Vietnam: Shipbuilding Executives Charged In Scandal

By Joshua Lipes

Nine former executives in Vietnam’s embattled state-owned shipbuilding firm have been accused by authorities of deliberately abusing their positions for financial gain, the country’s official media reported Tuesday.

The senior employees of the Vietnam Shipbuilding Industry Group (Vinashin), which owes debts of U.S. $4.5 billion, conspired to act against state regulations on economic management, according to Thanh Nien newspaper—charges that can carry up to 12 years in prison.

An investigation into separate charges of embezzlement is ongoing, the newspaper said.

The official Tuoi Tre (Youth) newspaper said the executives bought three used vessels without government approval and imported two used power plants, leading to the disappearance of U.S. $43 million in state funds.

The investigation has focused on Pham Thanh Binh, the company’s former chairman who was arrested in August last year. Prosecutors are reviewing police findings to decide whether to indict the suspects.

The government had said that Prime Minister Nguyen Tan Dung and several cabinet members made “shortcomings and mistakes” in managing Vinashin, but they are not serious enough to warrant disciplinary action.

Some lawmakers last year said the government should be held accountable for the scandal, with one member even demanding a vote of no confidence in the prime minister, who appointed the firm’s former chairman.

Credit default

In December, Vinashin nearly went bankrupt after defaulting on the first U.S. $60 million installment of a U.S. $600 million loan by Credit Suisse, which was provided in 2007. The company is undergoing restructuring.

The troubles at Vinashin, one of Vietnam’s largest state-owned companies, have sparked investor concerns over the management of the country’s other government-run firms.

Vinashin’s default is believed to have posed difficulties to state-backed companies wanting to borrow money. Lenders had viewed the case as a barometer of Vietnam’s creditworthiness.

Credit ratings agencies had cited Vinashin’s troubles in downgrading Vietnam’s sovereign ratings last year.

Standard & Poor’s slashed Vietnam’s debt rating by one rung to BB-, three levels below investment-grade.

The global credit rating agency followed a similar move by rival firm Moody’s. Another agency, Fitch, downgraded Vietnam’s long-term foreign and local currency ratings in July last year.

Vinashin’s default and Vietnam’s credit downgrade are only part of the country’s problems.

It is also grappling with double digit inflation, a widening trade deficit, capital flight, a drop in foreign reserves, a burgeoning budget deficit, and a shrinking currency.