The Phuong Nam Paper Factory, which has a total investment of VND 3,410 billion in Thanh Hoa district, Long An province, was invested 20 years ago. Just as the project was “born”, it must now be “shut down”. This is the most difficult project to handle among the 12 “ineffective big projects” in the Industry and Trade sector.
Deputy Prime Minister Le Minh Khai, Head of the Steering Committee for handling the weaknesses and inefficiencies of some projects and enterprises that are slow and ineffective in the industry, has come to inspect the Phuong Nam Paper Mill project.
“The traffic official” enters paper production
The Phuong Nam Paper Mill project was approved by the Long An Provincial People’s Committee in October 2003, with a total investment of VND 1,487 billion.
This project was initially invested by the Industrial and Transport Development Joint Stock Company (TRACODI) – a member company of the Transport Construction Corporation 6 (Ministry of Transport) – a completely unfamiliar unit in the paper production industry.
The project was built on an area of 45 hectares, with a production scale of 100,000 tons of paper pulp per year from raw materials of reeds. By November 2007, the investor had adjusted the total investment of the project to VND 2,287 billion.
Due to difficulties encountered by the investor, in June 2009, the Prime Minister decided to transfer the project’s ownership from TRACODI to the Vietnam Paper Corporation (VINAPACO).
According to the report of an independent auditing agency, as of June 30, 2009 – the date of transferring the project to VINAPACO, TRACODI had invested over 2,000 billion VND in the project, including 35% of the value of the main producer’s construction volume; 40% of the volume of the wastewater treatment area; office building and 30% of workers’ housing area.
Although the workshop construction item was not yet completed, TRACODI had purchased all machinery and equipment for over 57 million euros and also accepted 100% payment for the supplier.
After taking over the project, VINAPACO adjusted the total investment to 3,410 billion VND and implemented the incomplete investment items. In June 2012, VINAPACO basically completed construction, equipment installation, and non-load test. However, the loaded test process was unsuccessful, and the system was always congested. The reason was that the processing of raw materials for the production cycle was fragmented and did not meet the required quality standards.
To overcome the incident, VINAPACO invited experts in the mechanical and paper industry in Vietnam, as well as experts from the contractor Andritz (Austria) to study the incident and find a solution. At the same time, the Paper and Pulp Technology Institute also conducted research on replacing the production materials from reed to hardwood. However, all of these research results affirmed that it was impossible to solve the problem and convert the raw materials.
According to the calculations of an independent consultant hired by VINAPACO, in the case of smooth operation, the raw materials would only be enough to operate the factory for 12 days per year. Meanwhile, if there were enough raw materials to operate the entire year, the project would still incur a loss of nearly 5 million dongs per ton of paper produced using this technology. This is not to mention that the project’s wastewater treatment system design does not meet Vietnam’s discharge standards and requires an additional investment of 60 billion dongs to upgrade.
According to Vu Ngoc Bao, former Vice Chairman of the Vietnam Pulp and Paper Association and an expert in the field, the paper pulp production line from the bamboo plant at the Phuong Nam paper pulp factory is unique in Vietnam. However, this technology, which goes directly from the laboratory to practical application, is not suitable and therefore does not work.
“The Phuong Nam paper pulp factory was built with the objective of using bamboo as the raw material, so the equipment and machinery were invested based on this. If they want to switch to producing paper pulp from wood and scraps, they would have to change all the machinery and equipment, which cannot be done by upgrading the existing machinery and equipment,” analyzed Mr. Bao.
Regarding the difficulties and obstacles in this project, Nguyen Van Ut, Chairman of the Long An Provincial People’s Committee, stated that the project had made mistakes from the beginning when it was planned.
“The investor did not consider the source of raw materials, the output product, and the economic efficiency in the investment, and the technology was not suitable when the project was established. This project was proposed by the Ministry of Industry and Trade and approved by the Prime Minister to be suspended in April 2014 (Document No. 195 / TB-VPCP, the Prime Minister).
