Unethical behaviour taints Japan’s overseas aid efforts

Japan’s Official Development Assistance (ODA) to the less developed countries is an integral part of what it calls “values-based diplomacy,” a strategy designed to promote democracy and the rule of law in the developing world.

As part of this foreign policy agenda, Japan has pledged to provide ¥ 2 trillion in aid to Southeast Asian nations. It has also announced plans to expand Japan’s exports of infrastructure-related technologies and services. A vital part of this approach is that Japan should be seen as a country that does not tolerate corruption in any form.

Accordingly, there was great embarrassment when the Yomiuri Shimbun newspaper recently published an account of massive Japanese corruption in ODA projects. The newspaper revealed that the president of Japanese railway-consulting firm, Japan Transportation Consultants, Inc. (JTC), had confessed that it paid over US$780,000 in kickbacks in Vietnam to win an order for a project funded by Japanese ODA worth more than $41m.

The company also admitted allegations that it had bribed civil servants in Indonesia and Uzbekistan as well as Vietnam with a total of US$1,271,790 to win work on five Japanese ODA-funded projects in these countries. The projects related to railway construction, design, construction surveillance, and related services, and were carried out by joint ventures headed by JTC.
The illegal payments were made on about 40 occasions from February 2008 to February this year. The value of each order determined the amount of each payment.

Japanese prosecutors plan to conduct a criminal investigation into charges that JTC violated the Unfair Competition Prevention Law by bribing foreign government employees.

JTC was established in 1958 when construction began on the Tokaido Shinkansen line and is jointly owned by subsidiaries of East Japan Railway Co. and Central Japan Railway Co.

The company, which specializes in railway construction, design, and ground surveying, began expanding overseas in the 1990s. It has received 19 ODA projects totalling ¥25bn since 2000, including orders it received while participating in joint ventures.

This was not the first time there has been corruption involving Japanese ODA in Vietnam.

In June 2008, the Yomiuri Shimbun reported that Japan was investigating four former Japanese officials of Japan-based Pacific Consultants International (PCI) for bribing government officials in Southeast Asia to win ODA project contracts. This included payments of US$ 820,000 to officials in Vietnam.

PCI executives involved eventually received custodial sentences, as did their Vietnamese counterparts.