Japan's Official Development Assistance White Paper 2009
(3) Prevention of Fraud and Corruption
Given that Japan's ODA comes from taxpayers' money, fraudulent use of the funds provided for assistance must be avoided. Accordingly, the government and JICA work to ensure the transparency of procurement and other procedures.
During the procurement stage for ODA projects, tenders have been submitted by developing countries in accordance with guidelines. The results of these are verified by JICA, and steps are taken to increase transparency; not only is the name of the business receiving the order made public, but so too is the contract amount. In case improprieties are discovered relating to procurement or other stages of ODA project implementation, a mechanism has been set in place whereby firms that commit improprieties are disqualified from bidding or receiving contracts for projects for a certain period.
Efforts are also being made for auditing. These efforts include expanding external auditing, implementing spot audits, and taking measures to improve auditing based on audit results. With regard to external audits, external audits are being implemented at JICA by accounting auditors. For grant aid, external audits for Grant Assistance for Grassroots Human Security Projects worth ¥3 million or more are obligatory in principle and are steadily implemented.
With respect to the implementation of spot audits of loan aid, a mechanism has been introduced for audits that can be conducted where necessary for projects agreed upon by the governments. For technical cooperation, internal audits are conducted at JICA via sampling. For grant aid, as well, technical audits are being conducted.
Japan ratifies the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and as such it is strict in its handling of fraudulent business with foreign government parties, including application of the Unfair Competition Prevention Law, in order to ensure trust toward ODA projects, which use taxpayers' money as their main resource.
Improprieties were revealed in ODA loan projects in Viet Nam, and in 2008 concerned parties in Japan were prosecuted and convicted. As a result, the issue was responded to harshly so as not to lose trust in ODA loans and ODA projects. The government and the former JBIC announced measures to disqualify the applicable firm as a tenderer for loan and grant aid projects for a period of 24 months. In addition, by that point JICA had already taken it off the list of registered consultants.
In response to this incident, the governments of Japan and Vietnam set up the Japan-Vietnam joint committee for Preventing Japanese ODA related Corruption, aimed at blocking the recurrence of similar misconducts and winning back trust on ODA for Viet Nam. In February 2009, the Report of Japan-Vietnam Joint Committee for Preventing Japanese ODA related Corruption was released. Based on this report, Japan has responded by taking such measures as introducing quality and cost based selection, making negotiated contracting more strict, and establishing an office to assess information related to fraud and corruption in a unified manner. In addition, Vietnam is advancing such efforts as improving the transparency of procurement procedures, and drafting a code of ethical conduct that all persons related to ODA project tenders are to abide by, whether public or private sector. Japan also plans to expand the applicable results from these efforts to other aid-receiving countries in order to improve overall transparency of ODA projects.
In consideration of the aforementioned incident, an exploratory committee was established under the Foreign Minister and formed of external advisors in order to conduct deliberations aimed at preventing the reoccurrence of similar fraud and corruption. The committee compiled a report in September 2009. Specifically, the report included such measures as strengthening measures and regulations for corporations and utilizing the Office on Information relating to Fraud and Corruption. MOFA intends to promptly implement the measures contained in this report in the future.