Duong Chi Dung, 55, was accused of deliberately mismanaging Vietnam National Shipping Lines (Vinalines) from 2005 to February this year before he disappeared.

He rose through Vinalines' ranks even as it haemorrhaged money. He was appointed head of the Transport Ministry's Maritime Administration weeks before investigators uncovered wrongdoing at the company. Before joining Vinalines, he managed a loss-making waterway construction company.

The Police Ministry said he was arrested on Tuesday after Interpol issued a warrant in May. It did not give the location of the arrest. State media said Dung was detained in another Southeast Asian country and has been extradited back to Vietnam.

Six other Vinalines executives have been arrested this year in a case that marks a big test of the government's graft-fighting credentials and whether Communist-run Vietnam will sink deeper into an economic malaise rooted in a state sector plagued by red ink and cronyism.

Debt at Vinalines was 43.1 trillion dong ($2 billion) at the end of 2011, more than four times its equity of 9.41 trillion dong, the government said in June.

According to a government inspectors' report, Vietnam's largest state-owned shipper and port operator had losses or "irregular expenses" at several of its 14 port projects.

Management of its 154 ships, most of them cargo vessels and oil tankers, appeared haphazard. Five were detained in foreign ports as a result of major financial disputes, the inspectors said.

Among the blunders was the purchase of a 43-year-old, Japanese-built floating dock from a Singapore firm for $9 million. Repair work raised the cost to $26.3 million, about 70 percent of the price of a new dock.

The unused dock is now mocked in Vietnam's press as an "iron heap", symbolic of Vinalines' losses. The company also built three ship repair facilities between 2007-2010 that were not included in a government-approved development plan.

It spent 22.85 trillion dong ($1.09 billion) between 2005 and 2010 on 73 second-hand ships, including 17 described in an official report as "too old", according to state media. And it lost 434 billion dong ($21 million) in 2011 because of lax corporate management and "protracted wrongdoings in business management", the government report said.

Those findings have strengthened criticism of a controversial policy that puts a third of the economy under the control of state-owned companies to ensure tight government grip on strategic industries.

By Ho Binh Minh - Reuters - September 5, 2012