Vietnam’s PM demands answer on rubber firm sprung for stretching financial legality

Prime Minister Nguyen Xuan Phuc has called for a report on potential fraudulent activity at the state-owned Vietnam Rubber Group (VRG) after government inspectors discovered misuse of state capital and assets at the group three years ago.

The Ministry of Public Security has been instructed to submit the report by December 31.

VRG, in which the Vietnamese government currently owns a 95 percent stake, has allegedly committed fraud worth up to VND8.4 trillion ($370 million).

Between 2006 and 2011, the group spent over VND2.42 trillion, or 13 percent of its charter capital, on non-core businesses, such as cement, hotels, steel, hydropower projects and the stock market.

Most of the investment came from the state budget, but the group reported that it did not generate any profits.

Some VRG leaders have also been accused of contributing capital to establish and run a seafood import-export firm in the southern province of Dong Thap.

VRG also raised its charter capital in 2010 and 2011, without government approval, by VND1.84 trillion.

And although the inspection, completed back in 2014, was aimed at handling individuals and groups that committed fraud, VRG has yet to be held accountable.

Thanh Nien (Young People) newspaper reported last month that where the money had gone, and how the group would make up for the massive sum, remained a questions that the public still has no answer to.

In September, VRG rolled out a privatization plan, in which it declared a charter capital of VND40.7 trillion and 244,000 hectares (593,052) of lands in 18 cities and provinces across the country.

The rubber giant, which has 103 subsidiaries, expects to earn VND13 trillion from selling one billion shares in its initial public offering.

It also has a target of earning more than VND3 trillion in net profit this year, up 9 percent from last year.

"There is a sense of urgency in Vietnam to privatize state-owned enterprises (SOEs) and use the money raised from public offerings to alleviate the government’s fiscal burden," HSBC said in a report in August.

Late last year, PM Phuc signed off on a decision which pushes for further divestment of state capital in existing SOEs by eliminating or reducing the minimum level of ownership that the government holds in certain industries.

The decision provided a clearer roadmap for equitization by saying that the state will equitize 137 SOEs and sell its entire stakes in 103 firms. Equitization is the term Vietnam uses to describe the process of issuing shares to partially privatize state-owned businesses in which the government will still hold the majority stake.

The Ministry of Finance said in June that the country’s public debt, which includes central government debt, government-backed loans and local government debt, may reach the ceiling set by the legislative National Assembly of 65 percent of gross domestic product from 2017-2018.