The case of Vinashin, which followed a pilot scheme to reform state-run businesses, has raised concern over the effectiveness of the reforms, economists have said.

The ruling Communist Party found Vinashin Chair Pham Thanh Binh, who also heads the party chapter at the firm, "irresponsible in the mobilisation, management and use of the state capital, pushing Vinashin to the brink of bankruptcy".

The Commission for Inspection under the Party's Central Committee said in a statement Vinashin also made false financial reports to the government in recent years and invested heavily outside its core business which led to bad debt of "tens of trillion dong".

More than 5,000 Vinashin workers, or nearly 10 percent of the workforce, have lost their jobs and the firm has failed to pay 234 billion dong in salaries and social insurance to workers, the commission said in a statement issued late on Monday.

Vinashin will focus on its core business in ship building and auxiliary industries, and transfer projects in its non-core business to other companies, the government said in a statement last Thursday.

State oil group PetroVietnam and state-run shipper Vinalines will take over some Vinashin projects and assets, Pham Viet Muon, deputy head of the government's Steering Committee on Enterprises Renovation and Development, told a briefing last Friday.

He gave no timeframe but other state-run media said Vinashin would be divided into three parts by September 30.

Vinashin was the sole recipient of proceeds from the country's maiden $750 million sovereign bond issue in October 2005. It has invested the funds in building ships and will start repaying the debt from 2012.

The group operated well in 2006-2007, having signed contracts with a value of up to $6 billion, but it ran into troubles in 2008 partly because of the global financial crisis, Muon was quoted by the official Tuoi Tre newspaper as saying on the weekend

Vinashin's outstanding debt stood at more than 80 trillion dong, part of which will be transferred to PetroVietnam and Vinalines, Muon said.

Reuters - July 8, 2010

Vietnamese experts criticize government on shipbuilder's decline

Vietnamese experts on Thursday accused the government of mismanagement of the Vietnam Shipbuilding Industry Group that led one of the country's largest state-owned enterprises to the brink of bankruptcy.

Senior economist Pham Chi Lan, a former member of the Prime Minister's Research Commission, criticized the government's plan announced last month to restructure the company, also called Vinashin, by moving some of its subsidiaries and a debt of 20 trillion dong (1.07 billion dollars) to other state enterprises, including Vietnam Oil and Gas Group and Vietnam National Shipping Lines Corp.

"Restructuring it this way will bring many problems to Vinashin rather than solve them," Lan said. "Passing parts of Vinashin's debt on to other state enterprises does not make the debt disappear."

She also called on the development of a legal framework to ensure that state-owned economic groups respect market principles.

"Ministries, specific individuals and agencies must be punished," she said. "Public funds were not charity funds."

Economist Nguyen Quang A, former director of the Institute for Stable Development in Hanoi, criticized the government for favouring Vinashin, pointing to a 750-million-dollar loan the government gave Vinashin by issuing international bonds in 2005 and government urging of local banks to provide more loans to Vinahin while it was incurring a big debt.

"It is irrational," A said.

Lawyer Nguyen Tran Bat, chairman of Investconsult Group, which provides legal consulting services to foreign companies in Vietnam, said the government's mechanism to allocate capital to Vinashin was vague.

"Laws on enterprises have been approved, but there are not sufficient regulations as well as sanctions to manage and punish state-owned enterprises," he said.

Vinashin got into trouble when it diversified outside its core business and the global recession hit its customers, leaving Vinashin unable to pay up when its debts came due.

Prominent lawyer Cu Huy Ha Vu, who sued Prime Minister Nguyen Tan Dung last year over bauxite-mining projects, called on the National Assembly to establish a team to investigate the Vinashin case and bring charges against Dung for his role in managing Vinashin.

Dung on Tuesday fired the head of Vinashin, Pham Thanh Binh, for alleged mismanagement.

Vinashin, as of the end of June, had assets of 90 trillion dong but logged debts of more than 80 trillion dong, the government said.

Deutsche Presse Agentur - July 16, 2010