Case study: VINASHIN Hello every one!

My name is Nguyen Anh Dung, and I’m so glad to be here to give you the presentation. This was one of the most considerable issues of Vietnam last year, and I think that most of you have known abt this. It is the Debt of Vinashin. 1. Overview Vietnam Shipbuilding Industry Group (“Vinashin”) is one of the largest state-owned enterprises in Vietnam and offers shipbuilding, ship repair, shipping, heavy industries and other services to enterprises within Vietnam as well as internationally. Vinashin was established as the Vietnam Shipbuilding Union which was set up in 1972 to consolidate the country’s shipbuilding industry. Vinashin is the largest shipbuilder in Vietnam by capacity, accounting for approximately 70%-80% of total domestic capacity. 2. Recession: a. Actual situation: Vietnam Shipbuilding Industry Corporation (Vinashin) is worth an over VND 90 trillion sbut is in about VND 80 trillion of debt according to a government official. Vinashin got a $600 million(=12000 billions VND) loan in 2007 from banks led by Credit Suisse Group AG that paid interest of 1.5 percentage point more than the London interbank offered rate ( according to data compiled by Bloomberg). While it made a $6.8 million interest payment on Dec. 23, the company missed a Dec. 20 deadline to make a $60 million principal payment and asked lenders for a one-year extension. By early June 2010, its total debt reached 86 trillion VND (over $4.5 billion), including around 45 trillion VND of long-term debts and 14 trillion VND of due debts. The debt that Vinashin has to pay is 11 folds more than its capital. The group was on the brink of bankruptcy. Earlier, it didn’t honestly report to the government its actual situation. It still reported to earn 750 billion VND of profit in 2009 and nearly 100 billion VND in the first quarter of 2010. More than 5,000 Vinashin workers, or nearly 10 percent of the workforce, have lost their jobs and the firm has failed to pay 234 billion VND ($12.3 million) in salaries and social insurance to workers. b. Reasons: The limitation and weakness originate from many reasons, consist of both objective and subjective reasons, but the objective ones are essential. They belong directly to the responsibilities of Board of directors and managers of the Group.

+ To the objective reasons:

Vinashin extended production franticly. stock… Moreover. This is “a 2 edge knife”.Spread investment: Vinashin ambitiously wanted to make the shipbuilding industry in Vietnam perfect. After a short period. . and may cause a chain reaction of collapsing. 3. terrorists may arise because they have more reasons to oppose to government. for instance the investment in Hoasen Vessel which cost 1. the irresponsibility of Government is also a reason. especially in determining the business field. invested in to constructing many factories to assembly vessels. investment and control the capital. " + To the subjective reasons: . Other investments were not effective. there is no preliminary review and evaluation of effectiveness.- Corporate model is in its pilot period. To minimize damages to the source. State bank may have to print more money and easily it cause the increase of inflation. This is just a first ship sunk in a lot of rusty ships in Vietnam. . natural and human resources. Many epic projects were deployed/ conducted at the rate of a turtle. maritime transport. Because of this ineffective investment. It reduces the prestige of state-owned company in borrowing money not only to Domestic but also international banks It reduces the belief of People to Government. including Vinashin. we lost trillions of Dollars-> Deficit in Budget occurs.Weakness and irresponsibility in managing: Vinashin’s Board of Directors made many mistakes in managing the Group. Vinashin planed to issue $3 Billion bonds to raise the localization ratio on each exported products to 70-75%. The world financial crisis and economic recession have recently affected the development of shipbuilding industry.300 billions VND. there existed more than 200 subsidiaries. managing the subsidiaries. Beside the bond issued international 750 millions USD. There have been 11 times of audit and inspection but actually they could not report exactly the financial situation. Impact on Vietnam’s economy: Vinashin’s recession may cause many serious consequences: It’s a waste of money.

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