Unprofitable State projects show signs of recovery

Thursday, Mar 28, 2019 08:00

DAP 1 Hai Phong fertiliser plant. After suffering losses in the past, the plant reported profits of VND195.5 billion in 2018. — Photo vietnamfiance

The Ministry of Industry and Trade (MoIT) has reported some positive signs in the handling of 12 major State-owned projects that have long reported losses, as some have managed to resume operations after suspensions or even record profits.

The information was released at a working session chaired by Deputy Prime Minister Vuong Dinh Hue with representatives of the ministry and the projects’ investors in Ha Noi on Wednesday.

A report from the ministry showed that two of the projects managed to recover and report profits in 2018: DAP 1 Hai Phong fertiliser plant (VND195.5 billion or US$8.4 million) and Viet Nam – China Steel Plant (VND469 billion).

Four other projects have gradually managed to stabilise production and reduce losses. In the first two months of the year, Ha Bac fertiliser plant reduced its losses by VND30.6 billion compared with the same period last year. DAP 2 Lao Cai fertiliser plant reduced losses by VND10.1 billion and Ninh Binh fertiliser plant by VND44.5 billion.

Two projects resumed operations including Dinh Vu polyester fiber factory (PVTex) and Quang Ngai ethanol plant. Binh Phuoc ethanol plant also resolved issues and appears to be ready to restart commercial operations.

Nguyen Phu Cuong, chairman of Viet Nam National Chemical Group (Vinachem), proposed removing DAP 1 Hai Phong eertiliser plant from the list of loss-making projects as has posted three years of stable operations and met the MoIT’s criteria.

The ministry’s five criteria for moving projects off the list include finalising projects, problems and disputes with contractors in engineering-procurement-construction (EPC) contracts; stable operation and at least one profitable year. In addition, they must not have overdue debt continuously for a minimum period of three years at credit institutions and must comply with laws on tax obligations and budget remittances. Finally, the projects must complete the tasks set out in the action plan to handle weakness.

The Deputy PM agreed with the Vinachem’s proposal and asked MoIT to co-operate with the firm to remove the plant from the list. This could help the project better mobilise capital.

Nguyen Dinh Phuc, general director of Viet Nam – China Steel Plant, said the project has not completed tax and fee duties and is continuing to face difficulties in the first months of the year.

Nevertheless, he expects the plant to be removed from the list soon.

EPC disputes are a common sticking point for the projects. In most cases, contractors completed their work behind schedule, amassing further costs and flooding the projects with debt.

Viet Nam National Oil and Gas Group (PetroVietnam) was reported to have completely resolved legal disputes with contractors at PVTex, creating favourable conditions to restructure PVTex.

Le Manh Hung, PetroVietnam’s deputy general director, said PVTex has operated its 10 fibre production lines stably, bringing in profits to offset production costs. It has worked with banks to arrange capital to restart the rest of the plant this year.

However, resolving legal disputes with EPC contractors has not been easy for the remaining projects, especially Ninh Binh fertiliser plant and Thai Nguyen Iron and Steel plant.

Phuc said the Viet Nam – China Steel plant was unable to negotiate with its contractor and was awaiting instruction from the Ministry of Justice to resolve the issue.

Deputy Minister of Justice Phan Chi Hieu said the company had to clarify issues with the contractor to ensure benefits for the project.

Deputy PM Hue said it was necessary to resolve the difficulties before divesting State capital from the projects.

The Deputy PM said that if a project found it difficult to negotiate with an EPC contractor, they could involve the Ministry of Justice. — VNS

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