Two to the power of one

illustration photo

Minister of Transport (MoT) Dinh La Thang has inked Document 6454/BGTVT-TTCB seeking the prime minister’s approval to form two big groups operating in civil engineering construction by restructuring the sector’s existing construction corporations.

Accordingly, one such group, incorporating the Civil Engineering Construction Corporation 1 (Cienco 1), Cienco 8 and Thanh Long Construction Corporation, will be operating in northern areas and the other group, through merging Cienco 5, Cienco 4 and Cienco 6, will mainly operate in southern locations.

“These groups will take on large-scale transport infrastructure projects and public utility duties in underprivileged areas. They also take charge of accumulating capital to boost competitive edge,” said Thang.

Reality shows that restructuring Ciencos has become imperative to MoT’s leadership since capital-strapped Ciencos with their poor performance at almost transport sector projects are a burden to project developers.

Besides weak finance, most Ciencos are big debtors. Except Ciencos 4 and 5 which rake in profits, five remaining units have bogged down in debts. The Vietnam Waterway Construction Corporation is in most critical situation with its aggregated losses mounting to VND857 billion ($41.4 million) as of December 31, 2010, seven-fold more than its chartered capital.

Besides, after years operating without proper development orientations Ciencos have overlapped functions with similar technology and operational levels.

The idea of merging Ciencos is not a new concept. Back in the 1990s, the MoT gave the nod to Cienco 1-Cienco 8’s tie-up to form Construction Corporation 18 (Cei18). The merger aimed to give birth to an entity capable of handling big infrastructure projects in Vietnam and Laos through joining international bidding process.

However, since its birth Cei18 did not leave any remarkable results. It has engaged in executing beltway 3’s first-phase build-transfer Mai Dich-Linh Dam section in Hanoi which was notorious for its delay and low efficiency.

Since the proposal is new and awaits the premier approval, will there be specific mechanism to help the proposed groups still remains unknown.

The transport sector’s proposal would get the nod from the prime minister or not depends on state group model efficiency appraisals by competent state agencies in late 2011, according to Deputy Prime Minister Vu Van Ninh.