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
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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
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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