Communist police ambush Thai firm
06/Feb/2008 | Intellasia
Feb 6, 2008 - 11:45:33 AM
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For a Thai zinc oxide company, venturing into Vietnam’s provincial backwater has proved fatal after being ambushed by the communist country’s economic police.
After spending millions of dollars and years of setbacks and prolonged delays in setting up a zinc oxide factory in the poor and remote province of Bac Kan, production finally started in January 2007 at the Viet Thai Zinc Industry Joint Venture Co with output destined for export.
But no sooner had the company finally had its very first consignment cleared by customs and sent to a warehouse in the port city of Hai Phong, the economic police swooped in and seized Viet Thai’s goods at the warehouse claiming “economic violations”.
Following this is a harrowing account of months of persecution and harassment by the communist police and provincial officials looking for bribes to continuously squeeze the hapless Thai firm. Viet Thai Zinc was forced to stop production at its factory with a 160-strong workforce and brought to its knees with bankruptcy looming.
The following translation of a long winded article was extracted from the Dau Tu (Investment) newspaper which typifies the all too often harassment and persecution at the hands of the police in communist Vietnam. But unfortunately, most cases go unreported in the state-controlled press.
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| Bac Kan Province |
Viet Thai Zinc Co pushed to bankruptcy
17/Oct/2007 and 19/Oct/2007 Dau Tu newspaper
Bac Kan is one of poor provinces. As Ha Duc Toai, chairman of the Bac Kan province’s People’s Committee, said Bac Kan is a province with five “no”, namely, no railway, no airport, no port, no border-gate, no industry. Yet, an investor from Thailand went to such a place to invest into a zinc oxide power manufacturer. Bac Kan province should have red-carpeted to welcome the first foreign investor here. However, only after several months of operations, the company met a tragic situation and was on the edge of bankruptcy because its products were not allowed to be sold.
The Viet Thai Zinc Industry Joint Venture Co (Vithazinco) was established under Investment License 1399/GP dated October 20, 1995 of the State Committee for Cooperation and Investment (SCCI), which is now the Ministry of Planning and Investment. The joint venture between the Thai Nguyen Color Metal Co and the Thailand-headquartered-Teparak Holding Company Limited is specialized in producing zinc oxide powder. Vithazinco is headquartered at Bao Thi commune, Don Market, Bac Kan province.
Thirty one kilometers far from Bac Kan Township, Vithazinco is located Ban Thi commune, which was previously a famous war zone in the anti-French colonial resistance period. The time has passed, the country is living in peace however life of people here remains poor. On the way of over 70 kilometers to Vithazinco, there are sometimes a few of cottages, stilt houses located halfway down the hills.
Vithazinco’s manufacturer is a modern and large-scaled industrial construction work. Two production assembly lines with two hundred-meter-long furnace pipes are superb among dozens of mountains surroundings. Surprisingly, thousands of tons of equipment, some of which are super-long and super-heavy, are erected among thick and interminable mountains and forests here. Thai Ba Hien, vice general director of Vithazinco, happily boasted that “transporting such large equipment to this place is our big success. Some equipment could not be transported through Bac Kan, but had to be delivered via Tuyen Quang province and then Chiem Hoa province, which took several months to come here.”
Vithazinco’s zinc oxide manufacturer, which officially came into operation since January 2007, attracts some 160 labourers being ethnic minorities from surrounding areas. In addition to be insured under labour contracts, Vithazinco’s employees are paid over two million dong a month on average, which is a dream salary for many locals. Talking with us, many employees revealed that they dreamed of changing their life since they worked in Vithazinco.
However, perhaps their dreams will be hard to become true when nearly one month ago, Vithazinco Co had to suspend their operations with the reason of maintaining equipment. However, behind that is a long story, conclusion of which may be bankruptcy.
