VietNamNet Bridge - The debt worth VND5 trillion with interest rate of 4 percent to Chinese Eximbank has been burdening Ninh Binh Fertilizer. Problems occur regularly at its plant, and the more products it makes, the more losses it incurs.

A report of the Ministry of Industry and Trade shows that Ninh Binh has been taking losses forvmany years because of the high investment rate, outdated technology, high production costs and low-quality products.

The conclusion, say analysts, is not a surprise, because Ninh Binh is built with Chinese capital, by Chinese contractors and utilizes Chinese technology.

Nguyen Dinh Khang, former general director of Vinachem, the investor, said Ninh Binh had to choose Chinese contractors per the commitment made when borrowing capital from Chinese Eximbank. Huanqiu Contracting & Engineering was assigned to work as the EPC contractor of the project.

The debt worth VND5 trillion with interest rate of 4 percent to Chinese Eximbank has been burdening Ninh Binh Fertilizer. Problems occur regularly at its plant, and the more products it makes, the more losses it incurs.

Khang admitted that the plant uses European technology but some equipment is made in China.

Chinese capital not cheap capital

“The interest rate of 4 percent is not ‘preferential’. I believe that Vietnamese commercial banks are capable of lending in foreign currencies at the interest rates of 2-3 percent,” said Bui Quang Tin from the HCM City Banking University on Dat Viet.

He went on to say that the interest rate of the loan Ninh Binh received from Chinese Eximbank is ‘unusual’. In foreign markets, banks’ input interest rates are very low, just 0.5-0.7 percent, and banks can lend at 2-3 percent only.

Dinh Trong Thinh from the Finance Academy said that Vietnamese investors chose to receive loans from China partially because of their limited knowledge about Chinese technology.

In Vietnam, experienced experts are vigilant over Chinese technology and contractors. They have realized that Chinese technologies often break down during as the machines are made by Chinese standards, not international standards. 

What is Ninh Binh’s future?

According to Chu Van Tuan, deputy general director of Vinachem, when the investor drew up the feasibility study of the project in 2000, the price of input material – coal dust – was $35-36 per ton, while the urea price was $600 per ton. 

However, the coal price unexpectedly rose to $90 per ton and the urea price dropped to $250.

This means that while the input cost has increased sharply, the selling price of finished products has dropped dramatically. This is one of the reasons behind the big loss. 

The plant also has to pay for asset amortization and loan principal and interest rates.

Dat Viet