Vietnam's Largest Auto Project Undergoes Gov't Scrutiny

Vietnam's Largest Auto Project Undergoes Gov't Scrutiny

The Vietnamese Government has ordered the Ministry of Industry to look into a truck-manufacturing project run by VEAM in the central Thanh Hoa Province following allegations of impropriety and corruption while setting it up.

But the allegations have been denied by the head of the State-run Vietnam Engineering and Agriculture Machinery Corporation (VEAM) and even a senior government official.

In a recent letter, Deputy Prime Minister Nguyen Tan Dung asked the ministry to thoroughly examine all transactions involving purchase, technology transfer, consultancy and installation of VEAM's project.

He has given the ministry time until the end of this month to complete the probe and report to the Government.

VEAM, the country's leading machinery manufacturer who has entered into several major joint ventures with firms like Ford and Toyota, is alleged to have paid bribes for purchasing the facility and increased capital without Government say-so.

VEAM last year won a bid to buy the entire Samsung-made facility, including equipment, from a Korean company beating off other international bidders, paying US$12.3 million.

Later, one of the losing bidders filed a lawsuit in a South Korean court demanding revocation of the bid process because of wrongdoing.

As a result, two Korean directors at consultancies retained by VEAM for the deal were arrested on charges of bribing several officials in the Korean firm and an urban development company belonging to Daegu City.

VEAM's role came under suspicion after it was revealed to have paid more than US$750,000 to the two consultation firms for the deal.

But VEAM general director, Nguyen Thanh Giang, denied all allegations saying, "the illegal activities for individuals and companies providing consultation for VEAM in South Korea is completely unrelated to its purchase of the Samsung facility."

"The investigation found that VEAM did not provide the bribe money to these consultants. Our win in the bid is just and remains effective."

The general director added that setting up the facility was proceeding as planned.

Giang received backing from the Ministry of Industry with Deputy Minister Do Huu Hao confirming that the South Korean consultants' misdemeanors were unrelated to VEAM's bid.

"We verified with the Vietnamese embassy in South Korea," he revealed.

"And I am sure that if VEAM had really been linked to the scandal, it would not have won the bid or completed transportation of the facility to Vietnam."

Investment for the project was initially calculated at VND320 billion (US$20 million), but it was then increased to VND559 billion (US$35 million).

Deputy Minister Hao said that VEAM informed the ministry of the increase and that it followed all norms including consultant selection.

Besides, he pointed out, the low capital level kept it below the threshold where investors needed to seek Government approval.

"I believe VEAM purchased the facility at a very cheap price because this is a modern plant and the building of such a plant will cost us no less than US$100 million," he said.

A Vietnamese press source puts the present value of the facility at US$95 million.

Giang said the entire facility and equipment were en route to Vietnam and the plant would go on stream in June 2006.

It has a designed capacity of 5,000 vehicles a year in the first five years and 33,000 units in the following five.

• VNS, Vnexpress