After long time with various changes due to selections of investment places, adverse impacts from the financial crises at the end of 2006, Vithazinco started manufacturing zinc oxide with over-60%-zinc content for export on a trial basis. On January 16, 2007, the company opened customs declaration forms, No. 88 and No. 89, in order to export two lots of zinc oxide with total amount of nearly 700 tons worth nearly 20 billion dong, according to the Zinc Oxide Sale Contract 002/06.
On January 22, 2007, the two lots of goods of Vithazinco were cleared and transferred into a bonded warehouse at the Hai Phong Port and waited for shipment. On February 6, 2007, the company was suddenly informed by the bonded warehouse of the Customs Control Team-northern region under the Anti-smuggling Investigation Bureau’s order that required a suspension of export procedures for the two lots of goods because the company was “denounced to have broken laws”.
Following that notification, Vithazinco many times met with the Customs Control Team-northern region to clarify the denouncements. Seven working minutes between the Customs Control Team-northern region and Vithazinco were reported.
On May 17, 2007, the Customs Control Team-northern region made a report on seizing the two lots of goods. On the same day, the Customs Control Team-northern region informed Vithazinco that the company’s case was forwarded to the Economic Police Investigation Department of Bac Kan province. The Economic Police also had several meetings with the company however no official conclusion was made.
Then, the company received Decision 914/QD-UBND of the chairman of Bac Kan province’s People’s Committee dated June 18, 2007 ordering Vithazinco to pay 92 million dong (US$5,750) as an “administrative fine”. Under this decision, Vithazinco was only fined “lightly” because the company had breached laws for the first time and had only recently came into operation. The two lots of goods would then be released after the fine was paid.
The next day on June 19, 2007, the company paid the fine to the Bac Kan province’s State Treasury and requested their goods be released for shipment at the Hai Phong bonded warehouse.
However, seven days later after the fine was paid by Vithazinco, the provincial authority issued another decision revoking the original decision that included the 92 million dong fine and ordered the seizure of the company’s goods again and ordered another fine of 39.5 million dong.
The company repeatedly worked with the province’s people’s committee and police and asked for information about the company’s new violations. Nevertheless, there was no response.
Wishes of the investor
Facing up such a case, Amarit Sittipol, Vithazinco’s general director, made a complaint for the decisions of the chairman of the Bac Kan province’s People’s Committee including Decision 949/QD-UBND dated June 25, 2007, Decision 914/QD-UBND dated June 18, 2007 and Decision 1313/QD-UBND dated August 6, 2007.
Vithazinco said the Bac Kan province’s People’s Committee made a decision on administrative punishment and confiscated the two lots of goods of Vithazinco due to “new violations”. However after asking the committee for information about the new violations for further investigation, the company failed to get any response from the committee.
As for Decision 1313/QD-UBND dated August 6, 2007, Vithazinco proved that on January 16, 2007, the company’s staff made a customs declaration form for goods export, and transferred the goods into the bonded warehouse.
On February 6, 2007, the company received an announcement from the Hai Phong Bonded Warehouse that the goods was not allowed to be transferred from the bonded warehouse to the ship because of the “denouncement of legal breaches”. Thus, if the company had breached the customs, duty and accounting laws, the time that the violations occurred was in January 2007. However, that Decision 1313/QD/UBND issued by the Bac Kan province’s People’s Committee was based on Decree 97/2007/ND-CP dated June 7, 2007 of the Government and became effective from July 1, 2007 in order to punish Vithazinco did not follow current laws.
Together with asking the chairman of the Bac Kan province’s People’s Committee to reconsider the above decision, Vithazinco also requested him to postpone the implementation of Decision 1313/QD-UBND dated August 6, 2007 because if this decision was still realized, it would cause difficulties in settling aftermaths of the company and its legitimate right and interests would be hard to be ensured.
