Giant projects’ broken dreams

Vung Ang Economic Zone - illustration photo

Those projects are expected to have significant influence on the economy, but few have been implemented so far. Ninh Kieu finds out why.

After three years’ delay, Taiwanese consortium Formosa Plastics Group started developing a giant steel manufacturing and seaport complex in central Ha Tinh province’s Vung Ang Economic Zone.

Formosa representative Hsu Chih Hao told VIR that the $8.9 billion project would be operational in 2014, creating 10,000 jobs, and be one of the five largest steel factories in the world.

During February-May 2011, Formosa disbursed around $150 million for the project, not including the $30 million the group gave Ha Tinh People’s Committee to clear the site.

Formosa’s commitment to this mammoth project is what the Vietnamese government wants other foreign investors to replicate. 

Twenty-one, billion-dollar projects with committed capital of $61 billion have been registered in Vietnam since 2006, according to the Ministry of Planning and Investment (MPI).

Such giant projects in the fields of manufacturing, information technology, oil refinery, energy and real estate account for more than one-fourth of total FDI commitment capital in Vietnam. Commitments to billion- dollar projects even made Vietnam become one of the world’s most attractive places for investments in 2008 with registered capital recorded at $74 billion.

“If the investors implement those gigantic projects, this will have a very big influence on the economy,” said Nguyen Mai, chairman of Vietnam Association for Foreign Invested Enterprises.

Not only creating jobs, the development of such projects also helped ease foreign currency shortages caused by a widening trade deficit, Mai said, adding that their disbursement was also a gravitational force for FDI inflows into Vietnam.

Vung Ang Economic Zone Management Authority reported that many foreign and domestic investors in the zone had followed Formosa to push up the implementation of their projects since Formosa started construction in February, 2011. However, investors of only four billion-dollar projects have walked instep with Formosa.

Asia Coast Development LLC and New City Properties Development Company are constructing $4.2 billion and $4.3 billion tourism projects in Ba Ria-Vung Tau and Phu Yen provinces, respectively. Intel operates its $1 billion chipset factory in Ho Chi Minh City and Posco, one of the world’s largest steel makers, last year inaugurated its $1.2 billion steel factory in Ba Ria-Vung Tau.

Most investors blame site clearance difficulties. Site clearance issues were also blamed for stalling Formosa’s project in Ha Tinh for three years, the group said.

A representative at Vung Ro Petroleum, which registered to build a $1.7 billion oil refinery in Phu Yen province, also claimed site clearance issues had held the project back for two years.

China Steel Sumikin Vietnam – a consortium between China Steel Corporation, Sumitomo Metal, Sumitomo Corporation, Sumikin Bussan and Formosa – had to delay construction of its $1.15 billion steel factory in Ba Ria-Vung Tau province last August due to the similar difficulties.

But, this is not the only reason for investors’ indolence. Mai said many investors had delayed billion-dollar projects due to poor financial health.

The $9.8 billion Ca Na steel manufacturing project in Ninh Thuan, registered by debt-ridden  Vinashin and Malaysia’s Lion Group, is a typical exam. This was to have been the largest FDI project in Vietnam. However, the investors did nothing to push the project forward, despite Ninh Thuan People’s Committee urging investors to implement their commitments. Early this year, the provincial authority decided to revoke the investment certificate and change the project into an industrial park.

Poor financial ability also forced Phu Yen People’s Committee and Quang Nam People’s Committee to end the destinies of two, billion-dollar projects, the $1.68 billion Creative City and $4.15 billion Dragon Beach Resort as the investors declined to pay deposits for their projects.

“During the past years, we have been focusing on luring new FDI commitments, rather than quality of projects. This is why we saw lots of billion-dollar projects registered in recent years,” said Mai.

He said those stalled FDI projects were having serious impact on residents who had to move to other locations due to site clearance work. Furthermore, delays at those mammoth projects mean land resources are used ineffectively.

“They took investment opportunities from other investors, but have done nothing so far,” Mai noted.

Dang Huy Dong, Vice MPI Minister, admitted that the commitment at billion-dollar projects did not mirror the real quality of FDI inflows into the country. Although FDI commitments to Vietnam have been declining for three years, Dong believed the result was not bad because “we have carefully appraised projects to reject unrealistic billion-dollar ones”.