The consequence of the drive to build cement manufacturing plants is quite bitter for the government, who has backed the cement makers in borrowing foreign loans, since it has fallen to them to repay debts for the loss-making facilities.
In late May the Ministry of Construction called on the Ministry of Finance to seek approval from the government and the Prime Minister to allow the state-run Song Da Group to borrow from the Accumulation Fund for Foreign Debt Repayment to clear its VND437-billion debt with a foreign creditor, France’s Natixis Bank.
The debtor is the Halong Cement JSC, a subsidiary of Song Da Group which has been running a VND6.5-trillion cement plant with losses since 2010.
The debts were guaranteed by the Ministry of Finance, and also included a VND28-billion liability from the Northern European Bank.
The Halong cement plant incurred a massive VND581 billion worth of losses in 2011, and is expected to lose another VND496 billion this year.
The Ministry of Construction has also called for assistance to help Dong Banh Cement JSC, another subsidiary of Song Da Group, pay $3.4 million back to ANZ.
Dong Banh had foreign debt worth $45 million, Minister of Finance Vuong Dinh Hue said in a statement last September.
There are as many as 11 cement projects backed by the government for a total loan worth $300 million and EUR445 million, or VND17 trillion, according to a Ministry of Construction report.
Six of the projects belong to the Vietnam Cement Industry Corporation, or Vicem, the report stated.
Meanwhile, a high-ranking official at Vicem said it has to pay debts for projects that are not under its investment.
“Those indebted projects are implemented by localities with loans, and they just call for government assistance when the projects become ineffective,” he said.
Typical examples are the Hoang Mai plant in Nghe An, and Tam Diep in Ninh Binh, whose debts have recently been transferred to Vicem, as ordered by the government, he added.
“The Hoang Mai project was implemented by Nghe An province, with investment mostly borrowed from loans.
“So when the province failed to clear the debts, it asked the finance ministry for help,” he said, adding that Vicem has earmarked VND1 trillion to assist the debt-ridden cement plant.
Similarly, Vicem also spent VND1 trillion to help the Tam Diep plant, but failed to completely settle the liabilities.
“It won’t be until 2016 that the debts will be totally cleared,” he said.