VISIT OF JAPAN,S CROWN PRINCE TO VIETNAM -

C O N F I D E N T I A L SECTION 01 OF 02 HANOI 000094 SIPDIS STATE FOR EAP/MLS AND EAP/J E.O. 12958: DECL: 02/06/2019 TAGS: JA PGOV PREL VM SUBJECT: VISIT OF JAPAN,S CROWN PRINCE TO VIETNAM - ASSISTANCE TO RESUME SOON? REF: A. A) 08 HANOI 1348 ¶B. B) HANOI 60 HANOI 00000094 001.2 OF 002 Classified By: Ambassador Michael W. Michalak for reasons 1.4 (b) and ( d) ¶1. (C) Summary: In considering the resumption of new assistance to Vietnam, which was suspended last August due to a bribery scandal, Japan seems to be lowering its expectations for "meaningful" steps by the GVN from prosecution of the well-connected Vietnamese official who accepted the bribes to adoption of measures by both countries to avoid similar corruption in the future. A joint Japan-Vietnam commission is working on possible measures to tighten controls on assistance including third-party participation in pre-contract screening, auditing of yen-financed projects, and establishment of a system to protect whistleblowers. Japan's apparent eagerness to get its relations with Vietnam back to normal may be influenced by the upcoming visit to Vietnam by Crown Prince Naruhito. 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. Speculation is rampant that Si,s connections to HCMC Party Chief and Politburo member Le Thanh Hai may shield him from meaningful punishment. ¶3. (C) In response to the scandal, Japan has called for "meaningful" anti-corruption steps by the GVN. Asked if these steps would include GVN punishment of Si, Japanese PolCounselor Jyunichi Kawaue told us that while Japan would welcome such actions, they have made clear that they are not a precondition for the resumption of assistance. ¶4. (C) The Japanese are probably right to manage their expectations of Vietnamese actions in response to the scandal. Following last month,s CPV Plenum, a well-connected advisor to the Party leadership told Poloff the PCI scandal was not even mentioned at the Plenum, a development he described as "shocking" given the scandal's wide publicity. The contact explained that party leaders are already jockeying for position in anticipation of the 2011 Party Congress and are therefore unwilling to take risks. Other contacts say that the leadership is confident that the upcoming visit to Vietnam by Japan,s Crown Prince Naruhito will be a catalyst for improved relations, including renewed assistance. ¶5. (C) Naruhito will visit Vietnam February 9-15, visiting Hanoi, Danang, Hue, Ho Chi Minh City and the Mekong Delta. The Crown Prince,s first visit to Vietnam marks the 35th anniversary of the establishment of diplomatic relations between the two countries. Kawaue told us that the visit was strictly nonpolitical, noting that the Crown Prince,s official host is Nguyen Thi Doan, the GVN,s Vice President (a largely ceremonial position). The Crown Prince is bringing no business delegation and will not engage on political issues, Kawaue said. ¶6. (C) Meanwhile Japan and Vietnam have formed a joint committee to come up with a prevention plan to avoid similar scandals in the future, but it has not yet released its report. Measures under consideration to tighten controls on assistance reportedly include third-party participation in pre-contract screening, auditing of yen-financed projects, and establishment of a system to protect whistleblowers. ¶7. (C) On a recent visit to Japan, Ambassador Michalak was told that a package of measures to prevent a reoccurrence of incidents similar to the PCI scandal was almost ready. His interlocutors noted that informal discussions with the ruling LDP had begun and that a successful conclusion of those discussions rather than the Crown Prince's visit would drive the resumption of assistance to Vietnam. ¶8. (C) Comment: The joint committee's actions seem focused on dealing with corruption in Japanese assistance projects rather than corruption in Vietnam more generally. The Vietnam Press Agency is reporting that Japan has already agreed to resume assistance, and our Vietnamese business and government contacts seem to be taking these reports at face value. GVN hopes that the Crown Prince,s visit will lead to HANOI 00000094 002.2 OF 002 quick resumption of Japanese assistance are probably overly optimistic. At the same time, the Japanese seem to be resigned to the prospect of the well-connected Mr. Si avoiding meaningful punishment in the PCI scandal and have set their sights on more realistic measures such as those being considered by the joint committee. Whether those measures, if accepted by both countries, would actually be implemented in any "meaningful" way remains to be seen, but their adoption could give Japan a satisfactory pretext to resume assistance to Vietnam. ¶9. (U) This cable was coordinated with ConGen HCMC. MICHALAK