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The unlearned lesson

The Saigon Times Daily
Saturday,  May 26,2012,22:59 (GMT+7)
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The unlearned lesson

By Phuong Thao in HCMC

The Vinashin graft scandal is still fresh in the minds of people, with the former chairman and CEO of the nation’s biggest shipbuilder, Pham Thanh Binh, sentenced by a court in Haiphong City in late March to 20 years in jail on charges of having intentionally violated State regulations on economic management that caused serious consequences. During the go-go years, Vietnam National Shipbuilding Industry Group (Vinashin) made huge inefficient investments in a range of fields, resulting in a huge loss of nearly VND900 billion.

But this is not the last and only case involving state conglomerates that are seen as the mainstay of the economy. Another state economic giant, Vietnam National Shipping Lines (Vinalines), has made big headlines in local media in the past week. The former chairman of this company, Duong Chi Dung, has been on the run since the police issued a nationwide arrest warrant for him.

Just as what Pham Thanh Binh did, Dung made unthinkable investment decisions, particularly those related to port projects and purchases of a 42-year-old Japanese-built floating dock from Russia and secondhand cargo vessels at sky-high costs. The Vinalines case is as severe as that of Vinashin. This explains why the anti-corruption police at the Ministry of Public Security are directly responsible for handling it.

The case has stolen the limelight this week as a matter of fact. At the helm of Duong Chi Dung, whom the Ministry of Transport picked to lead the Vietnam Maritime Administration in February this year while Government inspectors were scrutinizing Vinalines’ investment irregularities, the shipbuilder racked up losses of around VND1,685 billion, or US$81 million, in 2009-2010 alone.

As reported by the popular news site Vnexpress, between 2007 and 2010, Vinalines implemented 14 port projects – 12 seaports, one river port and one inland clearance depot – but most of them have been found to infringe regulations on administrative management, financing allocation, design approval, and construction, according to the Government Inspectorate.

The most infamous investment decision made by Dung involves Floating Dock No.83M as part of a shipyard project in the country’s south. The US$26.3 million cost of the out-of-order dock is double the original projection and equivalent to around 70% of the average world market value of a newly built floating dock.

Vinalines has not been financially efficient in its core operations. The firm has never made profits from its ship fleet, which is mostly secondhand. Last year, a total of 40 Vinalines vessels were detained in China, India and Japan, including Hoa Sen, Vinalines Star, Cai Lan 4, Vinalines Glory and Vinalines Global.

Running a loss-making business like Vinalines, Dung still got promoted.

Speaking to Nguoi Lao Dong, Nguyen Minh Thuyet, former vice head of the National Assembly Committee for Culture, Education and Youth, asks why Dung as a poor-performing business leader was still selected to head the maritime administration in February this year after a probe into Vinalines was completed in late 2011. “The Ministry of Transport made a wrong decision when appointing Dung, who is an alleged criminal offender in a large economic case, as head of the Vietnam Maritime Administration. The ministry should explain this to the public and someone should be disciplined for this wrong appointment.”

People wonder why Dung had risen through the ranks over the years although his profile suggests he is unqualified to assume those posts. Between 2003 and 2005, Vietnam Waterway Construction Corp. suffered losses of nearly VND412 billion while he was serving as its chairman and CEO. State auditors at the time requested a thorough inspection into the losses and responsibilities of those concerned at the company, but Dung escaped unscathed. Ironically, he was appointed as CEO of Vinalines in May 2008.  

Both Vinalines and Vinashin got involved in non-core operations, executed ill-conceived investment plans, purchased old vessels and equipment and caused whopping debts. But the two had not been brought to light until Government inspectors stepped in.

The two cases have raised eyebrows over the state of state-run conglomerates and corporations. Others like Vietnam Coal and Mineral Industries Group and Vietnam Electricity Group are also found to have committed serious violations.

Economic expert Pham Chi Lan is quoted by Tuoi Tre newspaper as saying that ministries seem not to have learned the lesson of the Vinashin scandal.

Ministries represent the Government to supervise state-owned enterprises (SOE) but most of the officials responsible for the supervision role have little or no experience in business administration. They mostly rely on the reports the firms send them and in some cases, they sit on the boards of SOEs but they have never detected problems. The Vinashin case is proof that SOEs could give wrong reports while government officials on SOEs’ boards fail to fulfill their responsibilities.

Lan says it had been possible to prevent Vinashin and Vinalines cases from happening if there had been rules forcing SOEs to ensure transparency in business dealings. “Companies listed on the stock market are owned by thousands of shareholders, so they strictly follow information disclosure regulations. SOEs, which actually belong to the country’s population of over 86 million, must act as listed enterprises do,” Lan suggests.

The Saigon Times Daily

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Giấy phép Báo điện tử số: 321/GP-BTTT, cấp ngày 26/10/2007
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