Vietnam Shipbuilding Industry Group is facing difficulties clearing its debts but eventually it will have to pay them all, Minister and Chairman of Government Office Nguyen Xuan Phuc said.

The government said Vinashin has to repay what it has borrowed.

The government has been “clear and firm” with the shipbuilder on its debt problem and the company must repay what it has borrowed, news website VnExpress cited Phuc as saying at a press briefing on Friday.

However, it’s necessary to have a long-term plan for the payment so that the local shipbuilding industry could still grow, he said.

Total debts of Vietnam Shipbuilding Industry Group, also known as Vinashin, reached VND86.7 trillion (US$4.2 billion) as of the end of 2009, according to an audit by the Government Inspectorate. Its total assets were VND92.6 trillion.

Government inspectors said the shipbuilder incurred a loss of nearly VND5 trillion in 2009, higher than the VND3.3 trillion it had previously reported to the government.

Vinashin signed 85 contracts to build ships between 2006 and 2010 with a total value of more than VND58 trillion, but it only has completed 12 percent of the contracts due to its lack of financial, technical and management abilities, the Government Inspectorate said.

The group made many bad investment decisions and diversified beyond shipbuilding into too many business lines, inspectors said. For instance, it paid more than VND1.4 trillion for 20.4 million shares in insurance group Bao Viet in 2006, only to incur a loss of at least VND730 billion.

According to the Government Inspectorate, 16 Vinashin officials in charge of managing the company between 2006 and 2010 are responsible for the situation. Most of the blame lies with former Vinashin Chairman Pham Thanh Binh, who was arrested in August last year on charges of accounting and financial mismanagement.

The Government Inspectorate also said the Ministry of Transport, the Ministry of Finance and the Ministry of Home Affairs are also to blame for the wrongdoings at Vinashin. The Finance Ministry in particular did not monitor closely how Vinashin used proceeds from international bond issues.

All of these findings have been reviewed and approved by Prime Minister Nguyen Tan Dung. He has ordered Vinashin officials and concerned agencies to review all the problems and restructure the group successfully. Some issues that need further investigation will be transferred to the Ministry of Public Securities.

Last week, the state-owned company asked holders of a local-currency bond it defaulted on in April to write off as much as 90 percent of the money owed. It said it is unable to make any loan payments until 2015 at the earliest, some creditors said.

The shipbuilder had already asked foreign lenders for a one-year extension after failing to pay a $60 million principal payment in December last year on a $600 million syndicated loan.

Tuoi Tre newspaper on Saturday cited Pham Van Nha, an expert close to the restructuring at Vinashin, said it is necessary for the shipbuilder to have its debt payments extended until at least the end of 2012.

However, Vinashin has to pay its own debts, he noted, adding that the government cannot intervene with financial aid.