$4.5 billion steel investment sparks MOIT-VSA debate

News - The Ministry of Industry and Trade (MOIT) has allowed investors to increase the investment capital of Guang Lian Dung Quat steel project to $4.5 billion, thus raising the capacity to seven million tons per annum. The Vietnam Steel Association (VSA) has expressed its concern about the feasibility of the project.

 

In a reaction to the decision by MOIT to allow the investor to adjust the investment scale of the steel project, VSA has sent a document to the Government requesting to reconsider the project, located in Dung Quat Economic Zone in the central province of Quang Ngai.

 

VSA has asked MOIT and Quang Ngai People’s Committee to investigate thoroughly the financial capability of the investor before deciding to adjust the investment scale. The association believes it will be not easy for investors to increase capital, and the project has been implemented too slowly.

 

Deputy Chairman of VSA Nguyen Tien Nghi told VnExpress: “Besides the commonly seen reasons like the capital shortage and the tardiness in site clearance, one of the most important reasons that make big steel projects go slowly is that local authorities, while trying to attract as many investment projects as possible, do not consider thoroughly the financial capability and experience of investors before licensing projects”.

 

Representative of Guang Lian Dung Quat Company, the investor of the steel project, also admitted that it has been slow in implementing the project. Because of the 2008 global economic crisis, the process of purchasing equipment and machines for the project has been prolonged. Besides, the problems in site clearance have led to the delay of the start of the first phase of the project.

 

“The problems in procedures and capital arrangement were settled by March this year, which has allowed Guang Lian Dung Quat steel project to restart,” an investor said.

 

Leaders of Quang Ngai province said that if the proposal by the steel project’s investor to increase investment capital is not accepted, this will badly affect the foreign investment attraction in the locality.

 

Le Quang Thich, Deputy Chairman of Quang Ngai People’s Committee, stressed that the steel project absolutely comes in line with the steel industry development strategy. To date, Vietnam only has one steel mill, Thai Nguyen, which makes steel from iron ore, while other steel mills make steel from steel ingot or scrap steel. Therefore, Vietnam still needs to have more mills that can make steel from iron ore.

 

Thich also said Quang Ngai authorities believe in the financial capability and experience in steel production of E-United group and Tycoons. Regarding the markets for the project’s products, Thich said the factories of the investor in other countries have high demand for steel products. Therefore, only a part of products of Guang Lian Dung Quat will be consumed domestically, while the majority of products will be exported. Therefore, there is no need to worry about “steel indigestion” in the domestic market.

 

With this viewpoint, the Quang Ngai People’s Committee on July 27 sent a report about the project to Deputy Prime Minister Hoang Trung Hai. According to the leaders of the province, in late 1990, JICA (in fact, the experts of Japanese Nippon Steel) came to survey two places, Dung Quat and Vung Ang for the location to set up a steel complex. In late 2004, Quang Ngai met E-United and Tycoons ( Taiwan) to call for investment in the steel mill in Dung Quat. Then only Tycoons agreed to go further with the project.

 

In late 2006, the Ministry of Planning and Investment granted license to the project with the investment capital of one billion dollars and an expected capacity of five million tons. However, due to the limited capability in arranging capital for such a big project, Tycoons has invited E-United to join the project.

 

The ground breaking ceremony of the project took place in July 2007.