A group of major lenders, led by state-run Vietnam Development Bank, is unlikely to reclaim loans totaling VND750 billion (US$34.43 million) that they made to a steel plant project in the central province of Ha Tinh, whose construction has been delayed for five years.
Officials in the province were quoted as saying in a statement last week that they were shutting down Van Loi Steel Mill, because its investor admitted that it was not going to be able to resume the project.
Ha Tinh Cast Iron and Steel Joint-stock Company originally planned to invest more than VND1.7 trillion ($78 million) into the mill with a designed output of 250,000 tons per year.
Work on the project in Vung Ang No.1 Economic Zone started in 2008, but was suspended in late 2010 due to financial difficulties.
By the time it was halted, nearly VND1 trillion ($45.9 million) had been disbursed for the project, including the VND750 million of loans from banks like Vietnam Development Bank, Vietcombank, and BIDV, news website VietNamNet reported.
Ho Anh Tuan, chief of Ha Tinh's economic zone management board, was quoted as saying that they could have revoked the project's land and license earlier.
Instead, they informed relevant lenders first, so that the banks could collaborate in handling the project's assets, he said.
However, speaking to the website, a director of one of the banks, said it is "complicated and difficult" to deal with defaulted loans.
The lenders, in fact, are likely to lose almost all the money, considering all the works built and machinery bought a few years ago have become either rusty, broken, or stolen, the unnamed banker said.
"After financing the project with hundreds of billions of dong, the banks now have to get their shares from scraps," he said.