Vietnam uncovers $1.5bn of ‘wrongful spending’

FT - Vietnam’s corruption-fighting body has uncovered 30.7tn Vietnam dong ($1.5bn) of “wrongful spending” at several big state-owned companies, including PetroVietnam, the oil and gas monopoly.

Photo: Song Da Corporation - T.L/Thanh Nien

The Government Inspectorate alleged that PetroVietnam, Song Da and other state-owned companies had mismanaged assets and made bad investment decisions. It said PetroVietnam, whose outspoken chairman Dinh La Thang was promoted to transport minister last year, was responsible for 18.2tn dong of losses to the state budget, according to the state-owned Tuoi Tre newspaper.

Foreign and local investors say wasteful spending and corruption at Vietnam’s favoured state-owned companies has destabilised the economy and damaged the country’s reputation.

The Communist government has vowed to clean up the state sector while ensuring that it retains a “leading role” in the economy, as part of its struggle to maintain economic legitimacy.

Last week, the well-connected former chairman of Vinashin, a state-owned shipbuilder, was jailed for 20 years on charges of economic mismanagement after bringing the company, which had amassed more than $4bn in debt, to the brink of collapse. The scandal was a partial trigger for all three main global credit rating agencies to downgrade Vietnam’s sovereign debt rating in 2010.

Despite the large scale of the losses unveiled on Thursday, analysts said it was too early to know if this was the start of a concerted crackdown on errant state companies or merely more rhetoric.

“It’s not clear whether there will be any serious fallout from these allegations,” one foreign economic researcher based in Ho Chi Minh City said.

“Typically, the government inspectorate identifies a token number of state-owned companies, organisations and ministries at which to conduct an audit, they come up with all sorts of irregularities, there’s some noise for a day or two and then it goes away.”

Nguyen Quang A, an independent economist and former government adviser, said he was not surprised by the inspectorate’s findings as it was “in the nature of state-owned enterprises to use money for the wrong purposes”.

But he said this did not yet amount to a serious effort to restructure state-owned companies because “if they want to do that, they must be much stronger, they have to change the Communist party’s direction, and that’s not easy”.

PetroVietnam declined to comment, but said it would hold a press conference next week from which foreign news organisations would be excluded. Song Da was not immediately available to comment.

Additional reporting by Nguyen Phuong Linh in Hanoi