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Former Deputy PM warned over grave errors in steel mill project
By Pham Nhat
Saturday,  Jan 11, 2020,16:56 (GMT+7)

Former Deputy PM warned over grave errors in steel mill project

By Pham Nhat

Party Secretary of Hanoi City Hoang Trung Hai is the second member of the Politburo to be disciplined, after former HCMC Party chief Dinh La Thang, in this tenure – PHOTO: VGP

HCMC – Party Secretary of Hanoi City Hoang Trung Hai was issued a warning due to “serious violations and shortcomings” he committed in a project to expand production at the State-owned Thai Nguyen Iron and Steel Corporation, or TISCO, while serving as Deputy Prime Minister.

Party General Secretary and State President Nguyen Phu Trong chaired the Politburo’s meeting in Hanoi on January 10 on disciplinary actions against the 60 year-old Hai and another official, following proposals from the Party Central Committee’s Inspection Commission.

The Politburo found that during his time as a member of the Government’s Party Affairs Committee and Deputy Prime Minister between April 2007 and February 2016, Hai made grave errors in issuing instructions on the execution of TISCO’s steel-and-iron mill expansion project.

The then-deputy PM was accused of negligence, as he failed to properly consider feedback from the concerned ministries and agencies. He allegedly provided vague instructions in carrying out the project’s engineering, procurement, and construction (EPC) contract.

In this regard, he failed to follow the Government’s working regulations on resolving issues arising on the prices of building materials.

He also offered guidance on adjusting the value of the EPC contract, revising up the total cost of the project and borrowing preferential loans, in violation of State regulations on investment credit and export credit.

He displayed a lack of supervision and failed to provide supervisory instructions, in line with governmental procedures, which led to changes to the EPC contract that altered its nature and broke its managerial principles.

Hai also allowed TISCO to pay some expenses for the EPC contractor, China Metallurgical Group Corporation (MCC), in violation of the contract.

The Politburo stated that Hai made severe errors and shortcomings, causing grave concern among the public and negatively affecting the prestige of the Party and himself.

Given the nature, extent, consequences and causes of his violations, his working process and contributions to the Party and State, the Politburo decided to issue a warning against him as a disciplinary measure.

According to a report of the Government Inspectorate, then-Prime Minister Phan Van Khai gave TISCO the go-ahead to conduct a feasibility study in October 2004 for tripling the capacity of steel billet production from 250,000 to 759,000 tons.

One year later the project was approved, at an initial cost of VND3.84 trillion, or US$242.5 million, given the exchange rate at the time of VND15,850 per U.S. dollar.

The project, which was originally scheduled for completion in two and a half years, included two major bidding packages and 22 smaller components.

One package was aimed at developing a metallurgy processing line, worth some VND2.3 trillion, or US$143 million, at an annual capacity of 500,000 tons of steel billets.

In 2007, TISCO signed the EPC contract worth US$160.8 million with the Chinese contractor MCC to complete the second package within two and a half years.

However, the two sides signed many extra appendices on adjustments, which led to various changes in the contract.

In August 2012, TISCO and its holding firm, the Vietnam Steel Corporation, suggested the Ministry of Industry and Trade raise the total investment of the project to VND8.1 trillion, or VND4.26 trillion higher than the initial figure. The approval was given in mid-2013, and the project was expected to begin operations in late 2014.

At the time of inspection, TISCO had already paid MCC over 92% of the total value of the project, but the project was nowhere near completion. MCC and its subcontractors have suspended work on it since 2013.

The project owner, TISCO, still owes some VND40 billion (US$1.7 million) per month to service its bank loans.

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