Massive losses in recent years
Vinachem has been plagued with massive losses in recent years, with some of its projects making losses for two years in a row, especially Ninh Binh Fertilizer plant, which has been running in the red for four years in a row during 2012-2015.
The Ninh Binh Fertilizer plant has been constantly losing from 2012 to 2015. According to the feasibility report, the plant reported to lose $47.9 million in the first three years of operation and started making profit since the fourth year (2015). However, as of currently, the project has yet to make profit and must cease operation. So far, the project has incurred accumulated loss of approximately VND3.058 trillion ($134.5 million).
The plant is also struggling with huge loans from Eximbank China and other credit institutions. According to the Ministry of Finance, as of June 28, 2016, the plant was VND10.25 trillion ($451.3 million) in debt, with VND227.3 billion ($10 million) overdue.
|Ninh Binh plant is struggling with debts in addition to continuous losses
According to the inspection committee, aside from making ineffective investment, current and former leaders of Vinachem also lacked oversight, allowing the Project Management Board of Ninh Binh Fertilizer Plant to use equipment originated from China instead of the EU and G7 countries as stated in the contract.
Another project of Vinachem, Ha Bac Fertilizer Plant, has also been facing losses for two years in a row. Operating since 1960, Ha Bac plant was expanded in 2010, causing massive strain on the operating cost and resulting in a loss of $26.55 million in 2015 and $5.66 million in 2016. While the plant is expected to make a profit of $4 million in 2017, accumulated loss is expected to last until 2019.
The committee also found numerous violations in Lao Cai DAP Fertilizer Plant, developed by DAP2-Vinachem JSC. The inspection results show that errors in the adjustment of construction investment project caused the total investment to increase by almost VND79.9 billion ($3.5 million).
Problems in the negotiation and signing of the engineering, procurement and construction (EPC) contract also led to the contract price of some construction components and materials being higher than expected, increasing the contract value by more than $8.8 million. Additionally, there are other violations and shortcomings in project planning, management, quality acceptance, and payment.
Leaders of Vinachem in the 2005-2010 and 2010-2015 terms have committed numerous violations in contract signing, quality inspection, payment to contractors, fulfilling state budget obligations, and capital raising. Some projects even had to temporarily stop payments to contractors due to insufficient funds.
Current and former leaders facing disciplinary action
In terms of individual accountability, the Central Inspection Committee has decided to apply disciplinary measures against four high-ranking individuals due to the severity of their violations.
These individuals include Nguyen Anh Dung, secretary of the Vinachem Party Committee and chairman of the Board of Directors of Vinachem Group; Do Quang Chieu, former secretary of the Vinachem Party Committee and former chairman of the Board of Directors; Nguyen Quoc Tuan, former secretary of the Vinachem Party Committee and former chairman of the Board of Directors ; and Do Duy Phi, former deputy secretary of the Vinachem Party Committee and and CEO of Vinachem.
All four were deemed irresponsible as leaders, slacking in the course of their management, monitoring, and inspection duties, resulting in violations and shortcomings in staff, capital, and land management, among others, as well as failing to persevere the capital allocated by the state.
Nguyen Anh Dung was held mainly responsible for the violations and mistakes made in the period 2010-2015
Do Quang Chieu was held mainly responsible for violations and shortcomings in the early stage of the implementation of the Ninh Binh plant.
Chieu was deemed irresponsible for submitting the project pre-feasibility and feasibility study reports to relevant agencies before Vietnam’s chemical industry development plan was approved.
Despite warning from ministries, agencies, and professional bodies on the project’s low investment efficiency and potential risks, Chieu still requested the competent authorities to authorise investment. Currently, the project is performing extremely poorly and is making serious losses, losing all equity of the state.
Nguyen Quoc Tuan and Do Duy Phi were held responsible for violations and shortcomings in the approval and implementation of the Ninh Binh plant, the Ha Bac plant, and the Lao Cai DAP project, as well as imporperly issuing documents on the construction project for the commercial centre, offices and luxury apartment complex at 233B Nguyen Trai, Hanoi.
Aside from the four officials mentioned above, Nguyen Gia Tuong, CEO of Vinachem Group, and Nguyen Dinh Khang, former CEO, were also found responsible for a number of violations, albeit at a less severe degree. The inspection committee only demanded them to carry out serious self-review without disciplinary action.