Viet Nam seeks FDI quality, not quantity

Monday, May 11, 2015 08:00

It's necessary to improve the efficiency of FDI. — Photo

Compiled by Le Hung Vong

Viet Nam has licensed 448 new FDI projects worth US$2.67 billion in the first four months of the year, down 17.1 per cent compared with the same period last year, and permitted investors to infuse $1.01 billion in 167 existing projects.

While the commitments may have shrunk from last year, the actual disbursement has risen by 5 per cent to $4.2 billion, according to the Foreign Investment Department.

Authorities have been paying more attention to the "quality" rather than "quantity" of investment.

"[While considering an FDI project] authorities should ignore the idea of ‘more the better'," said Phan Huu Thang, a former head of the department.

Recently the central city of Da Nang rejected two multi-million dollar foreign projects over environmental issues.

To ensure the city's sustainable development, Da Nang authorities have adopted policies to attract FDI in hi-tech projects and supporting industries with high value addition, especially in "clean" projects.

Other provinces like Ba Ria – Vung Tau and Dong Nai have also rejected projects that could cause pollution, require large tracts of land, and employ unskilled workers.

The northern province of Hai Duong has decided to stop licensing FDI projects in sectors like textile and dyeing, leather and footwear manufacturing, plastics and composites, rubber processing, and paper production from pulp.

This year Hai Duong has also stopped seeking investments in production of construction materials and manufacturing that mainly involves exploitation of natural resources like minerals.

"Viet Nam has sound policies for FDI which are on the right track," said Nguyen Mai, Chairman of the Foreign-invested Enterprises Association in Viet Nam.

International organisations like the World Bank and International Monetary Fund, European, American, Japanese, and Korean business associations and the media had praised these efforts, Thoi bao Kinh te Viet Nam (Vietnam Economic Times) quoted him as saying.

Mai believed foreign investment would pick up this year due to the Government's efforts at institutional reforms and improving the business environment.

HCM City revokes land for Metro Line No 2

HCM City authority has announced plans to take over land in District 1 for the metro line No 2 connecting Ben Thanh Market (in District 1) and Tham Luong Bus Station (in District 12).

At a meeting to announce the acquisition plans on May 5, Luu Trung Hoa, deputy chairman of the District 1 People's Committee, told people affected by the acquisition that the total area to be taken over was 16,550sq.m.

Twenty four households and eight organisations will lose their lands, three households fully and the rest, parts of them.

Hoa said District 1 authorities had arranged for replacements for them, including nine apartments in Tenement No 203, Nguyen Trai Street. District 1 will also collaborate with the city Department of Construction to arrange for more houses for the families to be relocated.

City authorities are scheduled to pay compensation and take over the lands in September this year.

The lands will then be handed over to HCM City authorities for handing over in turn to the HCM City Management Authority for Urban Railways in July 2016.

Construction of line No 2 is scheduled to begin in 2017.

Steel industry battered by imports, excess capacity

Though domestic steel production is two times the demand, imports of steel products are rising relentlessly, putting local manufacturers under even more pressure.

According to figures from customs, in the first quarter of this year Viet Nam imported 2.88 million tonnes of steel products worth $1.72 billion, an increase of 30.7 per cent in volume and 15 per cent in value from a year earlier.

Notably, imports from China accounted for nearly 50 per cent of the total, with the quantity of steel containing boron (which qualifies for zero per cent import tariff) increasing year after year.

Last year out of 11 million tonnes imported, steel containing boron from China accounted for nearly five million tonnes.

The Chinese steel was sold for construction at VND1 million to VND2 million per tonne lower than local products.

This has forced many local steel manufacturers to scale down production, some by 60 per cent, or even shut down their plants.

The import of scrap iron is another headache for local steel producers.

Demand for domestically made steel remains sluggish as due to the import of cheap steel from neighbouring countries.

Despite promotions, in the first quarter only 300,000 tonnes of local products were sold in the market, down 30 per cent year-on-year.

The Viet Nam Steel Association said demand in the local market this year would be around six million tonnes, 8 per cent higher than last year.

But the capacity in the country is around 11 million tonnes a year, nearly double the demand, creating bruising competition.

According to a report from the Ministry of Industry and Trade, the competition would become even more intense when steel imports from a number of countries enjoy lower taxes under bilateral trade agreements Viet Nam has signed or will sign with countries like China, Russia, South Korea, and Belarus.

In addition, local supply has been increasing with the opening of new plants by Posco SS, Formosa, and Vinakyoei.

"The licensing of new steel plants at a time when there is a surplus in local steel supply (though the existing plants are not operating at full capacity) has led to a demand-supply imbalance," an official from the Ministry of Industry and Trade's Market Department said.

Faced with such a situation, local steel firms have demanded protection against imports in the initial stages of global integration.

Relevant agencies should impose "technical and commercial barriers" on steel products containing boron imported from China, they said.

They also want the Government to reject investment projects that use outdated facilities to keep supply lower.

"To ensure sustainable development of the steel industry, the Government should allow non-state enterprises to submit tenders for projects funded by State budgets," said Tran Minh Ngoc of the HCM City University of Technology. — VNS

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