Ailing state-owned projects stuck in impasse with Chinese contractors

The state-owned companies that developed these projects have not been able to come to an agreement with Chinese contractors in determining a new investment value for them after changes in technical design and the number of equipment were made, according to a government report submitted to the National Assembly.

As the delays in these projects have lasted years, the two parties have also not agreed on the amount of tax to be paid and fines for late filings, it said.

Three of these projects, developed by the Vietnam National Chemical Group (Vinachem), involve the construction and expansion of fertilizer plants in northern provinces.

The fourth, developed by energy giant Petrovietnam, involves the expansion of a plant belonging to the Dung Quat Shipbuilding Industry Company Ltd. in the central province of Quang Ngai.

The fifth involves the expansion of a plant belonging to the Thai Nguyen Iron and Steel Jsc (TISCO) in the northern province of Thai Nguyen.

The government has proposed that the disputes be taken to court or an international arbiter, but consultants have said there is very little chance of winning and legal costs could exceed current disputed values.

These five are among 12 loss-making projects of the Ministry of Industry and Trade which have seen their total costs balloon by 46 percent to VND63.6 trillion ($2.7 billion). Most of this investment, 75 percent, comprise loans from domestic banks and from other sources with government guarantees.

After three years of the government trying to settle these 12 projects, only two have become profitable. Another two have seen a reduction in losses and one has resumed operation after a hiatus.

The remaining seven are still not operational or have not completed construction.