Missing owners bequeath messy legacy 

 

Workers of a Korean-owned garment company confiscate work machinery and equipment in November 2008 after their boss, who still owed them two-month salaries, fled Vietnam.

Lack of relevant regulations to retrieve assets compounds the problem of unpaid workers, overdue taxes and other arrears left behind by absconding foreign investors

Last October, the owner of Ado Vina – a South Korean-owned garment company in the southern province of Binh Duong – was found to have left the country secretly, owing VND250 million (US$11,933) in workers’ salaries, and tens of thousands of dollars to suppliers.

According to the Binh Duong Department of Planning and Investment, the owner had rented a factory in Thuan An Town and leased all the machines needed for production.

So, there was nothing much left to pay the debts, the department said, adding that even Ado Vina’s utility bills were incurred by the owner of the premises.

Earlier, Binh Duong authorities had to take VND1.4 billion ($66,825) from the local budget to pay salaries to 630 workers of Kovi Industry – a South Korean plastic products manufacturer, after its director fled the country.

Ado Vina and Kovi are not the only cases in Binh Duong. At least 16 foreign investors have left their companies and gone out of reach since 2009, said Le Viet Dung, deputy director of the provincial planning and investment department.

Dung said in many cases, investors ran away because of big losses caused by difficulties in their businesses, but there were cases in which investors, mainly from China, South Korea, and Taiwan, were most likely swindlers.

He explained that after registering a business with small capital, usually less than $1 million, such investors would put in just a small part of the investment. Then, they would rent factories, mobilize capital by mortgaging factories and machines, and buy raw material on credit.

When such investors disappeared, the assets which they left behind would be very small compared to their debts, he said, citing a case in which a fleeing investor left assets worth VND300 million ($14,319), and its debts were estimated at nearly VND13 billion ($620,519), including workers’ salaries.

In worse cases, investors even sold their machines to get some money before fleeing the country, Dung said.

Similar cases have been recorded in other provinces like Dong Nai, where the owners of 42 FDI businesses are reported to have fled the country.

The HCMC Export Processing Zone and Industrial Park Authority (HEPZA) has reported that the investors of 24 FDI projects in the city’s export processing zones and industrial parks are out of its reach.

Left hanging

According to Dung, as investors run away without completing procedures to dissolve their companies, workers are the ones who suffer the most – losing their salaries and being unable to receive welfare benefits because they do not have necessary papers.

Dung said that at present, workers’ records of social insurance are held by their employers. Typically, employees do not know if their employers are paying social insurance for them as required, he said.

The Tien Phong newspaper earlier this year reported that 31 FDI businesses whose owners have fled since 2004 owe hundreds of thousands of dollars to the Dong Nai Social Insurance Agency, and the agency has no means of collecting the debt.

Meanwhile, the HCMC Tax Agency has complained about huge tax debts left behind by fleeing foreign investors.

It said Silver Star Vietnam, a South Korean-owned textile company, for example, owed over VND29.6 billion ($1.41 million) in taxes when its owner escaped in 2008.

Taiwanese-invested Magnicon Vietnam, a knitting company in District 12, owed tax debts of over VND5 billion ($238,600) when its owner ran away in 2011.

No clarity

Workers and tax agencies left in the lurch are not the only problems that runaway FDI investors leave behind.

Due to the absence of regulations on dealing with businesses when their owners have fled, related agencies face difficulties in revoking licenses and dissolving them. In the end, land and other infrastructure hired out to the businesses are left idle because they cannot be registered by other enterprises.

For example, in Dong Nai province, authorities had not been able to revoke the license of any of the 42 FDI projects with runaway owners, some of the cases dating back to 2004, until recently when the Ministry of Planning and Investment sent them temporary guidelines on tackling the problem.

So far 17 cases have been settled, and the rest are awaiting further instructions.

HEPZA said the lack of related regulations also makes it “very difficult” to deal with the assets and debts that are left behind by FDI investors.

For example, some of these businesses would have qualified for being declared bankrupt under Vietnamese laws, but in the end, related agencies could not do anything, because regulations require that a team including the business owners is established to manage and liquidate assets.

Therefore, in several cases, the businesses’ assets have been left to rust, posing threats to the environment as well as to nearby businesses, HEPZA said.

It suggested that regulations are formulated to deal with assets left behind by runaway businesses, and to revoke business licenses.

Bo Ngoc Thu, director of the Dong Nai Department of Planning and Investment, agreed, saying that the provincial authorities have made the same suggestions to the planning and investment ministry.

For its part, the ministry has proposed that the government adds these regulations in its draft revisions and guidelines for implementing some articles of the Law on Investment.

Meanwhile, Dung said Binh Duong Province is planning to restrict manufacturing projects with investments of less than $1 million.

ThanhnienNews