VietNamNet Bridge – Why offer incentives to Formosa Ha Tinh, a steel manufacturer, when Vietnam has an oversupply of steel and local authorities are reluctant to have steel manufacturers in their areas because of the environmental pollution?

Taiwanese-invested steel manufacturer Formosa Ha Tinh enjoys many attractive incentives and is asking for more preferences.

The steel complex project, according to Tuoi Tre newspaper, has total investment capital of $10 billion, of which $4 billion has been disbursed.

The Ha Tinh Economic Zone Management Board confirmed that 65 percent of the items of the complex, comprising a thermopower plant, port and steel plant, have been completed.

The management board’s representative quoted Formosa’s President as saying that the first batch of steel would be produced in 2015.

According to Formosa, it will focus on making steel plates with modern production lines.

The products, to be used for making car chassis, would target big automobile manufacturing centers in Thailand and Malaysia.

However, the production lines and the equipment to serve the production in Vietnam are not “modern” as promised, and they are mostly from China.

According to the local customs agency, Formosa Ha Tinh began importing machines and equipment in 2010, while 90 percent of the imports were from Taiwan and China, and only 10 percent from Germany, Belgium and Australia.

A report of the agency showed that Formosa now enjoys big tax incentives for the import equipment, including a tax exemption on products imported temporarily for re-export later.

It also does not have to pay import tax on imports and has many other attractive privileges.

Some experts said they cannot understand why Vietnam still offers so many investment incentives to a steel project, when the domestic steel output has exceeded demand.

A report of SEAISI, the South East Asia Iron and Steel Institute, showed that Vietnam was the country with the highest number of newly-invested steel projects in the region in 2013.

It warned that the existence of too many steel projects will lead to the more serious oversupply and stiffer competition among manufacturers.

The experts also pointed out that while domestic steel manufacturers cannot enjoy preferences, they are facing big difficulties with high inventories, Formosa Ha Tinh has been offered many preferences.

Dat Viet quoted its sources from the Ministry of Planning and Investment, saying that the ministry has recently asked the State Bank of Vietnam to allow Formosa Ha Tinh to raise credit limits that commercial banks can grant to the Taiwanese investor.

This is one of the claims Formosa Ha Tinh has made recently. It has also asked for the exemption of rent for the land to be used to build dormitories and exemption of natural resource and environment taxes.

Of the 17 proposals to Deputy Prime Minister Hoang Trung Hai so far, nine have got replies, five are being considered, while the other five were newly made.

Professor Nguyen Dinh Luong, former Head of the Vietnamese Delegation to the negotiations for the Vietnam-US Bilateral Trade Agreement, commented that Vietnam hopes Formosa will become the biggest steel complex in Southeast Asia, while steel projects are not welcomed anymore in other countries.

Dat Viet