Given that they are largely funded by Japanese taxpayers, there is no question that Japan's ODA projects must be implemented properly. However, sometimes things go wrong. For example, Japan provided a grant aid to Bhutan to build a communications network, a project that mattered a great deal to Bhutan, and was welcomed by its government and people. Yet, as a Japanese government investigation later found, certain elements of the project had been implemented in accordance with alterations to the original plan that had not been approved through proper channels. For this reason, Japan decided not to allow Bhutan to utilize grant funding to cover the unauthorized expenditures (¥200 million), imposed sanctions on the contractors involved, and set about the task of reinforcing its monitoring framework to ensure proper implementation of ODA.

The international community is still working to come up with effective safeguards against corruption. At the High Level Meeting of DAC in 1996, it was recommended that donor countries introduce anti-corruption provisions governing bilateral aid-funded procurement. Acting on that recommendation, Japan in FY1998 started to add an anti-corruption clause¹ to the notes to be exchanged with recipient countries regarding its financial assistance. Prior to this, the 33rd OECD ministerial conference in 1994 adopted the Recommendation on Bribery in International Business Transactions and called for the implementation of effective restraints against bribery involving foreign public officials.

In 1997, the OECD adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. By eliminating such illegalities, which can have a distorting the effect on the competitive functioning of the market, this OECD convention aimed chiefly at securing fair competition at the international level. Japan concluded the Convention in October 1998. Further, when the Convention entered into force in February 1999, the amended Unfair Competition Prevention Law by which Japan implemented the OECD Convention, establishing the bribery of a foreign public official as an offense was put into effect. These steps paved the way for punitive actions be taken whenever the offense of bribery is committed inside Japan, or even abroad, if it is clear that the complicity has taken place in Japan.

In April 1999, there were reports of suspected bribes made to Indonesian government officials in connection with the activities of several Japanese corporations that had won contracts for Japanese ODA projects implemented in Indonesia. The Japanese government, while requesting the Indonesian government to launch an investigation, conducted interviews with the companies cited in such reports to clarify matters. However, all those companies denied any wrongdoing, and no evidence to the contrary has been found. Aiming at preventing wrongdoing and bribes related to ODA and ensuring a proper and effective implementation of ODA projects, the Japanese government moreover held a meeting with ODA contractors to discuss safeguards against illegal practices in ODA project operations. To forestall similar charges of wrongdoing, Japan is determined to keep up its effort to ensure proper implementation of ODA projects.

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