TOKYO-NTT International Corp. (NTTI), a subsidiary of NTT Corp., promotes overseas telecommunications projects in developing countries using Japan’s Official Development Assistance (ODA) funding. Since it was founded in 1985 as an operational squad for NTT’s overseas business, NTTI has promoted a total of 400 ODA and non-ODA development projects in 50 nations.
Until recently, ODA projects had been NTTI’s primary business. However, the unit’s ODA work has been shrinking due to NTTI’s diversification into businesses such as multimedia, systems integration and product sales. ODA business accounted for just 5 percent of the firm’s total revenues of 12.3 billion yen (US$101.7 million) in fiscal 1997, ending March 1998, according to Kazutoshi Nakahara, senior manager of NTTI’s project management department.
“Since [PTT] carriers in many nations were privatized, ODA business has been shrinking because ODA business [targets] foreign governments, not private companies,” Nakahara said.
Japan has been the world’s largest ODA provider for the last seven years. Its ODA contribution stood at US$9.36 billion dollars in 1997, compared with France’s US$6.35 billion and the United States’ US$6.17 billion. However, as part of its effort to cope with its sluggish domestic economy, the Japanese government for the first time slashed its ODA budget by 10 percent in fiscal 1997.
Although its share of ODA business compared with its total revenues is shrinking, NTTI is still actively promoting projects worldwide. Currently, NTTI is working on yen-loan projects in Zimbabwe and Uzbekistan and a grant project in Angola. The yen loans are provided by the Overseas Economic Cooperation Fund (OECF), an organization under the Economic Planning Agency’s jurisdiction. The grant is provided by the Japan International Cooperation Agency (JICA), a Foreign Ministry affiliate.
KDD projects
KDD Engineering and Consulting Inc. (KEC), a subsidiary of former international services monopoly provider KDD Corp., has also been promoting overseas telecommunications projects with ODA money, focusing on satellite, maritime radio and international communications.
Its recent ODA-funded projects include constructing a maritime radio communication system in the Philippines between October 1988 and September 1996; improving the satellite communications system in Laos between June 1995 and March 1997; expanding Paraguay’s satellite earth station facilities and switching system starting in August 1995; and working on a coastal communications project in Vietnam beginning in March 1998.
All of these projects except the one in Laos were yen-loan projects funded by the OECF. The Laos project was a grant project funded by the JICA.
Kenichiro Torigoe, executive vice president of Japan Telecommunications Engineering and Consulting Service (JTEC), a leading Japanese consulting corporation specializing in overseas telecommunications projects, said overseas projects funded by foreign investors have been winning much attention. However, there are still many telecommunications projects that aren’t as successful in attracting foreign capital.
“Foreign capitals may invest for projects in densely populated areas, but they don’t want to do any job in sparsely populated areas where people keenly need a telephone line as a life line. So governmentally subsidized projects are necessary in the telecommunications field,” he said.
Training
Torigoe said Japan supports telecommunications development projects as international cooperative efforts rather than profit-driven commercial activities.
As a part of such efforts, Japanese telecom companies and their affiliates put an emphasis on providing training to engineers from developing nations.
KEC, for example, has received a total of 4,500 trainees from 160 nations since 1962. Just in the past year, KEC received 68 trainees from 64 nations. The training menu includes instruction in international telecommunications services, data communications engineering, optical fiber submarine cable communications and satellite communications engineering.
“In order to operate international communications efficiently and to give our customers satisfactory services, facilities and technology [in both a call’s originating and terminating] country had better be maintained at the same level,” said Shozo Izushi, director of engineering and consulting for KEC. “From this point of view, we will continue to accept a significant number of trainees from developing nations.”
Rethinking funding practices
Despite the good these project do, the Japanese government had to rethink its development efforts after the so-called Bhutan scandal broke out in June 1998.
Nippon Telecommunications Consulting Co. (NTC) was found to have misused a total of 195.6 million yen (US$1.6 million) out of 6.1 billion yen’s (US$50.5 million) worth of grant aid that Japan provided to Bhutan for a project to build telecommunications networks in the country between 1991 and 1998.
The firm purchased nine vehicles for 33 million yen (US$273,000) that were not originally covered by the ODA project. In addition, NTC falsely reported to authorities that it would construct a radio station in the fourth phase that had already been constructed in the third phase. And Mitsui & Co., a contractor of the project, gave away a 2-million-yen (US$16,551) kickback to the Bhutan government.
Foreign ministry officials and JICA said the misuse of funds occurred because once a contract is exchanged between Japan and the recipient government, neither the ministry nor JICA is involved in the project and all of the project jobs are entrusted to the recipient government.
After the scandal broke out, criticism against ODA projects ensued and the Japanese government issued preventative measures to ensure such ODA projects are carried out correctly. The measures include regularly checking JICA projects, establishing a screening department and assigning examiners for JICA’s grant aid starting from fiscal 1999.
Changes ahead
In general, the future direction of ODA business in the field of telecommunications is uncertain.
NTT, Japan’s dominant carrier, was scheduled to be reorganized as of 1 July 1999. Upon the reorganization, NTT will enter the international business through its international long-distance company, NTT Communications. It is believed the new unit will be involved in overseas projects.
Currently, NTTI is the NTT unit dealing with all of the projects supported by Japanese ODA funds, so with the reorganization its business may be reallocated.
Another concern is that the OECF is demanding Japan (and other nations) to make yen loans “untied.” Currently, almost all of the Japanese grants are untied, but all yen loans are “tied.” Due to objections submitted by the Japanese government and other nations, the last OECF meeting did not take any action regarding the tied vs. untied discussion.
However, under much pressure from foreign nations, the Foreign Ministry is said to be considering changing the status of yen loans. But if that happens, it is thought that weak Japanese consulting businesses may be easily defeated by non-Japanese consultants in project bids.
Thirdly, the OECF will be merged with the Japan export-import Bank of Japan and the International Cooperation Bank is scheduled to be established in October as part of administrative reform. Although maximum effort will be made not to interrupt the organizations’ businesses during the transition, there might be some confusion in the process.
Torigoe said repeatedly that Japan wants to help these recipient nations improve their infrastructure using the ODA money. Yet he believes these developing nations should make efforts to become more independent rather than continuing to receive financial help. Torigoe said Japan would be happy if it loses O
DA projects in certain nations due to those nations becoming more independent.
“But there are many nations that for
eign capitals never consider to invest for. There are many job opportunities for us,” he said.
