Japan suspends soft loans for Vietnam

HANOI, Vietnam - Japan has frozen low-interest loans to Vietnam until it takes "meaningful" steps to eliminate corruption in public works programs, Tokyo's ambassador said Thursday.

The announcement was an embarrassing blow to Vietnam, which receives more development aid from Japan than any other single country.

Japanese ambassador Mitsuo Sakaba said his country would make no new loan pledges to Vietnam next year and would also suspend $690 million in low-interest loans to support pending transportation and sewage projects in Vietnam.

In all, Japan pledged $1.1 billion in low-interest development loans to Vietnam last year.

Japan took the step after four Japanese executives pleaded guilty last month to paying $820,000 in bribes to a Vietnamese official who was overseeing a highway project in Ho Chi Minh City, the nation's southern business hub.

The two countries are now conducting a joint investigation into the case, involving Pacific Consultants International and Huynh Ngoc Sy, the Ho Chi Minh City official overseeing the highway project.

"Until effective and meaningful measures against corruption can be worked out through this joint committee, it would be difficult to regain the support from the Japanese public for further assistance to Vietnam and we are unable to pledge new yen loans," Sakaba said.

Sakaba spoke at an annual conference between Vietnamese officials and aid donors to the fast-developing communist country.

Speaking at the conference, Prime Minister Nguyen Tan Dung vowed that Vietnam would use donors' development money responsibly.

"The Vietnamese government will make the utmost effort to further improve efficiency," he said.

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