Interest groups squander prime public land in HCMC

The fact that the state was both a regulator and an enterprise owner created a breeding ground for the interest groups, says the Criminal Investigation Agency (C01) under the Ministry of Public Security.

C01 investigators say that so far, such interest groups have been responsible for least five state-owned "golden land plots" in Ho Chi Minh City being usurped by private owners, causing "significant losses" to the state.

The land plot at 2-4-6 Hai Ba Trung Street in District 1, HCMC. Photo by VnExpress/Huu Khoa.

‘Asking-giving mechanism’

Most recently, an investigation into Vu Huy Hoang, minister of industry and trade from 2007 to 2016 and his accomplices at the ministry has revealed how a 6,000 square meter land at 2-4-6 Hai Ba Trung Street in District 1 has landed in the hands of a private investor.

According to the investigators, Hoang and his deputy Ho Thi Kim Thoa knew in 2016 that the land plot was assigned to Vietnam’s largest brewery Sabeco, under the Ministry of Industry and Trade, to invest and build a 6-star hotel and convention center.

While the duo knew that Sabeco was not allowed to establish a new entity to use the land allotted to it, they permitted the establishment of Sabeco Pearl Company. Based on Hoang’s approval and Thoa’s direction, Phan Dang Tuat, board chairman and head of the state capital management board at Sabeco, signed a letter to the HCMC People's Committee requesting approval for Sabeco Pearl to be the new owner of the project.

Under Hoang’s direction, Thoa signed two documents for Sabeco to divest its 26 percent stake at Sabeco Pearl and approved the starting auction price at VND13,247 ($0.5) a share. These actions led officials at departments of HCMC People's Committee to advise the city's former vice chairman Nguyen Huu Tin to approve leasing of the prime land to Sabeco Pearl in contravention of regulations, leading to the land becoming a private property after some illegal transfers.

The Me Linh Square Investment Joint Stock Company, which used to be Sabeco Pearl, a wholly private company, is currently the owner of the plot.

The C01 agency says that the relationship between the ministry and the board managing state capital at Sabeco reflected the "asking-giving mechanism". While the board directly managed Sabeco’s business on paper, it was in fact completely controlled by the ministry and every decision it made had the guidance and/or intervention of the ministry. However, leaders at the ministry did not clearly understand the operations of Sabeco.

Eventually, former minister Hoang, former deputy minister Thoa and their accomplices caused losses of more than VND3.8 trillion ($164.3 million) for the state. Both are under investigation for "violating regulations on management and use of state assets, causing loss and waste." Thoa has since fled abroad and is wanted by authorities.

In a similar case, the Ministry of Public Security lost a prime 5,000 square meters plot at 15 Thi Sach Street in District 1 to Phan Van Anh Vu, or Vu Nhom, who used to be one of the biggest developers in Da Nang, the country's third largest city after Hanoi and HCMC.

Vu was the director of Bac Nam 79 Company, which was deemed as a "disguised" company belonging to the public security ministry.

Under the influence of some documents from the public security ministry, Nguyen Huu Tin, deputy chairman of HCMC during 2011-2016, signed a decision to allow Bac Nam 79 to lease the plot illegally.

Investigators found the leasing violated regulations related to state-owned land as it was done without any bidding process.

Vu later constructed an 18-story building there and sold the apartments to more than 110 foreign and local customers. In all, their violations caused losses of VND800 billion ($34.6 million) to the state, investigators estimate.

Last year, Tin was sentenced to seven years in jail for "violating regulations on management and use of state-owned property" while two former deputy ministers of public security Bui Van Thanh and Tran Viet Tan got 2.5 and 3 years in prison, respectively, for "negligence of responsibility, causing serious consequences."

Vu himself has to stay behind bars for 30 years starting 2018 for various violations, including "deliberately disclosing state secrets."

According to the C01 investigators, regulatory authorities engaged in loose management, creating conditions for individuals to take advantage of "loopholes" and, step by step, transfer ownership of public assets into private hands.

‘Private relationship’

In the case of another plot of prime land at 8-12 Le Duan Street in District 1, the city had leased it out to Mayflower Investment Company Ltd. in 2018 for doing business without organizing any bidding.

Nearly 5,000 square meters in area, the plot was earmarked for construction of a five-star hotel and mall. The Government Inspectorate said city authorities should have carried out a bidding process to select a prestigious and experienced investor.

Instead, preliminary estimates say that the state has suffered losses of over VND250 billion ($8.62 million), of which VND4.7 billion was the value of the structures on the land at the time of the violation and VND248 billion that is yet to be recovered due to the illegal land transfer and lease.

The plot at 8-12 Le Duan Street in HCMC's District 1. Photo by VnExpress/Quynh Tran.

Former city vice chairman Nguyen Thanh Tai later told investigators that he had made the decision based on his "private relationship" with the president of Mayflower and Lavenue, a woman named Le Thi Thanh Thuy. Tai now faces the charge of "violating regulations related to the management and use of state-owned property, causing losses or wastefulness," a crime that carries a jail term of 10-20 years.

In order to deal with such loopholes and group interests, the C01 has proposed a clear barrier between state management function and the function of representing state capital, eliminating the intervention of higher authorities in the operation of the state-owned firms.

The authorities, for their part, should reinforce inspection and management to avoid state losses in business activities, rearrangement, divestment and privatization of state companies, the agency says. They should develop the leverage to prevent group interests, corruption, abuse of positions and powers at state-owned firms, it adds.