ITG shut prominent textile plant amid dispute

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An anonymous source from Danang’s Industrial and Export Processing Zones Management Authority who is familiar with the case confided in VIR, saying that the joint venture had no interest in reopening the factory named Burlington Phong Phu Supply Chain City and that both had plans to divest by transferring the project to other investors.

“Foreign investors from Singapore and Hong Kong have expressed interest,” revealed the source. However, no final decision has been made.

In 2006, ITG partnered with Phong Phu – a wholly-owned subsidiary of state-run textile and garment giant Vinatex – to build the cotton manufacturing complex in the central coastal city of Danang.

The project was among Vietnam’s ten largest in 2006 with $80 million in investment capital, of which $22 million came from a Techcombank loan in October 2007. ITG is the majority shareholder with 60 per cent and Phong Phu the remainder.

Soon after opening, however, the project incurred losses primarily due to manufacturing inefficiencies, product quality issues, and a shortage of available operating capital, noted ITG’s November 2011 quarterly report.

VIR’s source revealed that ITG and Phong Phu were in regular dispute over capital contribution and resultantly, in December 2011, ITG’s board of directors passed a resolution suspending the project for an undetermined period of time. The facility was shut down in January, 2012.

In March the same year, the joint venture still owed Techcombank $18.2 million including the principal and accrued interest, reported ITG in March 2012.

Le Tien Truong, deputy general director of Vinatex, refused to comment on the case when contacted by VIR and this newspaper has not yet been successful in making contact with anyone from ITG who can comment on the dispute.

However, ITG in its March 2012 quarterly report stated that there was no dispute between the company and Phong Phu by that time. “The company and its joint venture partner have entered into arbitration to resolve their disputes,” said this report.