Government Inspectorate to investigate $92 million Phuong Nam pulp mill

Government Inspectorate to investigate $92 million Phuong Nam pulp mill

The Government Inspectorate will investigate the VND2.3 trillion ($92 million) Phuong Nam pulp mill, which has been delayed for 10 years.

Government Inspectorate to investigate $92 million Phuong Nam pulp mill. Photo: baodautu.vn

The pulp mill is one of 898 projects and works to be inspected, according to an announcement by the Government Inspectorate in late July. Of these, 145 projects will be directly handled by the Government Inspectorate, while inspectorates of ministries will manage the remainder.

The Phuong Nam pulp mill, which is located in the former Long An province (Tay Ninh province), has completed equipment installation but failed to operate successfully during loaded testing.

The project was initiated in October 2003 and was invested in by the Transport and Development Investment Company (TRACODI). The project's initial scale was 100,000 tonnes of pulp per year, with a total investment of over VND1.48 trillion ($59.2 million).

In November 2007, TRACODI adjusted the total investment to nearly VND2.28 trillion ($91.2 million).

However, due to financial difficulties, in June 2009, the prime minister approved a proposal by the Ministry of Finance (MoF) to transfer the project from TRACODI to Vietnam Paper Corporation (VINAPACO).

Under the transfer terms, the MoF continued to provide loans to the investor from the Foreign Debt Repayment Accumulation Fund to settle principal and interest payments to Societe Generale Bank in 2009 (9.5 million EUR) and 2010 (9.4 million EUR), without interest or guarantee fees until the project became operational and profitable.

After taking over, VINAPACO moved the project into the completion phase. By June 2012, the project had essentially completed construction, equipment installation, and no-load testing. However, loaded testing was unsuccessful. Despite VINAPACO increasing the total investment to nearly VND3.41 trillion ($136.4 million) and exploring operational solutions, the plant could not commence operations.

The company repeatedly negotiated with the contractor ANDRITZ regarding testing, but ANDRITZ refused to guarantee operational results, as the equipment supply and technical services contract with TRACODI had already ended.

At the time, the Ministry of Industry and Trade assessed that the project was no longer feasible, failed to meet its objectives, and proposed that the government halted its implementation. In 2014, the prime minister agreed to stop the investment and tasked the MoIT with developing a plan for liquidation or sale. However, the project has not been fully resolved.

As of the end of 2024, the total value of incomplete construction work invested in the project had exceeded VND2.68 trillion ($170.2 million). VINAPACO's financial reports have consistently recorded expenses related to this project, with auditors issuing opinions.

VINAPACO recorded exchange rate differences from 2013 to the present under “long-term prepaid expenses” amounting to over VND417 billion ($16.6 million), which will vary annually. Pending assets worth over VND12.3 billion ($492,000) includes the value of rotten jute liquidated in 2012 and inventory damaged due to a chemical H₂O₂ incident, with total losses exceeding VND9.5 billion ($380,000).

VIR