Bid-rigging hits Japan's good aid image

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A SCANDAL involving bid-rigging by Japanese companies for overseas aid contracts has seriously embarrassed Tokyo and threatens to further undermine Japan's image as the world's largest aid donor.

The government has ordered a full investigation of a racket under which 38 of the country's largest trading firms allegedly shared out foreign aid projects among themselves, ensuring profits were spread around while foreign companies were excluded from bidding on the contracts. Foreign countries have long criticised Japan's aid budget as self-serving, structured more to benefit Japanese companies and long-term commercial interests than the receiving nations. But this is the first time that Tokyo has admitted that its aid programmes are not entirely above board.

Earlier this week the Fair Trade Commission (FTC) raided 38 firms, including Mitsubishi, Mitsui, Marubeni, Itochu and Nissho Iwai on suspicion of involvement in the bid-rigging scheme.

'It is very destructive to Japan's image that bid-rigging is seen as common policy,' said Hiroshi Hirabayashi, the top official in charge of Japan's aid budget in the Ministry of Foreign Affairs. In a press conference yesterday, he did not attempt to deny that the bid- rigging took place, and conceded that his ministry had heard 'rumours' of improper procedures.

Last year Japan's aid budget was pounds 7.9bn - the highest in the world for three years in a row. In seeking to defend its high trade surpluses, the government often points to the size of its aid budget and contends this is recycling the money to countries who need it. But according to the preliminary investigations by the FTC, a lot of the money was simply paid out by Tokyo to Japanese companies who had already fixed the bidding process to guarantee a certain level of profits. Nearly one fifth of the overall aid is disbursed by the Japan International Cooperation Agency, which does not accept tenders from foreign companies. This agency provides construction, medical, computer and educational supplies to developing nations. The FTC thinks that the firms have divided themselves up into three groups, and agreed who would win the contract before tendering. Part of the problem, according to domestic critics, is that the budget is overseen by overworked Foreign Ministry diplomats rather than a specialised agency employing people with experience of the commercial world.