Kobe Steel hunting big incentives

The province’s chairman  Ho Duc Phoc, in a document sent to Prime Minister Nguyen Tan Dung, proposed the government allow Kobe Steel’s $1 billion iron-nugget manufacturing project in Nghe An province to enjoy favourable incentives that are granted to foreign invested projects located in special difficult area.

Specifically, the provincial committee suggested Kobe Steel should enjoy 10 per cent income corporate tax within the first 15 years instead of 25 per cent and employees working in the plant will enjoy a 50 per cent reduction in personal income tax. With strong support to this project, the provincial committee even asked the government for giving Kobe Steel a special incentive with only 10 per cent of corporate tax during the project’s lifetime.

Meanwhile, the manufacturer could enjoy import tax exemption for five years for input materials and equipment not produced in Vietnam. Another incentive that the committee proposed to the government is to give Kobe Steel an exemption of land and water surface leasing fees for 11 years since the project comes into commercial operation.

“Such favourable investment incentives are needed to attract investments to make the South Thanh Hoa-North Nghe An economic region become a driving force in north-central of Vietnam,” said Phoc.

He said Nghe An would try to give Kobe Steel the most favourable conditions with the highest incentives to implement its project in the Dong Hoi Economic Zone, expecting this one will be a magnet luring other foreign investors to the zone. Kobe Steel obtained investment certificate for its iron nugget manufacturing project in 2010 as a part of its oversea investment expansion.

Kobe Steel announced this $1 billion plant would produce and market 2.4 million tonnes of iron nuggets per year. The firm also said that the production at this plant would use the next-generation ITmk3® iron making process that it developed.

Once operational, Kobe Steel’s plant will notably contribute to satisfy the rising demand of raw materials for Vietnam’s steel industry. Currently, Vietnam is largely dependent on importing scrap and semi-finished steel products to meet local manufacturers’ demand.

In a document responding Nghe An’s proposal, the Ministry of Finance (MoF) said Kobe Steel could enjoy corporate tax at 10 per cent within the first 15 years. During the first 15 years, the firm would also gain exemption of corporate income tax in four year and 50 per cent reduction in the following nine years. Its plant’s employees would enjoy reduction for half of personal income tax. Meanwhile, the investor could enjoy import tax exemption for input materials and equipment that are not produced in Vietnam and would not have to pay land and water surface leasing fees for 11 years, according to the MoF.

In a related development,  Kobe Steel has a big chance to invest in Vietnam’s largest iron mining project that is expected to provide its plant with raw materials for production.

 State-run Vinacomin, the mining project’s current biggest stakeholder, said the group would either sell a stake in the Thach Khe Iron Joint Stock Company to Kobe Steel or set up a joint venture with the Japanese heavyweight.