Cablegate: Japanese Special Yen Loans in Haiphong Port

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A
SUBJECT: Japanese Special Yen Loans in Haiphong Port

1. (SBU) As part of a September 8 trip to Haiphong,
Ambassador and ECON/C toured the port and were briefed about
the port modernization project. According to the Port
Project Manager, the first phase involving construction of a
container port is complete and bidding is in progress for
the second phase. Phase II has several parts: enlarging
the container port with landfill, dredging the port, and
redirecting the channel to take advantage of naturally
deeper water and avoid silting problems from the river.
Currently the minimum depth of the port is 5 meters with an
additional 3 meters at high tide. The dredging would
increase this to 7.5 meters minimum depth.

2. (SBU) The Project Manager went on to say that the
first phase had cost $34 million in ODA provided by Japan.
Although there had been open bidding on the first phase,
only Japanese firms would be allowed to compete in the
second phase. The $126 million second phase would be funded
by a special yen loan with a 10 year grace period before the
30 year repayment period at the rate of 1% interest would
begin. The Manager noted that the two phases of the project
were created in the wake of the 1997 financial crisis to
shore up Southeast Asian economies as well as provide jobs
for Japanese construction firms.

3. (SBU) A few days later, the rep of a US firm pointed
out that the Japanese firms often subcontracted Vietnamese
SOEs for various parts of large construction projects like
this one. Unlike Japanese firms, SOEs are not obliged to
use only Japanese equipment so his firm which provides heavy
construction equipment had a nearly 90% share of the
Vietnamese market compared with the 10% share of its major
Japanese competitor.

4. (SBU) Following the IBRD consultative group meeting
last June, the Ambassador spoke with GOJ embassy officials
up to and including the Japanese Ambassador all of whom
denied that there was any tied aid in Japanese ODA-funded
infrastructure projects in Vietnam. Subsequent to the
Haiphong trip, the Japanese Econ section chief confirmed the
details of the project and its financing as described above
and noted that it had been approved by the OECD. He
surmised that his Ambassador had been discussing tied aid
that had not been approved by the OECD.

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