The Lost Port: How Ukraine Will Dispose Of Its Asset In Vietnam

What is the seaport that was has suddenly been "discovered" in Saigon, what does the Ministry of Infrastructure intend to do with it, and which other overseas assets can Ukraine claim?

Ukrainian officials are still capable of surprising. Minister of Infrastructure Volodymyr Omelian demonstrated this when he announced to the public on the last day of winter that Ukraine owns a stake in a Vietnamese port. "Only a few initiated people know that Ukraine has one more port. Our country is the owner of 37% of the Lotus Port near Ho Chi Minh City in Vietnam," Omelian wrote on his Facebook page. We decided to gather all the available information about this Ukrainian port that had been hitherto unknown to the Ukrainian public. In addition, we spoke to Deputy Minister of Infrastructure Yurii Lavreniuk, who is in personal control of the effort to return the temporarily lost asset to Ukraine. We asked the deputy minister about the expected results of an audit of the seaport and his vision of the future role of Ukraine in the management of the seaport and other Ukrainian marine assets abroad.

The Saigon Lotus

Location

The Lotus port is located 43 nautical miles from the confluence of the Saigon River in the South China Sea. The port is located in in the southeastern part of Vietnam’s largest city, Ho Chi Minh City (formerly called Saigon). The Phu My cable-stayed bridge, which was opened near the port’s terminal in 2009, provides the port with a convenient transport link.

The founders

VIETRANS (a Vietnamese transport company), VOSA (a Vietnamese shipping agency), and the Black Sea Shipping Company (later Blasko ChMP) established the Lotus Joint Venture Company, which operates the Lotus port, in 1991. According to Vietnamese publications, the Lotus Joint Venture Company was the first joint venture to be created with the involvement of foreign investments in Vietnam. The current owners of the joint venture are VIETRANS and Blasko ChMP with 62% and 38% stakes in the seaport, respectively. They have invested USD 20 million in development of the port.

1

Capacity

The Lotus port occupies an area of is 150,000 square meters, including 140,000 square meters of open area and 8,000 square meters of closed warehouses. Most of the area (about 100,000 square meters) is designated for handling containers.

The Lotus port has two main berths with a combined length of 300 meters, as well as a 120-meter berth for barges

The Lotus port has two main berths with a combined length of 300 meters, as well as a 120-meter berth for barges. The water depths are 9.5 meters at the main berths and 6.5 meters at the berth for barges. The approach channel has a depth of 14 meters, but tides of up to 2.5 meters often form in the Saigon River.

The main berths are equipped with two gantry cranes with a lifting capacity of 40 tons and three RMG cranes with a lifting capacity of 40 tons. The port also has nine container loaders (reach stackers) and 22 forklifts.

In addition to containers, the port handles general cargoes and automobiles

In addition to containers, the port handles general cargoes and automobiles. The port is capable of handling up to 2 million tons of cargoes per year and up to 200,000 TEU of container cargoes. The port also receives cruise liners. The Japanese vessel Asuka II with a capacity of up to 960 passengers and a draft of 7.8 meters recently called at the Lotus port.

Specialization and transshipment volumes

The port of Lotus is constantly expanding. It received ships with deadweight tons of up to 25,000 in the mid-2000s, now it handles ships with deadweight tons of up to 36,000. This has had a positive effect on its cargo turnover. The port handled 280,000 tons of cargoes in 2000, 518,000 tons in 2004, 800,000 tons in 2005, and 865,000 tons in 2006. The port’s cargo turnover exceeded 1 million tons in 2007, when it totaled 1.2 million tons. The port’s cargo handling volume reduced from 2008 to 2010, reaching the lowest volume of 852,000 tons in 2010 (the 2006 level). The port’s cargo handling volumes reached a record 1.9 million tons in 2014 and then fell to 1.5 million tons in 2015.

The port’s container turnover followed a similar growth trend, followed by a fall in the period of 2009-2010: its container turnovers were 21,000 TEU in 2006, 24,200 TEU in 2008, about 4,500 TEU in 2010, 56,500 TEU in 2011, 68,900 TEU in 2013, 84,900 TEU in 2014, and 56,400 TEU in 2015.

2

The market share of the Lotus port is relatively small. It accounted for 0.9% of the combined cargo turnover of Vietnamese ports and 0.8% of their total container turnover in 2014. Its market share reduced slightly in 2015 to 0.6% of the total cargo turnover and 0.5% of the total container turnover. At the same time, the overall performance indicators of Vietnamese ports improved: Vietnamese ports handled 74.6 million tons of cargo and 1.9 million TEU of container cargo in 2004, 205 million tons of cargo and 10 million TEU of container cargo in 2014, and 233.5 million tons of cargo and 11 million TEU of container cargo in 2015.

