Noi Bai - Lao Cai expressway, one of a few projects executed by South Korean-owned POSCO E&C in Vietnam between 2009-2012. Photo: Thai Son
The Ministry of Transport is reviewing contracts signed with POSCO Engineering and Construction after the South Korean company is investigated in its home country for operating a slush fund of about 10 billion won (US$8.9 million) in Vietnam.
All findings by the Vietnam Expressway Corporation will be submitted to Korean authorities when requested, Deputy Transport Minister Nguyen Hong Truong told the press on Friday.
He said his ministry learned about the POSCO scandal through media reports, promising to provide more detailed information once there are reports from South Korea's authorities.
“As Vietnam is fighting corruption in every sector, the news is attracting a great deal of public attention,” he said.
South Korean media last month reported that POSCO E&C, a subsidiary of giant steelmaker POSCO, allegedly operated a slush fund of 10 billion won by adjusting the costs of its projects between 2009 and 2012 in Vietnam.
According to Truong, the deputy minister, during the period in question, the company was in charge of three packages in the construction of the Noi Bai-Lao Cai Highway connecting Hanoi and the northern province of Lao Cai. The $1.2 billion-project is funded by the Asian Development Bank and was completed at the end of last year.
The Korean company was also contracted for two packages in the Long Thanh-Dau Giay Highway project linking Ho Chi Minh City and the southern province of Dong Nai.
All the projects have been checked by their foreign sponsors and state auditors’ initial inspections have found no problems with them, Truong said, adding that procedures related to management and investment were too in line with the laws.
In fact, POSCO E&C won the packages with offered prices lower than investors’ estimates, by 15-30 percent, he said.
Asked about the company’s claim that it spent the illegal money paying its subcontractors in Vietnam, Truong said it was POSCO’s business and that the ministry and the Vietnam Expressway Corporation “do not interfere in that."
Last month prosecutors in South Korea detained a former chief of POSCO E&C’s Vietnamese unit, referred to as Park only, for allegedly helping the company create and operate the fund, The Korean Times reported.
Park headed the Vietnam-based unit between 2009 and 2011, and was believed to have pocketed 4 billion won ($3.5 million) from the fund.
Korean prosecutors also raided the offices of three companies acting as subcontractors for POSCO E&C’s projects in Vietnam.
The Korean Times quoted prosecutors as saying that they are investigating how the fund was spent.
POSCO, which first reported about the fund after finishing an internal inspection last July, claimed that the money was paid as kickbacks to contractors in Vietnam.
However, prosecutors suspected that the money was transferred to South Korea, where it was paid to “high-profile policymakers” under the former Lee Myung-bak administration.
Korean prosecutors were expected to summon Chung Dong-hwa, former vice chairman of POSCO E&C, for questioning anytime soon on suspicions that he played a key role in the whole graft case.
Besides POSCO, Korean authorities are also looking into other big companies like Lotte Shopping, Dongkuk Steel, and the state-run Korea National Oil Corp as part of that country’s attempt to “root out” corruption, ordered by Prime Minister Lee Wan-koo.