Vietnam gov't reflects on Vinashin debacle

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This week, the government reflected on its role in the near-collapse of the state-owned shipbuilder, Vinashin.

"Vinashin's situation was mainly caused by managerial weaknesses, a lapse in responsibility, deliberate violations and the falsification of financial reports by the group's managers," said Prime Minister Nguyen Tan Dung in a speech delivered to the National Assembly on Wednesday.

The government and concerned ministries also had responsibility in this matter, Dung said.

He said the government took a serious look at the case. Following their review, they have defined the causes and created concrete plans to straighten up Vinashin's operations in addition to taking measures to improve the governance of state-owned enterprises.

In a report released at the National Assembly meeting on Wednesday, the government said Vinashin was established in 1996 and became one of the country's Economic Groups in 2006. As of the end of 2009, the shipbuilder contributed more than VND3.3 trillion (US$169.6 million) to the government budget and its assets were recorded at VND104 trillion.

The report claimed that the company incurred its tremendous losses as a result of the global financial crisis, and mismanagement by Vinashin officials who were dishonest in their financial reporting.

Last year the group claimed to have earned a profit of VND750 billion when, in fact, it racked up VND1.6 trillion in losses, the government report alleged.

This misconduct made it impossible for the government to know the real situation, the report claimed, leading to inappropriate guidance.

Vinashin was verging on bankruptcy after accumulating total debts, by June, of about VND86 trillion ($4.4 billion), leading to a restructuring and an investigation into the firm.

The World Bank said in a report on Tuesday that state-owned enterprises have played an important role in Vietnam's progress, but have also become "a source of long term vulnerabilities."

Vietnam needs to increase controls on the way state-owned companies use their investment capital, according to Le Song Lai, deputy general director of State Capital Investment Corp. The corporation is responsible for managing the government's holdings in companies that have sold stakes to investors.

The government should speed up share sales, a process known in Vietnam as equitization, he said.

"Corporate governance in state-owned companies is an area that has been neglected," Lai said in response to a question posed at a conference on Tuesday in Ho Chi Minh City. "After incidents like Vinashin, the need for faster equitization becomes more visible than ever," he told investors in a speech.

The sale of shares in state companies has been hampered by government provisions meant to prevent foreign investors from receiving preferential prices, Lai said. The share-sale process has also been slowed by inflated valuations due to land prices and by a stock-market slump that discouraged state-owned companies from listing, he said.

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