Due to failing to deal with a dispute over EPC contract packages between investors and Chinese contractors, the fates of four of the 12 loss-making projects will be decided by the Vietnam International Arbitration Centre.
|Four of the eight EPC disputes are with Chinese contractors |
According to Bizlive, the report on a year of implementing solutions at 12 loss-making projects following a request from the National Assembly showed that eight of the 12 projects still have disputes over engineering, procurement, construction (EPC) contracts. Four of these projects are waiting for international arbitration.
Notably, to date, the dossiers of Ha Bac fertiliser plant, DAP 2 Haiphong fertiliser plant, and the Quang Ngai bio-fuel plant are waiting for a solution from the international arbitration centre. Meanwhile the dossier relating to the dispute in Dinh Vu polyester fibre factory will be submitted to the authorities in November this year.
The common point in these disputes is the presence of a Chinese contractor. In Vietnam, Chinese contractors are known for bidding low to win contracts, then asking for more, citing unexpected cost overruns. Most Chinese-contracted projects are completed behind schedule, amassing further costs.
Along with the EPC contract problems, almost all of these 12 loss-making projects are flooded in massive debts.
Notably, with the exception of Lao Cai iron and steel plant and DAP 1 Haiphong fertiliser plant, which managed to turn profit, the projects racked up VND18.67 trillion ($819.8 million) of accumulated losses, up VND2.55 trillion ($111.9 million) on-year.
As of December 31, 2017, the total debts of the 12 loss-making projects increased by VND3.44 trillion ($150.8 million) to VND58.5 trillion ($2.56 billion), almost all of which is threatening to become bad debts.
According to MoIT, the total initial investment in these 12 projects was some VND43.7 trillion ($1.91 billion), which was later adjusted to VND63.6 trillion ($2.79 billion) (an increase of 45.65 per cent). Of this, equity was VND14.4 trillion ($632.3 million), accounting for 22.56 per cent, while loans made up 74.6 per cent with about VND47.5 trillion ($2.08 billion). The remaining 2.84 per cent came from other sources.
The eight projects having disputes over EPC contracts:
- Ninh Binh fertiliser plant
- Ha Bac fertiliser plant
- DAP 2 Lao Cai fertiliser plant
- Quang Ngai biofuel plant
- Phu Tho bio-fuel plant
- Dung Quat Shipbuilding Industry Co., Ltd.
- Dinh Vu polyester fibre factory
- Phase II expansion project of Thai Nguyen Iron and Steel Complex