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Vietnam should not rely on foreigners in steel investments: VSA
The approved steel industry development strategy until 2015 and with the vision to 2025 said that Vietnam will have the demand of 15 million tons of steel by 2015 and 20 million tons by 2020. Meanwhile, to date, there have been 32 steel projects which are not in the strategy and have the total capacity far exceeding the forecast demand.
One of the most worrying problems is that most of the said steel projects are 100% foreign invested steel complexes. This will put big challenges for Vietnam’s steel industry, according to Pham Chi Cuong, Chairman of the Vietnam Steel Association.
He said:
It is true that foreign capital will help lessen the risks for Vietnamese enterprises. However, it would be more dangerous if Vietnam, lacking capital and fearing risks, lets foreign investors dominate the market.
Steel production proves to be a very important industry and its products relate to all fields of the national economy and the national defense. Therefore, if most of the steel complexes are foreign owned, Vietnam’s role will be dim in the important industry.
If all steel complexes are 100% foreign owned, Vietnam can only control the steel projects in terms of technology and the impacts on the environment.
We should not rely on foreign investors in developing such a very important industry. The State should give capital support, so that Vietnamese businesses can make investment in projects, while it should not let foreign investors to hold 100% of capital.
China, for example, allows foreign investors to hold no more than 30% of investment capital in steel projects. The country does not allow making investment if the projects do not use new high technologies.
But, if looking into the issue from another angle, these projects will allow us to have enough of a supply of cheap steel, when the demand for steel is expected to be very high.
We have forecasted that Vietnam’s total demand will be some 20 million tons per year by 2020. Meanwhile, if the projects are carried out on schedule, the total capacity would reach between 40-50 million tons per year in the next 5-7 years.
We should not expect that we can export the abundant steel to the world, when the world has too many giant steel exporters, like China, Japan and South Korea.
More importantly, countries’ experience shows that they can export 10% of total export productivity at maximum. China’s steel output is around 500 million tons, but its exports have never exceeded 50 million tons.
As such, if the said projects become operational as scheduled, there will be a great volume of abundant steel, which will be a stiff challenge for domestic steel producers who remain young and weak.
However, we cannot sure that the projects will be developed on schedule?
This will be a bad thing too. A lot of investors, who do not have capability and experience, still seek licenses for steel projects. The Formosa steel project in the central province of Ha Tinh has made an unbelievable record: it was licensed within two weeks, while a small Vietnamese enterprise (which holds 5% of capital) applied for the licensing.
In the joint venture Tycoon-Jinan project in Quang Ngai province, Jinan withdrew just one month after the licensing. A steel mill in Quang Ninh province had to shut down just one month after it was put into operation due to the lack of both capital and experience.
Do you mean that the ‘indigestion’ of steel projects can be attributed to the problems in licensing?
In order to attract more foreign investors, the Government has been decentralizing in licensing projects. However, a lot of problems have been found in the local authorities’ licensing. In many cases, local authorities do not have enough knowledge about technology to approve industry investment projects.
Do you mean that local authorities should take responsibility for this?
Under the current regulations, local authorities have the right to license the investment projects with the capital of less than US $1.5 billion. Therefore, investors have dodged the laws by declaring the investment levels lower than US $1.5 billion. Meanwhile, we do not know the actual scale of the projects.
vneconomy
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