US embassy cable - 04HANOI1766

UNCLAS SECTION 01 OF 02 HANOI 001766 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY 
 
E.O. 12958:  N/A 
TAGS: EAID, ECON, PREL, JA, VM 
SUBJECT:  JAPAN LAUNCHES NEW COUNTRY ASSISTANCE PROGRAM FOR 
VIETNAM 
 
 
1.  (U) SUMMARY.  Japan used the launch of its new Country 
Assistance Program to raise concerns about a variety of 
issues related to Vietnam's economic and political reform 
process, at least in principle including human rights.  The 
new program was also touted as a model because of the 
increased involvement of the GVN in the planning process. 
Despite Japanese claims, Embassy suspects Japan will 
continue its emphasis on large infrastructure projects.  END 
SUMMARY. 
 
New twists to the assistance program 
------------------------------------ 
 
2.  (U) On June 2, the Embassy of Japan launched its new 
Country Assistance Program (CAP) for Vietnam featuring 
several changes from the previous CAP.  Chief among them, 
claimed Minister Mitsuru Kitano, would be a shift from an 
emphasis on infrastructure development to projects related 
to promoting economic growth, poverty reduction, and 
institutional reform.  The new CAP was also formulated in 
Vietnam with greater input from the GVN.  Kitano also noted 
the need to review developments in several areas of 
political and economic reform, including human rights and 
ethnic minority issues, as part of the ongoing dialogue 
between the two governments.  In addition to linking 
Official Development Assistance (ODA) disbursements to the 
reform process, the GOJ also emphasized the importance of 
Vietnam's ability to absorb and disburse aid in a timely 
manner as a factor in determining the size of ODA 
contributions.  Despite the new linkages and concerns about 
the reform process, Japan remains committed to maintaining 
its high level of ODA to Vietnam.  The level of ODA pledged 
for 2004, 846 million USD, remains the same as the level for 
2003 despite cutbacks in Japan's overall aid budget. 
 
3.  (SBU) In a subsequent meeting between political officers 
from the U.S. and Japanese Embassies, however, the Japanese 
indicated that human rights would not become a major 
consideration in Japan's decisions on assistance for 
Vietnam, despite the language in the CAP suggesting 
otherwise. 
 
4.  (U) The launch of the new CAP was scheduled over a month 
after its approval, perhaps to create momentum in advance of 
Prime Minister Phan Van Khai's visit to Japan in order to 
attend the Tenth International Conference on the Future of 
Asia from 2 - 5 June.  The CAP launch also aided Japan, 
Vietnam's largest ODA donor, in steering discussions at the 
Vietnam Business Forum in Hanoi on 14 June and the Mid-year 
Consultative Group (CG) Meeting of Donors in Vinh 15 - 17 
June.  At the CG meeting, the Japanese, with a strong 
endorsement from the GVN, promoted an increased role for the 
GVN in harmonization of development assistance. 
 
Latest priorities 
----------------- 
 
5.  (U)  In a similar effort to foster a greater sense of 
ownership by the GVN, Japan's CAP is based on the three 
development priorities identified by the GVN as part of its 
Comprehensive Poverty Reduction and Growth Strategy: 
Promotion of Economic Growth, Poverty Reduction, and 
Institutional Reform. 
 
6.  (U) The main focus of the growth promotion program will 
be: a) improving the investment climate; b) developing 
private sector and small and medium-sized enterprises; c) 
developing economic infrastructure; d) developing human 
resources; and e) implementing various economic reforms such 
as SOE reform.  In addition to infrastructure projects in 
the transportation and energy (power generation) sector, the 
new CAP will incorporate more projects focused on the IT and 
telecommunications sector, specifically assistance for the 
maintenance and management of high-speed communications 
networks. 
 
7.  (U) The poverty reduction program has five main areas: 
education, health care, rural development, urban 
development, and the environment.  The CAP will support 
reform to higher education as well as improvements in the 
quality of primary education.  Other areas of interest in 
the education sector will be efforts to reduce the number of 
schools operating two and three shifts and efforts to reduce 
the high drop-out rate.  The CAP still promotes large 
infrastructure developments as part of its rural and urban 
development projects.  The focus of the CAP's rural 
development efforts will involve irrigation projects.  The 
GOJ has also identified flood prevention as another serious 
issue affecting rural development.  Inadequate waste 
treatment and disposal is another issue that the GOJ has 
identified as placing major constraints on urban 
development. 
 
8.  (U) The CAP identifies institutional reform as vital to 
the support and sustainability of progress made in the other 
two areas.  The primary focus will be on the development of 
Vietnam's legal framework and administrative reform such as 
civil service and fiscal reform.  With regard to improving 
the legal system, the primary focus will be on the following 
areas: civil litigation laws that will provide for the 
transition to a market-oriented economy; judicial reform 
with a focus on ensuring transparency of the judicial 
system; human resource development through strengthening the 
function of institutions for training legal professionals; 
and improvement of availability of legal information needed 
for judicial reform.  In the area of administrative reform, 
the focus will be on public expenditure management, to 
include tax collection and the taxation system, as well as 
enhancing the link between policies and the allocation of 
financial resources. 
 
9.  (U) COMMENT.  We are not convinced that the GOJ will 
truly shift much emphasis away from infrastructure projects, 
especially those benefiting Japanese construction firms and 
equipment.  In fact, the new CAP may signal a greater 
emphasis placed on promoting wider penetration of the IT 
sector by Japanese firms, especially since the CAP 
highlights Japan's willingness to fund the maintenance and 
management of high-speed communications networks as well as 
developing the human resources necessary to maintain digital 
communications systems. 
BOARDMAN