PCI likely paid contacts in Asia to win ODA deals

More questions are being raised about questionable payments by Pacific Consultants International (PCI), a construction consulting firm based in Tama, Tokyo, that has won lucrative contracts in connection with Japan's official development assistance (ODA).

PCI has been the focus of an investigation that led to the arrests last month of former executives on suspicion of aggravated breach of trust.

PCI has transferred about 100 million yen annually to subsidiaries in Hong Kong and elsewhere since 2003, sources said. A portion was apparently paid in kickbacks.

A former PCI executive said part of the funds were used as rebates paid to civil servants in Southeast Asia. Those rebates were paid to ensure that PCI won bids for official development assistance projects paid for by the Japanese government.

However, current PCI management insists there is nothing shady about the money transfers, saying the funds were used to gather information about bidding processes in Asian nations.

The Foreign Ministry, which oversees ODA projects, is looking into the matter.

According to PCI sources, the company in 2003 began transferring about 100 million yen annually to the Hong Kong subsidiary that was headed by a former PCI executive.

The amount transferred was subsequently increased and also funneled to other subsidiaries in the Philippines and Thailand. The money was distributed by those subsidiaries to local agents who served as intermediaries with local governments.

According to the former PCI executive: "It is not unusual for civil servants in Southeast Asia who are involved in commissioning ODA projects to ask for rebates. If we refuse to pay, we would end up losing contracts. In general, a rebate that was the equivalent of several percentage points of the total contract amount was paid."

Between April 2002 and November 2007, PCI won about 400 ODA-related contracts, including those conducted in conjunction with other companies. The total contract amount for those projects was about 65 billion yen.

Among the projects PCI was involved in were a new airport in Thailand and a subway system in India.

Construction consulting companies such as PCI often worked together with major trading firms until the 1990s in order to win ODA contracts, according to multiple sources.

Trading companies, through the nature of their business, accumulate a wealth of knowledge about foreign nations.

After obtaining information about local conditions, the Japanese companies would propose projects to recipient nations' governments; for example, the construction of transportation systems as well as building schools and hospitals using Japan's ODA program.

The governments that accepted the ideas would in turn ask the Japanese government for financial assistance.

Once the Foreign Ministry approved the use of ODA funds for various projects, the recipient governments would open them to bidding by companies involved in design and construction.

It was not unusual for five or even 10 years to pass from making the initial project proposal to handing out contracts.(IHT/Asahi: May 6,2008)