Vinashin ex-chair detained over mismanagement

Ministry of Public Security police last night detained the ex-chair of Vietnamese shipbuilding giant Vinashin Business Group, Pham Thanh Binh, over alleged mismanagement charges.

The arrest was made following a police raid on Binh’s residence in the capital city of Hanoi. He would be in police custody over a period of four months so that investigators can further probe the case, according to the online news website VTC News.

An inspection released on July 12 by the Party Central Committee’s Commission for Inspection shows the former boss of one of the country’s largest state-owned conglomerates had committed serious violations.

He is alleged to have infringed regulations on the mobilisation, management and use of State capital at Vinashin. And the commission said after its June 21-July 3 meeting in Hanoi that it would discipline Binh.

Binh’s violations are deemed as severe since they have placed the shipbuilder, once the pride of the country’s engineering industry, on the brink of bankruptcy. Vinashin owes total debt of a staggering VND86 trillion (more than $4 billion) while its combined assets are VND104 trillion, according to figures of the government Office.

The inspection also found Vinashin had falsified its financial reports to the government, established as many as 200 incapable subsidiaries, and expanded outside its core business operations.

The company bought many secondhand ships, causing big losses for the State, violated regulations on project formulation, approval and bidding, and incurred huge debt which puts the group on the threshold of insolvency. Binh picked a son of his and a younger brother to serve as representatives of the State’s stake holdings and hold senior positions.

Shortly before Binh’s detention last night, deputy prime minister Nguyen Sinh Hung told reporters in Hanoi that the government would get tough on the case.

Those Vinashin leaders who have violated laws will be strictly dealt with, he said at the government Office’s press conference following the monthly Cabinet meeting.

Just one day after the Commission for Inspection made public the results of the Vinashin probe, prime minister Nguyen Tan Dung suspended Binh from the post of Vinashin chair to facilitate a police investigation.

Flanked by the ministers and deputy ministers of planning-investment, finance and construction, and the central bank governor, deputy PM Hung said the government would be thoroughly restructuring Vinashin by reducing its non-core operations.

“Vinashin’s core operations will revolve around ship building and repair, and services that support the shipbuilding sector,” Hung said. “No more shipping services. Vinashin has even got involved in cement production, tourism and many others.

“We’re determined to rebuild the shipbuilding industry. Vietnam has a long coastline, so the sea-based economy is of great importance and we’ll have to develop it.

“The Vinashin situation is still under control. It is still manageable. If Vinashin goes bust, we will have to start from scratch. So the government’s resolve is to restructure it.

” The government will use capital from the State-owned enterprise restructuring fund to ensure Vinashin would have as sufficient chartered capital as required, he said.

He added the government would raise funds from appropriate sources to lend them on to the group to pay foreign loans that fall due and pay down their debt, complete half-done projects and half-built ships, and commission or sell completed ships to improve its financial position.

Vinashin will have to rebuild its balance sheet on its own, he stressed, and the government would consider issuing bonds to raise funds for Vinashin if needed.

Hung unveiled at the press conference that on top of all its financial obligations, Vinashin was having a foreign debt amounting to around $600 million at the moment without government guarantees.

This is not to mention the $750 million Vinashin borrowed from the government following an international government bond sale. This loan is scheduled to fall due in 2016.

A statement on Vinashin restructuring measures read at the press briefing by government Office chair Nguyen Xuan Phuc says the group would be forced to settle debts, sell stakes at other non-core businesses or projects, let them go public, or even transfer them to other entities.

The Vinashin board has mapped out a new business plan in which the company is projected to continue racking up losses in 2010-2012, start making some profit in 2013-2014, and return to its growth path after 2015.

“Vinashin will have a brand-new image in 2015,” Hung said with confidence.

Some of the government measures include urgently strengthening the company’s leadership, restructuring its operations, approving its new charter, adopting rules for financial management and other in-house regulations, focusing resources on half-finished shipbuilding orders, minimising termination of shipbuilding contracts, withdrawing capital from non-core businesses, reviewing investment projects and relocating some shipyards to make use of land for commercial purposes. – Saigon Times

Tags: Vietnam shipping industry, Vinashin restructure