The Hai Van Tunnel in Da Nang, Vietnam’s first mountain pass, was built with construction assistance from Japan

World Bank Vice President James W. Adams Thursday called on the Vietnamese government to continue working on its reform agenda and assisting the nation’s poorest citizens.

Adams warned the global economic downturn would continue to affect Vietnam, with the poor the most at risk.

He told the Consultative Group Meeting for Vietnam that he believed the measures Vietnam had taken to stabilize the economy and contain inflation had proved effective so far.

Fiona Louis Lappin, head of the UK Department for International Development in Vietnam, hailed the poverty alleviation priority Vietnam had incorporated in its socio-economic policies.

Medium- and long-term economic prospects of Vietnam were bright, particularly when the government was committed to further reform, said International Monetary Fund (IMF) Assistant Director for the Asia and Pacific Department Shogo Ishii.

Shogo suggested the Vietnam government accelerate reforms in the banking and business sectors and keep a close watch on state-owned companies.

Representatives from the Asian Development Bank, the EU, the US, and the UN also promised to support Vietnam’s continued development efforts.

But Japan Thursday said it was suspending relevant procedures of transport and sewerage projects in Vietnam it planned to fund with aid loans. ODA loans to Vietnam will be suspended until both countries agree on how to deal with a major corruption scandal, the Japanese ambassador said.

Japan is “unable to pledge new yen loans until both countries work out effective and meaningful measures against corruption,” Mitsuo Sakaba, Japan’s Ambassador to Vietnam, said at the Consultative Group Meeting, which was also attended by Vietnamese Prime Minister Nguyen Tan Dung.

The suspension of Japanese ODA loans to Vietnam follows claims made in a Tokyo court that a Ho Chi Minh City transport official took bribes from a Japanese company.

Ho Chi Minh City authorities last month suspended Huynh Ngoc Si, deputy head of the HCMC Department of Transport and chief of the Japan-funded East-West Highway and HCMC Water Environment Project, pending further investigation of allegations he took more than US$820,000 in bribes from executives of Japanese Pacific Consultants International (PCI) in 2003 and 2006.

Si allegedly received the bribes in exchange for helping PCI win consulting contracts on the highway project.

The Vietnamese and Japanese governments set up a joint committee to investigate the allegations.

“Until effective and meaningful measures against corruption are worked out through this joint committee, it would be difficult to regain the support from the Japanese public for further assistance to Vietnam, and we are unable to pledge new yen loans,” Sakaba said.

Earlier this year the Japanese government announced its intention to extend ODA loans to Vietnam up to JPY65.3 billion (over $700 million) for the first half of the fiscal year 2008 for infrastructure, transport and sewerage improvement projects.

“All the relevant procedure of those projects, however, have been suspended since the PCI corruption case was brought to light,” Sakaba said.

Sakaba later told journalists Japanese-funded technical assistance projects and grant aid to Vietnam would continue.

Japan, Vietnam’s biggest bilateral donor, in 2007 pledged $1.1 billion in ODA loans to Vietnam out of the total $5.4 billion in ODA promised by foreign donors.

At a televised question-and-answer session of the National Assembly last month, Prime Minister Nguyen Tan Dung promised the Vietnamese government would deal with the case in accordance with Vietnamese laws.

Thursday, PM Dung vowed the Vietnamese government would use donors’ financial assistance more efficiently.

“The Vietnamese government treasures all ODA capital from foreign donors and will make the utmost effort to further improve the efficient use of ODA,” he told the two-day meeting, themed “Stabilizing the economy and maintaining its growth potential.”

ODA has helped Vietnam upgrade its infrastructure and improve levels of healthcare, education, environmental protection, rural development and poverty alleviation, Dung said.

Vietnam had effectively used ODA, reaching many socioeconomic and poverty reduction achievements since 1993, Ayumi Konishi, Country Director of the Asian Development Bank (ADB) told journalists on the sideline of the meeting

ADB will offer more ODA to Vietnam in 2009, he said. In 2007, the bank pledged to offer $1.35 billion of ODA to the country.

However, Vietnam should reduce the bureaucracy surrounding ODA-funded projects to make them more effective, Konishi said. The Vietnamese government should also facilitate investors by ensuring macroeconomic stability, improving infrastructure and intensifying anticorruption measures, he said.

Acting Country Director of the World Bank in Vietnam Martin Rama said the global lender was also planning to sustain ODA of around $1 billion for Vietnam every year.

Early this year, Vietnam was put on the list of five low-income developing countries that will receive annual World Bank preferential loans of $1.5 billion over the next three years.

Source: TN, Agencies