Vinashin gets new name as Vietnam restructures state companies

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A 2012 file photo shows workers build a ship at a Vinashin shipyard in the central province of Quang Ngai

Vietnam Shipbuilding Industry Group, the debt-ridden national shipbuilder, is being renamed and restructured as the government works to reform inefficient state-owned enterprises that are weighing down the economy.

Vinashin, as the company is known, will have its name changed to Shipbuilding Industry Corp., or SBIC, the transport ministry said in a statement posted on its website yesterday. SBIC will be state-owned with eight subsidiaries and registered capital of 9.52 trillion dong ($451 million), the ministry said.

"Vinashin ceases operation from the day SBIC is granted business registration certificate," the ministry said, without specifying a timeframe.

The shipbuilder, whose near-bankruptcy spurred sovereign credit downgrades, defaulted on a $600 million internationally syndicated loan in 2010. Vinashin said in September it plans to cut 14,000 jobs, more than half its workforce.

"Inevitably, there would need to be a rebranding," Dominic Mellor, Asian Development Bank country economist, said in a phone interview today. "You can't use the name Vinashin. But more important than that is what is different in terms of management. That's what potential investors will be looking at more closely."

Vinashin received the $750 million proceeds from Vietnam's first dollar-denominated bond sale in 2005. By 2010, the company had accumulated about 86 trillion dong in debt, according to the government.

Vietnam's two-year-old effort to reform state-owned enterprises has had "limited" progress, the World Bank said in July, citing a low number of share sales of government companies.

Sold, liquidated

The government has ordered Vinashin to restructure its 234 units. The majority, 165 units, will be sold, liquidated or placed into bankruptcy, according to the ministry's statement. Sixty-nine units will be restructured through mergers, equitization or capital transfer. SBIC will take over the rights, liabilities and legal benefits of Vinashin, it said.

State-owned companies, which dominate key industries, account for an estimated one-sixth of employment in Vietnam and half of corporate income tax revenue, the International Monetary Fund said in August.

The new company must become more efficient, Mellor said.

"That involves, potentially, shedding of labor and financial and organizational restructuring, divesting from activities they shouldn't be in," he said. "You need to look at the corporate governance, what is the composition of the board, what's the oversight. Only time will tell whether they actually implement these new requirements."

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