Vietnam shipbuilding chief arrested over scrapped vessel

Sep 6, 2010, 5:56 GMT

Hanoi - The acting chief executive of Vietnam's troubled state-owned shipbuilding conglomerate was arrested last week for scrapping a ship the company had mortgaged and failing to return the loan, the company's chairman said Monday.

Tran Quang Vu was arrested Friday along with three other senior executives of the Vietnam Shipbuilding Industry Group (Vinashin). Police announced the arrests Saturday but said only that they were related to investigations of the company, which the government is reorganizing.

According to Vinashin chairman Nguyen Hong Truong, Vu was arrested for selling a ship the company owned for scrap in 2006. The ship had been used as collateral for 5.4 million dollars in loans obtained through Vinashin's financial subsidiary.

Police said evidence for Vu's arrest came from interrogation of his predecessor, Pham Thanh Binh, who was arrested August 4.

'[Vu] and Binh deliberately bought the Bach Dang Giang, which was an old ship manufactured in 1973, even though the government did not allow them to buy old ships,' Truong said.

The Bach Dang Giang proved too deteriorated for use, and an attempted refurbishment failed. Vu ultimately cannibalized the engine for another ship and sold the rest for scrap but did not inform the Vinashin Financial Corp that the collateral was gone.

Truong is a deputy minister of transport appointed by the government to oversee Vinashin's restructuring. He said the 5.4 million dollars in loans had come from domestic sources.

But the newspaper Tien Phong reported Monday that the loans had come from government international bond issues.

Besides Vu, police arrested Vinashin board member Tran Van Liem and the chief executives of two major Vinashin subsidiaries, Nguyen Tuan Duong and Nguyen Van Tuyen. They have been charged with 'deliberately acting against the state's regulations on economic management, causing serious consequences.'

Vinashin got into financial difficulties when it diversified beyond its core business and the global recession hit its revenue. It left the company unable to keep up with its debt repayments and resulted in salary cuts for more than 70,000 employees and the dismissal of 5,000 others, the government said.

As of the end of June, Vinashin had assets worth 90 trillion dong (4.63 billion dollars) and debts totaling 4.6 billion dollars, the government said.

Several economists have criticized the government for offering Vinashin unjustified state support, including a 750-million-dollar state loan in 2005, financed by a bond sale.

In a move to rescue Vinashin, the government last month asked local commercial banks to allow Vinashin to suspend payments on its debts.