Government advances $97 million to pay debt for Phuong Nam Pulp Mill

May 27, 2019 | 16:39
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As of the end of 2018, the government had to advance EUR82.6 million ($97 million) to help Vinapco pay off the debts of Phuong Nam Pulp Mill, with plans for the Ministry of Industry and Trade (MoIT) and Vinapco to sell the project and then repay the government loan – which has not happened yet.
government advances 97 million to pay debt for phuong nam pulp mill
The government advanced $97 million to pay the debts of Phuong Nam Pulp Mill

Notably, according to the government’s report on public debts submitted to the National Assembly, so far, Vietnam Paper Corporation (Vinapco) owed altogether €82.6 million ($97 million) to the government which it is supposed to collect by selling the paper mill. Vinapco put the project on sale numerous times but failed, leaving it unable to repay the government.

Phuong Nam Pulp Mill is one of the 12 loss-making projects under the management of the MoIT. The mill’s construction was kicked off in March 2006 with the initial investment capital of VND1.487 trillion ($65 million) by Transport and Communication Development Investment Company (Tradico). The mill is designed to produce the best quality pulp in Vietnam, reaching European standards.

At the time, the province encouraged farmers to grow eucalyptus and acacia trees on nearly 9,000 hectares in Thanh Hoa, Moc Hoa, and Tan Thanh districts to supply materials for the mill.

In 2007 the mill began the test run and in November Tradico decided to increase the total investment capital to VND2.286 trillion ($99.3 million).

However, the test run was suspended due to machinery breakdown. In 2009, Tradico was licensed to transfer the pulp mill to Vietnam Paper Corporation. The expected cost of the project increased to VND3.4 trillion ($148 million).

However, after Vinapco took over the mill, it was upgraded and started operation again, but the malfunctions remained.

The investor organised three auctions at the starting price of VND1.885 trillion ($81.95 million) to sell the mill but failed. In July 2018, the management board of Phuong Nam Pulp Mill sought extended discount incentives to deal with difficulties encountered during the sales process. However, as of now, the project is still “up for grabs”.

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