[Solar Power and Firewood] In Search of the Person in Charge

1.85 Billion Won Worth of Scrap 'K-Solar Power' Left Abandoned
Visiting the ODA Site in Quang Binh Province, Vietnam

[Summary of previous article] The Vietnam Quang Binh Province solar power official development assistance project, funded with 12 million USD (18.5 billion KRW) of Korean taxpayers' money. Construction began in 2015, equipment was installed in 2018, and maintenance was completed in September 2019, but village residents said the solar power equipment in Ban Rao Con broke down in less than a year after installation. To uncover the reasons behind the project failure, the press met with subcontractor Company C on site. They revealed that due to delayed settlements by the main contractor KT, poor construction continued, making the entire project doomed to fail. "KT intentionally delayed payments to lower the delivery price, which led to poor construction," they claimed.

Solar power panels installed at a school in Vinh Lao Con Village, Quang Binh Province, Vietnam. Firewood is piled up in the battery box, and scrap materials are stacked in the equipment box. Photo by Younghan Heo younghan@

After returning on October 14, the press heard rebuttals from KT and the Export-Import Bank of Korea (KEXIM). They inquired about the reasons for delayed settlements and project delays. Responses were received in writing. There were significant differences between the positions of the most involved parties related to the Quang Binh solar project (the beneficiary country’s citizens, subcontractors, Quang Binh Provincial People's Committee, and local media). The following is a summary of the investigation based on official and private documents. Conflicting testimonies remain unresolved and are listed as 'questions to be clarified.' The full rebuttals from KT and KEXIM are included at the end of the article.

"The subcontractor selected by the local client (Quang Binh Provincial People's Committee) lacked execution capability."

KT responded that the contract with subcontractor Company C was terminated due to insufficient construction capability. They also mentioned reasons for project delays. In September 2017, Typhoon Doksuri (Typhoon No. 19) struck Vietnam. This was during the period when equipment was being installed after construction started in 2015 and continued through 2018. A significant portion of the solar power equipment was damaged. The project was delayed due to recovery efforts. However, they stated that defects and maintenance of the Quang Binh solar power project were completed by September 2019, and all administrative procedures were finalized by June 2021.

The Export-Import Bank of Korea (KEXIM) stated that the responsibility lay with the beneficiary country. The Vietnamese government inspected the solar power equipment’s operational status and took over the equipment from the contractor. The equipment operated normally during the one-year after-sales service (A/S) period. After the A/S period ended, the local Vietnamese government could not secure its own budget, making it difficult to replace worn-out batteries or broken parts. KEXIM said they would support aftercare if requested, but no such request was received for this project.

Question 1. Responsibility for defect repairs Defect repairs refer to the supplier’s responsibility to replace or repair equipment when there are problems with materials such as solar power equipment. KT claimed maintenance was completed by September 2019, but residents said that after breakdowns around 2017, no one came to repair the equipment. 'Maintenance' refers to repairs after the defect repair period ends, when parts replacement cycles occur. There is a discrepancy between KT’s stated maintenance period and the beneficiary country citizens’ perspective, who are the most involved stakeholders. This issue should be resolved through an audit by the Quang Binh Provincial Audit Committee.

Source = Page 5 of the U.S. Securities and Exchange Commission order (Release No. 94279) issued on February 17, 2022. It records that "KT agreed to pay a bribe of $95,031 to a construction company and senior officials in Quang Binh Province, Vietnam, to secure a solar power project."

Question 2. Reasons for project delays On February 17, 2022, the U.S. Securities and Exchange Commission (SEC) released a document stating that "KT agreed to pay bribes totaling $95,031 to a construction company and senior officials in Quang Binh Province, Vietnam, to secure the solar power contract." This alleged that KT gave rebates to the client to win the solar project. The SEC said, "KT neither admitted nor denied the investigation results but agreed to pay a total fine of $6.3 million (about 7.5 billion KRW)."

Additionally, a public notice titled 'Announcement' issued by the Quang Binh Provincial People's Committee on April 5, 2016, stated that "KT, the Korean contractor, failed to fulfill the contract, causing delays in equipment import and installation." It further mentioned, "This is the main cause affecting the progress of Bid Package No. 7 and the reason why the overall project is not progressing." The Quang Binh solar power project audit by the Vietnamese local government began on July 19. Multiple local media reports claimed KT delayed settlements in this project. It is noteworthy to examine the connection between KT’s bribery allegations stated in the SEC order and the delayed settlements claimed by the local subcontractor.

Source = Quang Binh Provincial Government Portal, Title 'Announcement' - Conclusion of Nguyen Suan, Project Operations Committee Chairman, at the Quang Binh Province Solar Power Supply Project Operations Committee Meeting in Vietnam

Question 3. Responsibility for follow-up management KEXIM’s concessional loan projects are larger in scale than grant aid projects, meaning the risks of failure are also greater. Moreover, the grant rate (an indicator of the degree of grant portion in aid funds) approaches 90%. Although these are loans, interest rates are low and grace periods are long. If a concessional loan project fails, it can waste huge amounts of taxpayers’ money and damage national prestige. The beneficiary country bears the loss from project failure and the obligation to repay the loan. Developing countries often have high bureaucratic corruption indices. KEXIM has a duty to strictly manage transparency issues.

KEXIM did not take separate measures despite the SEC allegations that "bribes were paid to Vietnamese officials to win the project" remaining unresolved. Their rationale was that since KT neither confirmed nor denied the allegations and paid the fine, it was difficult to conclude bribery charges. Korean companies participating in EDCF projects usually sign anti-bribery and corruption pledges, agreeing not to dispute disqualification from future EDCF projects if involved in misconduct. KEXIM has the responsibility to monitor whether this pledge is properly upheld.

The Quang Binh project also avoided 'special management.' Typically, ODA projects delayed over a year are designated as special management projects (according to the 'Regulations on Handling Economic Cooperation Fund Operations,' Articles 4-12 and 5-15) to investigate issues in project planning and on-site problems. When the delay reached one year, KEXIM extended the project period at the Vietnamese government’s request, missing the opportunity to identify causes of delay. No follow-up management was conducted. Whether to conduct post-evaluation is at the institution’s discretion. There are criticisms that noisy aid projects are excluded from evaluation and only successful projects are selectively evaluated.

[Solar Power and Firewood] Connected by 4 batteries

■Infographic Page■

Solar Power and Firewood - Vietnam Ban Rao Con Report

(story.asiae.co.kr/vietnam)

What problems does aid budget fragmentation cause?

(story.asiae.co.kr/ODA)

This project was supported by the Press Promotion Fund funded by government advertising fees.

The full rebuttals from KT and the Export-Import Bank of Korea are included below.