Vinashin inspection report released 

Published: 10/06/2011 05:00



Sixteen former Vinashin officials and three government ministries implicated in the company’s financial debacle

A ship assembled by the Vietnam Shipbuilding Industry Group (Vinashin)’s Ha Long Ship Building Company in the northern Quang Ninh Province. Three government ministries and 16 former Vinashin officials have been implicated by a team of government inspectors in the financial fiasco of the giant shipbuilder.

Government inspectors have found three ministries conducted poor oversight on the Vietnam Shipbuilding Industry Group (Vinashin).

The company drew international attention last July when the government announced that the firm had accumulated VND86.7 trillion (US$4.2 billion) in debts. Much of the debt remains outstanding as the firm and its affiliates scramble to restructure their business.

Last week, the Central Government Office, which assists the Prime Minister, announced that PM Nguyen Tan Dung had approved the inspection team’s findings at Vinashin and its 19 affiliates, in addition to the solutions that have been proposed.

The release of the recent inspection sheds light on some of the missteps.

Investigators from the central government gathered their information between July and November of 2010. The inspection findings only became public last week.

The team accused the Transport Ministry of failing to ensure that Vinashin establish a set of operating procedures and company regulations. The ministry, which was directly responsible for monitoring Vinashin’s business practices and reporting any violations to the Prime Minister, failed to do so.

The inspectors charged that the Finance Ministry did not force Vinashin to disclose its financial and investment activities and failed to ensure that its international bond loans were put to good use.

Finally, inspectors indicated that officials from the Ministry of Home Affairs had lapsed in making sure that Vinashin followed the correct procedures in appointing its general director.

The group’s chairman Pham Thanh Binh had served simultaneously as its general director since 1998, until he was suspended last July and arrested a month later. Authorities have so far arrested nine other Vinashin’s former officials.

Game plan

PM Dung instructed the Finance Ministry to draft measures that would minimize losses and establish financial plans for Vinashin’s restructuring. Deputy PM Nguyen Sinh Hung has been deputed to head a government commission to help with Vinashin’s restructuring.

Dung asked that the Finance Ministry collaborate with other governmental bodies to draft and submit a report on the plan in the third quarter of this year.

Inspectors said that between 2005 and 2010, Vinashin borrowed VND72 trillion ($3.5 billion) but failed to manage the funds effectively, causing “serious consequences” and losses.

The group was also found to be “irresponsible and dishonest” in its use of $750 million in international bond loans.

From 2006 to 2010, Vinashin signed 85 contracts, valued at VND58.2 trillion ($2.84 billion), but completed only 15 of them due to general incompetence, according to the inspectors.

Terminated contracts accounted for an estimated 47 percent of the group’s accumulated debt—excluding fines of more than VND1 trillion ($48.7 million).

A preliminary audit found that Vinashin officials had lost VND1.68 trillion ($81.9 million) in 2009, but the recent inspection said the company had lost VND4.98 trillion ($242.7 million) that year.

Inspectors warned that Vinashin could lose another VND20 trillion ($974.7 million), due to interest and fines that have been compounded by the termination of its contracts.

Inspectors also called for seven criminal investigations to be launched into Vinashin and its subsidiaries.

Responsible parties

The Government Inspectorate named 16 Vinashin managers, who ran the company between 2006 and 2010, responsible for the current crisis. Most of the blame was placed on former Vinashin chairman Pham Thanh Binh, who was arrested last August on charges of accounting and financial mismanagement.

Binh was found to have purchased an aging vessel when the Prime Minister asked the company to build a new ship. He was also said to have authorized the construction of the Song Hong Thermoelectricity Plant, a project that was never approved by government officials. The inspectors say that Binh covered debts owed to the Bank for Investment and Development of Vietnam (BIDV) with international bonds borrowed from the central government. He also stands accused of using state money to play the stock market.

Inspectors said that Tran Quang Vu, former Vinashin general director, who was also apprehended last September on the same charges, should be held responsible for mortgaging the Bach Dang Giang ship—a scrapped Polish vessel—for a VND106 billion ($5.16 million) government loan.

Ho Ngoc Tung, Vinashin’s former financial director and Trinh Thi Hau, director of Vinashin Finance Corporation, both detained pending further investigations, were also accused for their involvement in the Bach Dang Giang ship case.

Struggling to restructure

In April, Vinashin defaulted on a Vietnamese dong loan backed by local businessmen.

Last month, officials from the giant shipbuilder allegedly asked the loan’s backers to write off as much as 90 percent of their outstanding debt—according to quotes from Pham Viet Bac, general director of Sabeco Fund Management, published by Bloomberg  on June 2.

Officials told creditors that the shipbuilder wouldn’t be able to make any payments until 2015 at the earliest, he said.

Sabeco Fund currently holds VND30 billion ($1.5 million) worth of Vinashin bonds.

The shipbuilder had already asked foreign lenders for a one-year extension after failing, last December, to come up with a $60 million principal payment on a $600 million syndicated loan.

Pham Van Nha, an expert at the Party Unit of the national state-owned enterprises group, said the shipbuilder will have to extend its debt payments until, at least, the end of 2012.

“I think Vinashin could hardly pay off its debts this year. Its payments should be extended to late 2012 or early 2013,” he was quoted by the Tuoi Tre (Youth) newspaper as saying on June 4.

Nha also said that Vinashin would have to repay its own debts to international partners and should be active in negotiating those payments.

He advised the government to issue specific restructuring regulations for Vinashin and encourage the group to resume certain contracts with its partners to minimize losses.

Nguyen Xuan Phuc, minister and chairman of the Government Office, said that the government has been “clear and firm” with the shipbuilder on its debt problem and that the company must repay what it has borrowed.

However, he said, it’s necessary to establish a long-term plan for the payment so that the local shipbuilding industry can continue to grow.

Founded in 1996, Vinashin aimed to become one of the world’s top shipbuilders. But as the group expanded and diversified into running businesses ranging from animal feed production to tourist resorts, it incurred massive debts that the government has estimated at VND86 trillion, around 4.5 percent of the country’s gross domestic product in 2009.

Reported by Thanh Nien staff

Provide by Vietnam Travel

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