JAPAN RESUMES SUSPENDED ASSISTANCE TO VIETNAM

C O N F I D E N T I A L HANOI 000165 SIPDIS STATE FOR EAP/MLS AND EAP/J E.O. 12958: DECL: 02/25/2019 TAGS: EAID ECON JA PREL VM SUBJECT: JAPAN RESUMES SUSPENDED ASSISTANCE TO VIETNAM REF: A. A) HANOI 94 ¶B. B) HCMC 103 Classified By: DCM Virginia Palmer, reasons 1.5 (b) and (d). ¶1. (C) Summary: Not unexpectedly, Japan announced the resumption of its suspended assistance to Vietnam when Vietnamese Minister of Planning and Investment Vo Hong Phuc met Japanese Foreign Minister Hirofumi Nakasone in Tokyo on February 23. Japanese DCM Koichi Abioshi told DCM that the resumption of assistance was based on three conditions: the establishment of a joint Japan-Vietnam Commission, the repayment of the full PCI loan by the end of the year, and meaningful progress in the investigation of the Vietnamese suspects in the case. Perhaps most meaningfully, Vietnam is to have a new whistleblower protection law in place by 2010. Abioshi said the recent visit to Vietnam by Crown Prince Naruhito would be reciprocated by visits to Japan by CPV General Secretary Nong Duc Manh in April and Prime Minister Dung in May. End summary. ¶2. (C) The PCI corruption scandal, involving bribes of $820,000 paid by Japanese consultants to Vietnamese official Huynh Ngoc Si, led to suspension of new aid programs to Vietnam by Japan, its largest donor. While three Japanese consultants were tried and found guilty in Japan, the GVN's investigation of Si is moving slowly amid rampant speculation that Si's connections to HCMC Party Chief and Politburo member Le Thanh Hai may shield him from meaningful punishment. ¶3. (C) Japanese DCM Abioshi told DCM at a February 24 lunch meeting that the resumption of assistance was based on three conditions: 1) the establishment of a joint Japan-Vietnam Commission, 2) the repayment of the full PCI loan by the end of the year, and 3) meaningful progress in the investigation of the Vietnamese suspects in the case. Abioshi assured DCM that Vietnamese press reports of the resumption of aid by the end of Japan's fiscal year in March were exaggerated. "We will be lucky to have things rolling by the next Consultative Group meeting in June," he said. ¶4. (C) The first condition was met with the formation of a joint Japan-Vietnam commission to work on possible measures to tighten controls on assistance including third-party participation in pre-contract screening, auditing of yen-financed projects, and other measures. The commission's work led to a GVN agreement to put in place whistleblower protection legislation by 2010. On the condition that Vietnam repay in full the PCI loan by the end of the year, Abioshi said the negotiations with the GVN involved serious haggling, like being "in a market." ¶5. (C) Regarding the condition that the GVN show meaningful progress in the investigation of the Vietnamese suspects, the GVN agreed to provide the GOJ a written report. Abioshi said the report the GVN had provided on the investigation had been "vague" and included no reference to the penal code and that Japan had asked the GVN to provide more specifics. Japan is also concerned that Si faces "abuse of power" rather than more serious corruption charges, but Abioshi admitted that the Japanese consultants involved had all received suspended sentences or probation. ¶6. (C) In a sign that the PCI scandal had not significantly shaken strong bilateral ties between Japan and Vietnam, Abioshi said the recent visit to Vietnam by Crown Prince Naruhito would be reciprocated by visits to Japan by CPV General Secretary Nong Duc Manh in April and possibly Prime Minister Dung in May to attend a seminar organized by Nikkei News. ¶7. (C) Comment: The resumption of Japanese aid was widely expected, and indeed had been prematurely reported by the Vietnamese press. Japan's insistence on the introduction of whistleblower protection in Vietnam could have a positive long-term impact in avoiding similar corruption scandals in the future. At the same time, the Japanese seem to have accepted the prospect that, in this case, the well-connected Mr. Si may indeed avoid meaningful punishment. End comment. MICHALAK