Vung Tau – Paradise tourism project fails

01/10/2006 (GMT+7)

Vung Tau – Paradise, which was once believed to be the biggest tourism project in the southern sea city of Vung Tau, is on the verge of bankruptcy.

Vung Tau – Paradise was one of the first five foreign invested projects in Ba Ria – Vung Tau. It was granted a licence in 1991. It is a joint venture between Vietnam’s Vung Tau Intourco and Taiwan’s Paradise Development and Investment Company.

 The investors planned to build a three-star 1,500-room hotel, an area for underwater sports, swimming pool, entertainment park, a Vietnamese traditional music centre, park for children, and a 27-hole international golf course.

 The total investment capital of the project was estimated at $97mil, toward which the Vietnamese side would contribute $15.5mil (in land).

 It has now been 15 years since the licence was issued, and only several items of the project have been completed.   

The problem may be that the foreign partner in the joint venture has not contributed as much capital as it had committed. In fact, it is written down in the joint venture’s books that the foreign partner has contributed only $25.4mil in cash and equipment, materials.

 However, the joint venture’s management board has not acknowledged this figure as its capital contribution, saying that there were not regular vouchers made.

 The joint venture has been experiencing heavy losses since its establishment with the accumulated loss sum of VND74,397bil ($4,649mil) reported at the end of 2005. Moreover, the joint venture owed VND2.1bil ($0.13mil) in tax duties.

 Currently, the two sides in the joint venture are still arguing about each other’s capital contributions. In August 2002, Micontrol, an inspection company was hired to assess the value of the joint venture’s assets. However, the final conclusion reached by Micontrol was not recognised by the foreign partner.

 In September 2003, Ba Ria – Vung Tau People’s Committee asked the Ministry of Planning and Investment to find out a suitable solution to the joint venture’s asset pricing. However, the problem has not been settled so far, and the ministry has not said a word about the fate of the project, while the project’s duration, according to the licence, will end in 10 years.

 Vietnamese officials said that the most important thing needed to be done now to ‘save’ the project was to raise enough funds for the project. However, the Taiwanese partner said that it was facing big difficulties in raising capital due to the joint venture’s short duration, and asked for the licence to be extended from 25 to 50 years.

 The fate of the tourism project remains uncertain. Experts have said that it would be better to dissolve the project, and distribute the land to investors who can use it more effectively.

 (Source: Tien phong)