Until now, this project has been inactive for nearly 10 years, and the longer it lasts, the more damage and waste of land and resources. Therefore, the People’s Committee of Long An Province proposes that the Government decide to terminate this project so that the parties can handle the assets on the land, return the site, and invite investment in other fields,” said the head of the Long An Provincial Government.
The Phuong Nam paper mill project has been closed and suspended for decades.
The most difficult project among the 12 ineffective projects
During a working session with key officials in Long An province on March 26, Deputy Prime Minister Le Minh Khai, head of the Steering Committee for addressing the weaknesses and shortcomings of some projects and slow-progressing businesses in the Ministry of Industry and Trade, emphasized that the Phuong Nam Paper Mill project was started nearly 20 years ago. This is one of the 12 ineffective projects in the industry over the past time. The delayed handling of this project has caused a huge waste of resources.
Therefore, the Deputy Prime Minister requested the Ministry of Industry and Trade to analyze, evaluate, and come up with specific solutions within the appropriate jurisdiction to propose a feasible final plan. Regarding the termination of the project, the Deputy Prime Minister noted the need to handle related assets and land, debt settlement, etc., in accordance with the law.
The Deputy Prime Minister also requested the Ministry of Industry and Trade to coordinate with relevant ministries, sectors, and localities to compile a report before April 15, 2023, to propose to the Steering Committee for submission to the Party Central Committee for instructions from the Politburo.
Deputy Prime Minister said that among the 12 weak projects, the Party Government Committee has proposed a plan to handle 8 projects to the Politburo. The Nam Phuong Paper Factory project is the most difficult among the remaining 4 projects (Nam Phuong Paper Factory; Lao Cai Steel; Thai Nguyen Steel; Dung Quat Shipbuilding).
Deputy Minister of Planning and Investment Nguyen Thi Bich Ngoc said that in practice, the factors ensuring the project’s operation are no longer guaranteed. The competent authority has directed to suspend the project since 2014 to avoid further damage, which is very reasonable. However, the slow progress of handling has caused significant damage.
If the project cannot be implemented, it must be handled according to the law’s regulations. The proposed plan of the Ministry of Industry and Trade needs to clarify the debts and solutions for debt handling; handling assets on land and issues related to land, a liquidation plan must be developed, including specific solutions to handle related issues.
Representatives of the Ministry of Planning and Investment also proposed that the competent state agency make a decision to terminate the project. At the local level, it is necessary to adjust the planning and the purpose of land use.
At the meeting, representatives from the State Bank and the Ministry of Justice also clarified some issues related to credit handling and legal issues to handle the project. Representatives of banks (creditors) expressed their sympathy with VINAPACO’s difficulties and said they would be willing to cooperate to resolve project obstacles in accordance with the law’s regulations.
According to the Chairman of the People’s Committee of Long An province, Nguyen Van Ut, based on the local situation, after the paper mill project is terminated, the province proposes to convert and invite investment in a high-tech ecological urban and agricultural project in this area.
The Phuong Nam Paper Mill project was approved by the Prime Minister for the Investment and Development of Transport and Transport Company (TRACODI) to be the investor in October 2003, with a capital of over 1.487 trillion VND, a scale of 100,000 tons of paper pulp per year. In November 2007, TRACODI adjusted the total investment amount to nearly 2.287 trillion VND.
In June 2009, the Prime Minister decided to transfer the project investor from TRACODI to VINAPACO, with the total investment amount adjusted to 3.410 trillion VND.
In June 2012, VINAPACO completed the construction, installation of equipment, and conducted a non-load test. However, the load test was unsuccessful.
In 2014, the Prime Minister agreed with the proposal of the Ministry of Industry and Trade to stop investing in the Phuong Nam Paper Mill project and urgently instructed the ministry to develop a plan for handling the project, such as liquidation, transfer, and sale.
VINAPACO has carried out three rounds of auctioning the factory: the first time was from July 12-14, 2017. The second time was from July 20 to August 9, 2017, with an additional 15-day extension, and the third time was from August 23 to September 22, 2017 (with an additional 30-day extension). However, these auctions were unsuccessful as there were no investors participating.
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