Experts skeptical about Formosa’s SEZ proposal

VietNamNet Bridge – Local experts have cast doubt on a recent proposal by Hung Nghiep Formosa Ha Tinh Steel Company for establishing a special economic zone (SEZ) for steel and iron industry enjoying the most preferential incentives ever.

SEZ, Vung Ang steel, Formosa’s steel, high-tech industry

A Hai Quan (customs) newspaper report says the Taiwanese-invested company has written to Deputy Prime Minister Hoang Trung Hai seeking approval to set up Vung Ang steel and iron SEZ in the central province of Ha Tinh and enjoy the most special incentives.

Formosa wants to build a deepwater port to serve production, a protection mechanism for the steel industry and tax exemptions, including import tariffs on machinery, equipment and materials. It also asks for a land allocation scheme that will benefit 15,000 staff, or 60,000 people if their relatives are included.

Economist Le Dang Doanh said the proposal sounds abnormal and unsuitable to the current legal framework of Vietnam. “I think it is important to weigh pros and cons of the proposal and ask specialists and economists to give advice.”

After Formosa suffered damage due to worker protests against China’s illegal placement of an oil rig in Vietnam’s exclusive economic zone and continental shelf in mid-May, the Government has adopted a lot of support policies to help the company.

“However, it seems that ‘give him an inch and he will take a yard’. Vung Ang actually has some difficulties but it is not a reason for the Government to accept any proposals from investors easily,” Doanh said.

In the current hardship, investors are trying to demand more incentives, so the Government should take caution. In this case, Formosa has asked for unprecedented privileges, Doanh noted.

Sharing Doanh’s view, economist Pham Chi Lan said only the Government has the right to set up and locate a special zone by considering common benefits of the whole economy.

When the investor enters Vietnam, it must accept that its project is normal. It is unusual to turn its investment venue into a special zone, she said.

Lan suggested the Government should ponder the issue. If Formosa’s proposal was met, the Government should expect similar proposals from big investors in the future, resulting in numerous SEZs going up in the country.

Phan Huu Thang, former head of the Foreign Investment Agency under the Ministry of Planning and Investment, urged the Government to take careful considerations as Ha Tinh Province serves as an important connection point between the north and south of Vietnam and is located in a strategic region in Indochina.

The SEZ establishment and its management board is under management of the Government Office as proposed by Formosa is impossible. “If this comes true, even the local government where the SEZ is located cannot intervene in its operations, so it is difficult to perform administrative activities,” Thang said.

Pham Chi Cuong, former chairman of the Vietnam Steel Association, said in support of the aforesaid experts that the proposal looks highly infeasible. The Government should mull it carefully as the location of the proposed SEZ is vital for both economic development and security.

Despite a large project, steel is not an important or high-tech industry. So, it is not necessary to establish a SEZ for the sector, Cuong said.

Formosa’s steel and iron complex project is expected to commission the first phase in 2015 with total capacity of around 22.5 million tons a year.


SEZ, Vung Ang steel, Formosa’s steel, high-tech industry