooden and without complete freedom of movement and/or expression.). ¶6. (C) Sakaba said the two sides have agreed in principle to a new a system for selecting consultants which will be an open, transparent bidding system. He said the existing system was very non-transparent but the executing agency for Japan (at that time JBIC and now, after a reorganization of Japan's ODA system unrelated to this case, JICA) pushed for a change. Sakaba said the agreement has been sent up the chain command and he expects it will be approved and will become the new system to use in the GVN-GOJ ODA relationship. He said it was not a system-wide change for Japan, but could be a system wide change to Vietnam as it could be applied in GVN contracts with other ODA donors. ¶7. (C) Sakaba said that because of the amounts involved ($30 million paid to the consultants) and the blatant violation of Japanese law in the PCI case, the GOJ decided to invoke the relevant provisions of the grant agreement to ask for the return of the amount involved in the bribery case. Sakaba said it was the first time in the history of Japanese ODA that such a move has happened. He noted that in the infamous PMU-18 corruption scandal there was an instance of Japanese ODA being used to buy a Mercedes for personal use and sending in an invoice for a Toyota Land Cruiser to help out the project. In this case the GVN discovered the problem and voluntarily agreed to repay the money involved so it never proceeded to the stage of an official request for the return of illegally used funds. HANOI 00001413 002 OF 002 Possible Political Fallout for the GVN -------------- ¶8. (C) The issue that presents the biggest headaches for Sakaba is what will be the likely result of the ongoing investigation of the GVN into the incident. Sakaba said he is not sure of the implications of connections between Si and Le Thanh Hai and he is fearful that the PM may have to "take responsibility" for the investigation if it does not produce a concrete result. Sakaba is worried that the investigation may not produce sufficiently strong evidence to link Si to the payments; should Si walk free and the PM be forced to resign as a result of the ensuing scandal, Sakaba believes that DPM Hoang Trung Hai or DPM Nguyen Thien Nhan might be candidates to replace him. He further believes that whatever happens, Hai and Nhan are likely candidates for future PM positions and wondered if they might be inducted into the Central committee at the upcoming mid-term meeting in January. Asked about DPM Nguyen Sinh Hung, whom some regard as a stronger candidate than Nhan or Hai, Sakaba said that Hung's rivalry with the PM might prevent him from getting the job, depending on the strength of the PM within the party. ¶9. (C) Sakaba said that, within Japan, an upper house committee on ODA has been formed recently which is following this case rather closely. He said that the Diet will resume o/a January 5 of next year and he wanted to be prepared for questions on the accountability of the government for the $30 million as well as to answer questions on the progress of the GVN investigation. South China Sea: Japan Worried About Developments -------------- -------------- ¶10. (C) Asked about Japanese involvement in the South China Sea, Sakaba said that Idemitsu was involved with BP and CP in blocs 5-2, 5-3 and was worried about future developments there. He said Idemitsu wanted to stay involved but could not go it alone. Sakaba said he has been trying to encourage the GVN to use ASEAN to negotiate with China as a group but that Malaysia and others also have conflicting claims which has hindered their ability to work together on this issue. MICHALAK