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Vietnam begins inspecting projects implemented by slush fund-hit Korean firm

Vietnam begins inspecting projects implemented by slush fund-hit Korean firm

Sunday, April 12, 2015, 16:40 GMT+7

Vietnam has kicked off an inspection of expressway projects South Korea firm POSCO Engineering and Construction (E&C) was contracted to after Korean media reported that an executive of the firm set up a slush fund and embezzled millions of U.S. dollars when working as the country director in Vietnam during the 2009-2012 period. 

According to a decision made by Minister of Transport Dinh La Thang on Thursday, a six-member inspection team, including representatives from the Ministry of Transport, its Finance Department, Department of Science and Technology, and Department of Transport Construction and Quality Management, is led by the ministry’s Deputy Chief Inspector Le Van Doan.

The delegation is inspecting the selection of contractors and acceptance of payment and settlement to detect any weaknesses, flaws, and violations of the law.  

The inspection team will also propose amendments and supplements to current mechanisms, policies, and regulations in order to enhance the effectiveness of state management, openness, and transparency in the implementation of transport projects.

The inspection process will takes a maximum of 45 days, starting Friday, April 10.

South Korean media reported last week that a man named Park, former CEO of POSCO E&C, has been accused by Korean prosecutors of creating a 10 billion won ($9 million) slush fund and embezzling 4 billion won ($3.66 million) when implementing construction projects in Vietnam in the position of the country director during the 2009-2012 period.

Park and POSCO E&C said that the fund was used as a payment account for the subcontractor but the prosecutors found evidence that a large part of the money was used elsewhere.

POSCO E&C, which first reported about the fund after finishing an internal inspection last July, claimed that the money was paid as kickbacks to contractors in Vietnam, according to The Korea Times.

However, the difference between the statement of Park and the source of money caused investigating authorities to conclude that some leaders of POSCO E&C had used the money to solve other issues, The Korea Times said.

Apology letter from POSCO E&C

On Thursday, Kwon Sang Kee, an executive in charge of the Southeast Asian branch of POSCO E&C, sent a letter to the Vietnamese Ministry of Transport and the Vietnam Expressway Corporation (VEC), a state-owned investor of expressways in Vietnam, to apologize for the Park incident, according to

Kwon said POSCO E&C won three packages A1, A2, and A3 under the Noi Bai-Lao Cai Expressway project and two packages 3 and 5A under the Ho Chi Minh City-Long Thanh-Dau Giay Expressway project, all invested by the VEC, through a transparent international competitive bidding process.

The process was in compliance with the bidding guidelines of the Asian Development Bank and the Japan International Cooperation Agency, he said in the letter.

The letter is a response to another letter the VEC previously sent to POSCO E&C to ask for more information about the purported slush fund, according to

Kwon said in the letter that the allegation is under investigation so POSCO E&C cannot give any information at this time, said.

In the 2009-2012 period, POSCO E&C engaged in two major expressway projects in Vietnam, Noi Bai-Lao Cai and Long Thanh-Dau Giay.

Legal bidding, implementing process

In a statement released last week, the VEC said POSCO E&C was awarded the five construction packages through an international competitive bidding process conducted transparently.

According to the contract signed with POSCO E&C and other contractors in the projects, the entire method and form of payment between the main contractors and subcontractors were under the authority of the Korean firm, without any VEC interference.

The VEC only paid the main contractor for completed packages guaranteed by quality assurance units, and the cost control agency was the Vietnam Development Bank and the Ministry of Finance, which were approved by the donor – the Asian Development Bank.

The Noi Bai-Lao Cai project has been audited by the State Auditor with no violations detected, the VEC said.

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