A Chinese contractor involved in a suspended steel project of Thai Nguyen Steel and Iron Corporation (TISCO), a subsidiary of the State-run Vietnam Steel Corporation (VNSTEEL), has turned a deaf ear to the demand to pay back US$13 million in payments.

A view of a long-deserted facility at the State-run Thai Nguyen Steel and Iron Corporation. It is among 12 ineffective megaprojects of the industry and trade sector 

VNSTEEL general director Nguyen Dinh Phuc made the revelation at a meeting aimed at solving 12 ineffective, loss-making projects, under the umbrella of the Ministry of Industry and Trade, on March 27, reported Thanh Nien newspaper.

Speaking at the meeting, Deputy Prime Minister Vuong Dinh Hue asked the VNSTEEL leader whether the corporation has sent the inspection results of the Vietnamese Government Inspectorate for TISCO’s phase-two production expansion project to the Chinese contractor, Metallurgical Construction Corporation of China (MCC).

Phuc told the senior Government leader that the corporation has already sent the findings to MCC. However, the partner has not promised to pay.

He said that there is little or no likelihood of negotiating with MCC to complete the unfinished work of the project, since the contractor has repeatedly demanded a US$100 million increase in the total value of its contract as a prerequisite, as stated in previous rounds of negotiations.

Earlier, the Government watchdog suggested Prime Minister Nguyen Xuan Phuc impose financial sanctions and take measures to recover US$13 million in payments from MCC, and some VND876 billion worth of other improper payments to its subcontractors, among other monies.

According to the findings, poor administration by State agencies over the years has prompted the project to grind to a halt, despite huge investments, while the project owner still has to spend some VND40 billion (US$1.7 million) per month to service bank loans.

In late 2004, the then-Prime Minister gave TISCO the go-ahead to draft a feasibility study for tripling the capacity of steel billet production from 250,000 tons to 759,000 tons.

One year later, the project was approved, at an initial cost of VND3.843 trillion, or US$242.5 million given the exchange rate at that time at VND15,850 to the dollar.

The project, which was originally scheduled for completion within two and a half years, included two major bidding packages and 22 other smaller components.

The first key package involved Tien Bo iron mining, worth VND442 billion. A local contractor was chosen to build an iron ore screening plant, which was designed to handle 300,000 tons of iron ore on an annual basis. It was put into operation in May 2014.

Meanwhile, the second package was expected to develop a chain of metallurgy technology operations, worth roughly VND2.3 trillion, or US$143 million, at an annual capacity of 500,000 tons of steel billets.

In 2007, TISCO signed an engineering, procurement and construction (EPC) contract, worth US$160.8 million, with MCC to complete the second package, scheduled for completion within two and a half years.

However, the two sides signed many extra appendices of adjustments, which led to various content changes in their EPC contract.

In 2012, TISCO and its holding company VNSTEEL suggested the Ministry of Industry and Trade revise upward the total investment of the project to VND8.104 trillion, or VND4.261 trillion higher than the initial figure. The approval was given in mid-2013, and the project was expected to begin operations in late 2014.

Since 2013, MCC and its subcontractors have suspended work on the project. Consequently, the project is over 10 years behind schedule and all of the major items remain incomplete, according to the Government watchdog.

Statistics from TISCO showed that the total payments on the project, as of late 2016, had amounted to nearly VND4.5 trillion, including the costs of equipment and construction of some VND2.1 billion and VND1 trillion, respectively. Also, the principals and interest on the project has reached some VND3.9 trillion.

TISCO has paid, on behalf of MCC, an accumulated amount of taxes worth US$11.6 million, as well as other costs for equipment loading, unloading and maintenance.

However, the Chinese corporation has not transferred all the machinery specified in the contract. It even supplied substandard equipment and failed to comply with the agreed countries of origin for such equipment and technical specifications.

SGT