Vietnamese economists say that unscrupulous Chinese businesses and contractors have capitalized on the pursuit of low bids to offload old technology into Vietnam.
The Vietnam National Chemical Group recently sought a government bailout for a US$700 million fertilizer plant which went into operation in 2012 only to lose more than US$47 million.
The group admitted the plant in the northern province of Ninh Binh, was equipped with “average quality” Chinese machines and assembly lines that quickly developed technical problems.
Insiders said Vietnam is now paying the price for building itself up with a string of cheap Chinese technology.
Costlier in the long-run
Nguyen Van Thu, chairman of the Vietnam Association of Mechanical Industry, said Vietnam has handed five out of six chemical projects to Chinese contractors, 49 out of 62 cement projects, 16 out of 27 thermal power projects on top of a series of transit plans and two controversial bauxite mines.
The Chinese contractors handled some of those projects in their entirety--from planning to procurement to construction.
Most of the thermal plants built by Chinese contractors opened three months to three years behind schedule, Thu said noting that many turned out to be of remarkably poor quality.
An unidentified energy expert said Chinese contractors “are shifting outdated and polluting technologies from China to Vietnam.”
The food processing industry suffers the same problem.
Chinese contractors were chosen to build processing facilities because they offered the cheapest prices.
Pham Vu Ha, general secretary of the Vietnam Cassava Association, said most cassava processing plants in the country use Chinese technologies that are between 10 and 15 years old.
Ha said Vietnamese cassava powder is known for being of middling quality and cannot compete with Thai products in terms of whiteness, fineness and purity.
Dr Tran Dinh Long, vice chairman of the Vietnam Electrical Engineering Association, said cheap Chinese bids always end up costing more in the long run due to the constant need for repairs.
He blames Vietnam’s Bidding Law for forcing the country to pursue cheap prices and failing to hold contractors accountable for poor quality.
Economist Le Dang Doanh, former head of the Central Institute for Economic Management, said the country needs an independent review process to evaluate contractors.
Doanh suggested that government officials have been bribed by Chinese contractors to secure bids.
Dr Tran Dinh Thien, director of the Institute of Economics, said cheap Chinese technology “is costing Vietnam a lot of time in its journey toward modernization.”
He pointed to the Hanoi-Ha Dong railway project, now three years behind schedule, as an example.
Dr. Thien said the tendency of Chinese contractors to submit artificially low bids and then blow their deadlines doesn't just cost Vietnam precious time, it eliminates the possibility of fair competition.
He said lagging thermal power plants projects have hampered Vietnam’s industrialization and made it harder for the country to attract foreign investment.
“These technical delays will have terrible consequences for development,” he said.
At the same time, he blamed local businesses for valuing cheap prices over competitive technology.
The government should issue environmental protection policies to filter out such schemes, he said.