The structure of the port’s turnover has changed in recent years. Imported cargoes dominated in the early 2000s but domestic cargoes began to dominate in the 2010s. Imports totaled 700,000 or 87% of the total cargo turnover in 2005. The share of domestic cargoes exceeded the share of imports in 2011: 826,300 tons (49.5%) and 806,700 tons (48.4%), respectively. In the period of 2012-2014, the volume of transshipment of domestic cargoes was double the volume of transshipment of imported cargoes. However, imports regained the lead in in 2015: 811,000 tons (53.7%) of imported cargoes and 638,000 tons (42.2%) of domestic cargoes.

3

What does the Ukrainian government (particularly the Ministry of Infrastructure) intend to do with Ukraine’s 38% stake in the port? We spoke to Lavreniuk about this.

4

Sell the port and revive the Black Sea Shipping Company

Why has the Ministry of Infrastructure begun working on the issue of returning the port to Ukraine's economic orbit only now?

"On the day of my appointment, I was tasked with returning the assets that we have abroad and which, as they say on the margins of the ministry, are considered lost. I thought differently – they are temporarily inaccessible assets. Therefore, we set up a group for returning assets located abroad, identified the enterprises that have such assets, and started work. Subgroups including representatives of law enforcement agencies have been created for each of these enterprises. The United States embassy in Ukraine is providing strong support to us in this area."

The minister said that a Ukrainian delegation is currently in Vietnam. What is the purpose of the delegation’s visit?

"We had long correspondence with Vietnam. They could not decide when to receive the delegation. The problem was simple: the Black Sea Shipping Line’s representative there has not been doing what was needed for a long time: he was earning money not for the country but for his own pocket. The task on this trip was to notify the Vietnamese side that we intend to change the Black Sea Shipping Company’s representative in Vietnam (the Ukrainian representative is a member of the Lotus port’s supervisory board) and notify the current representative that his powers have been terminated and serve him summons from the NACB (the National Anti-Corruption Bureau)."

When will the audit of the port be completed?

"We have reached agreement on a full audit from 2011. This process should be completed as soon as possible and the Ukrainian embassy in Vietnam will do its utmost to facilitate it. The new representative of the Black Sea Shipping Company will travel to Vietnam in the near future, and he will be present during the audit. After that, it will become clear how much dividends Ukraine has actually not received since 2012. Dividends were last paid in 2011, and the amount paid that year was USD 108,000."

5

What will happen now to this asset?

"There is a common vision that this port, in which USD 3.3 million was invested in the 1990s to acquire a stake in it, can be sold. For this, we want to conduct a general assessment of the enterprise and then discuss the issue of selling our stake in it.

“The Black Sea Shipping Line has a debt of about UAH 157 million (USD 5.8 million). Given the fact that the Black Sea Shipping Line has other lost assets abroad that we also want to return and the fact that it has assets in Odesa … that have already been registered as state asserts, we plan to revitalize this company.

“It will be possible to sell the company (the Black Sea Shipping Company) if we receive the dividends now, sell its shares, and pay off its real and not inflated debt,” Deputy Minister of Infrastructure Yurii Lavreniuk

“Maybe we will take a historic step 20 years after the attempts to bankrupt it began. Figuratively speaking, it will be possible to sell the company (the Black Sea Shipping Company) if we receive the dividends now, sell its shares, and pay off its real and not inflated debt. Even better if we manage to return those assets that were alienated illegally in Madrid, Singapore... It should be understood that the Black Sea Shipping Company once had representation in every maritime state."

Which enterprises, apart from the Black Sea Shipping Company, have assets abroad?

"Chernomorazovmorput (ChAMP), which is also involved in bankruptcy proceedings; the Maritime Rescue Service (MARS), which is now the newly created Marine Search and Rescue Service; the Ukrainian Danube Shipping Company (UDP); and the Ukrtanker State Shipping Company.”

What assets are these?

"ChAMP has assets in Brazil, where our ships are detained for unclear reasons. Two tankers belonging to the Ukrtanker company, which are in Russia for some reason. MARS has ships in the UAE; the Sea of Azov dredger in Turkey: it is such a unique dredging vessel. Because of the numerous scandals surrounding dredging operations, we are thinking of creating our own state company to handle dredging operations under the control of independent companies."