Shooting at moving goals

The Vung Ang Economic Zone Management Authority (VAEZ) recently gave an August 30 deadline for which the world’s sixth largest steel maker and its partners to re-submit completed application dossiers for an investment certificate.

“Otherwise, after the deadline, the papers signed by the VAEZ in July 2009, in which the land in the economic zone given to Tata Steel-consortium steel project is agreed, will become invalid,” said a VAEZ document sent to Tata Steel and its partners early this month.

The VAEZ is the licencing agency for the $5 billion Ha Tinh integrated steel project that the Indian firm proposed to develop in partnership with state-run Vietnam Steel Corporation (Vnsteel) and Vietnam Cement Industries Corporation (Vicem) in the Ha Tinh province’s Vung Ang Economic Zone.

The VAEZ document said the deadline’s issuance came after the Ha Tinh People’s Committee met Tata Steel and its partners in the middle of last month to discuss the terms of issuing an investment certificate for the project. The meeting concluded that Tata Steel and its partners were required to provide further documents to address nine outstanding issues requested by the prime minister in regard with the implementation of the Ha Tinh integrated steel complex.

The nine outstanding issues were raised following the meeting of the prime minister and relevant governmental agencies including the ministries of Planning and Investment (MPI) and Industry and Trade (MoIT) and Ha Tinh authorities in May this year to discuss the project. They relate to the project’s land plot, water supply, environmental issues, the project’s progress, supply of raw materials, foreign partner’s agreements to arrange capital for local partners, tax law application and spending on site clearance.

There was also another directive from the Government Office issued on July 10, asking the MPI to coordinate with Ha Tinh authorities and the investors to respolve the outstanding issues and report back to the prime minister.

Indronil Sengupta, chief executive of Tata Steel’s South East Asia projects, last week told VIR that VAEZ’s move was ‘a big surprise’ for Tata Steel, which was currently working with the MPI, MoIT and other relevant governmental agencies to resolve the nine outstanding issues.

Sengupta said that more than half of such issues had been resolved, but the remaining was pending on the side of the relevant governmental agencies. “We are really confused about whose directions to follow,” he said.

Tata Steel initiated the Ha Tinh integrated steel complex with designed annual capacity of 4.6 million tonnes per year in May, 2007 when it signed a memorandum of understanding document with Vnsteel to develop the project. The document set timeline of 16 months for Tata Steel to complete a feasibility study of the complex, which would totally use domestic raw materials such as Thach Khe iron ores. The study was completed by Tata Steel in 14 months.

A year later, a joint venture agreement was signed between Tata Steel, Vnsteel and Vicem, in which the foreign partner committed to hold 65 per cent of shares, Vnsteel 30 per cent and Vicem 5 per cent. The joint venture’s first application dossiers for an investment certificate were submitted to the VAEZ in August, 2008.

The project, however, was not licenced as the project’s planned land had been given to Taiwan’s Formosa Group, which is building a 15 million tonne steel facility with an initial investment capital of $7.9 billion. The VAEZ agreed to give the joint venture another 725 hectare site in July last year. This approval allowed Tata Steel and its partners to submit investment certificate application dossiers to the VAEZ for the second time in December, 2009.

“We are strongly committed to implement this project, but we expect that equal treatment will be rendered to our project as compared to others in the Vung Ang Economic Zone,” Sengupta said.