Vietnam’s state-owned shipbuilding company SBIC is facing bankruptcy, and the government has initiated plans to overhaul the corporation. This follows a resolution passed last month by Vietnam’s Political Bureau (Politburo), which gave a green light to declare SBIC and its seven subsidiaries bankrupt.
The Deputy Minister of Transport Nguyen Xuan Sang is leading the working group tasked with implementing the resolution. During a meeting with SBIC’s managers on January 3, Xuan Sang emphasized that the bankruptcy was inevitable after sustained efforts to restructure the company proved unsuccessful. SBIC’s debt balance remains large compared to total assets.
The bankruptcy process includes a transfer of ownership, he said, which will enable the company and its subsidiaries to operate without the burden of old debts. The profitable subsidiaries will also be freed from their parent company’s debt burden.
For almost a decade, Vietnam’s state-run shipbuilding has been in the doldrums because of alleged mismanagement and cost overruns. This began with the crash of former state shipbuilder Vinashin in 2010, which was later restructured into SBIC in 2013. At the time, SBIC was saddled with debts totaling $4 billion left by Vinashin.
However, a recent report by the Transport Ministry claimed that SBIC’s shipbuilding operations have been unable to make any profit, hence the difficulty in meeting financial obligations inherited from Vinashin.
In the last two weeks, Sang has led the working group to conduct a full evaluation of SBIC’s operations across the country, and initiated drafting of a bankruptcy roadmap to maximize capital and asset recovery.
This will be followed by SBIC and its subsidiaries filing for bankruptcy. Once the case is resolved, liquidation of assets and debt payment will be carried out in accordance with a court ruling. During the process, actively operating units with existing contracts will continue with their normal operations.
At its prime, Vietnamese shipbuilding climbed up the ranks to become the fifth largest in the world, fueled by a boom between 1999 and 2007. Despite the current collapse of the sector in Vietnam, Sang said this is a good time for a comeback as the maritime industry is gradually replacing old ship with a new generation of vessels running on alternative fuels.
“The completion of bankruptcy will be an opportunity for shipyards to enter a new phase and seize the moment for development,” said Sang.