PetroVietnam’s withdraws from huge property project

News - The decision of PetroVietnam to withdraw from a 79-storey building project in Vietnam has raised many concerns from real estate investors and experts.

Under the initial plan, PVN Tower had 102 floors with an investment of more than USD1 billion. However, in March 2010, state-owned Vietnam Oil and Gas Group (PetroVietnam) reduced the number of floors to 79.

Recently, Phung Dinh Thuc, Chairman of PetroVietnam officially confirmed the withdrawal of the group's investment from the project, saying that they were following the Prime Minister’s instructions concerning state-owed enterprises for non-core business, including stock market, finance and real estate projects.

He added that the project could be transferred to another investor. This would depend on the Hanoi People’s Committee.

Opinion over the matter is somewhat divided, but most say that PetroVietnam does not have any choice but to follow the PM's instructions.

However, there have been claims that PetroVietnam has other concerns, such as the safety of the building site, particularly after a number of earthquakes that have taken place in Vietnam.

Still, economic experts have said that the geological factors were not a concern in PetroVietnam's backing out from the deal.

They say that since 2008, the property market has been on the decline, especially in terms of the "luxury" sector, which has failed to attract the amount of customers expected. PetroVietnam’s affiliate, PetroVietnam Power Land Joint Stock Company, announced discount of 35% on apartments in order to repay bank loans.

In their opinion, if the real estate market had remained at its previous levels, PetroVietnam would have been unlikely to abandon the huge project.

Some have been quoted as saying that PetroVietnam's investment in the project would be replaced by other groups or firms.