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Cablegate: Japan Launches New Country Assistance Program For

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

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

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.

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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

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

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

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.

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