Talking with a reporter from Dau Tu newspaper, Amarit Sittipol, frankly admitted that while making procedures on goods export, the company unintentionally made certain breaches of customs or accounting laws due to their poor understanding of such laws. “Our company has voluntarily declared our violations, demonstrating our sincerity. Furthermore, this was the first time that our company was given an administrative punishment in customs. Hence, we would like relevant agencies to lighten the punishment, namely not seizing the two lots of goods.
Amarit Sittipol said if the two lots of goods were still confiscated, his company would have no way but to suspend production. Seizing the two lots of goods may push the company into economic exhaustion and foreign partners may sue the company for not delivering goods on time according to contracts. The company would suffer from a big loss, which may lead to a bankruptcy and closure of the factory.
Explanations of Vithazinco
Right after the last meeting, Vithazinco explained the company’s operations. Regarding breach [unclear investment source of the manufacturer], Vithazinco said with the guarantee of its, Thai partner, Teparak, in the joint venture, Vithazinco borrowed from Thailand Export and Import Bank US$9.05 million with a five-year term [the loan is extended for another two years]. In June 2000, the State Bank of Vietnam certified Vithazinco’s registration for overseas loan at SBV.
However, Vithazinco admitted that during the construction of the manufacturer, the company did not open a deposit account in foreign currency at the Vietnam Bank for Foreign Trade (Vietcombank). The value of the construction bid package was directly transferred to the contractor, leading to the violation on currency and banking operations. The company committed to gather and submit all documents related to the money transfer to the relevant agencies in the soonest time. The company would bear all legal punishment for this violation.
Regarding the second violation [the contractor had not paid tax on capital construction], the company confirmed that it paid 200 million dong of construction tax and that the company had sent its accountants to work with the Bac Kan’s Taxation Department in order to identify the payable tax amount. The company has not yet received any order on collecting tax arrear from the Bac Kan’s Taxation Department. Thus, after identifying the payable tax amount, the company committed to fulfill its tax obligation in the soonest time.
Given the third violation on the company’s failing to fulfill the regulation on assessing environmental impacts, the company explained that it submitted a report on assessing environmental impacts to the Bac Kan province’s Natural Resource and Environment Department. Currently, the company is waiting for approval from the department for that report.
As for the violation that the expired construction license has not yet been extended, the company said that during the construction, because of various difficulties in weather, geography, economic situation (economic crisis in Thailand), the company failed to meet the scheduled construction pace.
The company also asked the Bac Kan province’s Construction Department to extend the commencing and completing time of construction however the construction pace still did not meet the extended time. Therefore, the company will bear all punishment for not applying for extending the license.
About the fifth violation [the company has not yet had any production and business activities and the manufacturer has not made required procedures to come into operation but export goods without clear origins], the company did not agree with the conclusion. In January, the EMC&TMUCB&BLASTER joint venture contractor had a report on temporarily transferring the zinc oxide power manufacturer with capacity of 23,000 tons a year to the company. The contractor is running the manufacturer on a trial basis under the contract. The contractor is finalizing the construction completion document in order to hand over the whole construction items of the manufacturer under the regulations of the engineering-procurement-construction (EPC) contract.
Additionally, under the contract on establishing the Vithazinco Zinc Industry Joint Venture Co, the Thai Nguyen Color Metal Co, which is now transformed into the Thai Nguyen Color Metal one-member liability company, is liable to provide zinc ore to the joint venture during the project period, following requirements of the joint venture on technical features, quantity with negotiated prices. Therefore, when the manufacturer run on a trial basis, the Thai Nguyen Color Metal one-member liability company supplied the joint venture zinc oxide ore. At present, the zinc oxide ore purchasing contract has already been liquidated. With 9,656,206 tons of zinc oxide ore, the manufacturer produced zinc oxide power during the trial-run.
Thai Ba Hien said the new violations that the Bac Kan province’s police provided included many not new contents and the company has been managing to settle them actively. According to Tham Hong Hanh, lawyer, Vithazinco’s violations should be entitled to administrative fines for warning but should not confiscate goods.
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