Petrolimex subjected to millions of USD of fines

According to the inspectorate’s recently released conclusion, an inspection of the group was carried out between December 26, 2013 and June 17, 2014, uncovering multiple violations of many regulations while managing and using assets and capital, equitisation, managing the parent company and its subsidiaries, as well as in construction and land use.

Petrolimex incurred big losses from financial investments and making investments into businesses that do not belong to its core operations.

As of June 30, 2013, Petrolimex made a financial investment of VND10.54 trillion ($473 million). The sum included investing VND5.46 trillion ($244.8 million) into 45 fully-owned subsidiaries, contributing VND2.89 trillion ($130 million) to 23 joint stock companies, investing VND1.65 trillion ($74 million) in three joint ventures, and buying VND128 billion ($5.7 million) worth of shares in seven joint stock companies.

These investments had low returns. For example, the VND76.5 billion ($3.4 million) investment into Petrolimex Aviation resulted in a dividend of VND6.4 billion ($287,000), a 2.8 per cent gain, while the VND102 billion ($4.6 million) investment into PetrolimexLand yielded a thin VND6.12 billion ($274,000), equal to 2 per cent.

Not only did the above investment choices yield miniscule benefits, the company’s conduct while making them raised eyebrows at the Inspectorate. Petrolimex’s investment of VND400 billion ($18 million) in PG Bank, VND171 billion ($7.7 million) in PG Insurance, and VND51 billion ($2.3 million) in PetrolimexLand all went down without permission from the Ministry of Industry and Trade and the prime minister.

Petrolimex subsidiary Vietnam Petroleum Transport JSC (VIPCO) invested VND311 billion ($14 million), once again, with low returns. VIPCO transferred VND72.54 billion ($3.25 million) to the account of Thien Loc Phu Ltd. as advance payment for four projects, but then the recipient company’s general director Nguyen Dao Thinh allowed a partner to withdraw VND20.18 billion ($905,000) for undisclosed reasons. As of now, VND18.68 billion ($838,000) remains unrecoverable.

Meanwhile subsidiary Petrolimex Petrochemical JSC invested VND5 billion ($224.2 million) into PLG Investment and Trading Ltd. In 2011, PLG was dissolved, leaving Petrolimex Chemicals to grieve the loss of hundreds of millions of VND.

Apart from the VND1.2 trillion ($54 million) and $310,000 fines proposed, the Government Inspectorate also advised the Ministry of Industry and Trade to collect tax arrears for 319.5 tonnes of diesel that Petrolimex imported then re-exported and sold to unapproved buyers. As further punitive measure, the Inspectorate put forward that Petrolimex should also be ordered to divest VND662 billion ($29.7 million) from non-core businesses and collect other sums that it has invested.