A worker at Vietnam-China Steel Mill. (Photo: VNA)
Three years after the implementation of a government directive aimed at salvaging 12 failed business projects under the Ministry of Industry and Trade (MoIT), little progress had been made and the majority were still losing money, according to a recent Government report submitted to the National Assembly.
The 325-million USD Dinh Vu Polyester Plant resumed production in March last year, but had reported a loss of more than 5 trillion VND (215.5 million USD) by the end of August this year, making it the heaviest loser of all MoIT projects.
Elsewhere, bio-energy plants in Binh Phuoc and Quang Ngai showed losses of nearly 1.4 trillion VND (60.3 million USD) and 1 trillion VND (43 million USD), and Phuong Nam Pulp Mill’s total liability had reached more than 3 trillion (129.3 million USD) by September this year.
DAP Fertiliser Hai Phong and Vietnam-China Steel Mill were the only two profitable companies on the list. DAP Fertiliser Factory Hai Phong reported a modest 7.2 billion VND (310,000 USD) profit after tax and Vietnam-China Steel Mill posted 270 billion VND (11.6 million USD), but both looked unlikely to maintain their momentum next year.
A few other projects have been able to reduce their losses. Fertiliser firms Ninh Binh and DAP Fertiliser Laao Cai were able to cut their losses by 417 billion VND (18 million USD) and 208 billion VND (9 million USD), respectively.
The report highlighted a number of issues that must be resolved including settlement of legal disputes over EPC contracts (Engineering, Procurement and Construction), finalisation of projects and recovery of State capital.
Seven out of the 12 projects were dealing with legal battles over EPC contracts. As attempts to settle disputes had failed, some cases now must go before international courts.
As the State will no longer pump money into those projects, companies said they were without the required financial resources to dig themselves out. Lack of funding has already hurt their operation and profitability due to increased input costs.
Recovering State capital remained a challenging task. Investors from the private sector either showed little or no interest in loss-incurring projects or were unable to buy in due to ongoing legal disputes.
The report recommended companies to conduct a comprehensive review of their operations to reduce costs and cut losses. A study of their products and markets must also be carried out in order to increase sales. The Government must make greater efforts to encourage private investors to buy in as additional investment are crucial to bringing these projects out of the red.VNA