Capital headache for Van Phong zone

The zone’s vice head Hoang Dinh Phi told VIR that it would need at least VND15 trillion ($769 million) from now to 2015 to build the infrastructure necessary for major projects to be licensed within the zone.

The zone’s authority said that 2011 and 2012 might see the granting of investment licences to a large number of projects with total investment capital of about $8.5 billion.

These projects include a $2 billion coal-fired power plant of Japan’s Sumitomo Corporation and a $4.5 billion petrochemical and oil refinery complex of the Vietnam National Petroleum Corporation (Petrolimex).

Other upcoming projects at the zone are a $1.4 billion oil and gas service park project of PetroVietnam, and a $200 million Van Thang Industrial Park invested in by a South Korean investor.

Petrolimex’s petrochemical and oil refinery complex project, approved by the government in December 2008, was completing its investment procedures, said the zone’s management. The 600 hectare complex, located in Ninh Hoa district’s Ninh Phuoc commune, was expected to be completed by 2016.

It would produce 10 million tonnes of liquefied petroleum gas, petrol, gasoline, diesel oil, benzene, polypropylene and sulphur per year. The project was also expected to bring in some $718 million in annual revenue.

Meanwhile, Sumitomo Corporation and its local partners are putting the finishing touches on a build-operate-transfer (BOT) contract with the province’s authorities and relevant ministries for a 1,320-megawatt coal-fired power plant, expected to start commercial operation by 2015.

PetroVietnam’s oil and gas service park project replaces South Korean STX Corporation’s zone-based $500 million STX-Vina heavy industrial complex project, which saw its investment licence revoked mid last year because of delayed implementation. This project would serve the zone’s shipping and maritime industries, and oil and gas projects based on Vietnam’s south central continental shelf.

To raise capital for the necessary infrastructure for these projects, Van Phong Economic Zone’s authority had planned to ask the provincial People’s Committee to consult the Ministry of Finance about the possibility of the province issuing bonds. “However, on second thoughts, we saw that commercial banks’ lending rates were very high, and this would push costs for bond issuance up, badly affecting the local budget. Thus this plan has just been discarded,” Phi said.

Since the zone’s establishment in May 2006, it has received just around  $26 million from the state budget for infrastructure construction.

The authority is now calling for local and foreign investors to invest in BOT and build-transfer projects, particularly clean water provisions and road construction projects. Investors’ taxes will be deducted during their project operations at the zone.

To date, the zone has licenced 88 domestic and foreign projects with total registered capital of $17 billion, of which 28 projects with total registered capital of $330 million are operational.