Chinese projects need quality control scrutiny

VietNamNet Bridge – China’s investment in Vietnam has dramatically increased both in terms of value and project number, but the quality of these projects needs to be taken into account, and to ensure they contribute to reducing the bilateral trade gap.

According to statistics released by the Foreign Investment Agency under the Ministry of Planning and Investment, as of March 20, Chinese investors had poured nearly US$8 billion into 1,112 projects in Vietnam, ranking the country 9th in terms of Vietnam’s foreign investors. Compared to other big foreign investors, China has fewer large-scale and key projects in Vietnam.

Most of the Chinese projects are focused on energy, with the country often involved in the construction of power plants. According to the statistics released by the Ministry of Industry and Trade’s National Research Institute of Mechanical Engineering in April 2014, Chinese were known as the main contractors in 15 of Vietnam’s 20 thermal power projects.

The US$2 billion 1,200MW Vinh Tan 1 thermal power plant is one of China’s biggest projects in Vietnam and also the first power project in which Chinese firms are the main investor. China’s Southern Group (CSG) and China Power International Holding Ltd (CPIH) hold a 95% stake in the project.

China Investment Corporation (CIC) is one of the investors at the US$2.1 billion Mong Duong 2 thermal power plant. CIC owns a 19% stake in the project which recently saw its first turbine put into operation.

In the Electricity of Vietnam-invested 1,245 MW Duyen Hai 1 thermal power plant, China’s Dong Fang Electric Corporation Ltd was the main engineering, procurement and construction (EPC) contractor. 85% of the EPC contract valued over US$1.39 billion was sourced from the China Export-Import Bank.

Mining now ranks second among Vietnam’s most attractive sectors for Chinese firms, with the Lao Cai cast iron and steel plant being the biggest project that a Chinese firm has invested within Vietnam’s mining industry. China’s Kunming Iron and Steel Group holds a 45% stake in the US$337 million project, while the remainder is owned by state-run Vietnam Steel Corporation.

With several free trade agreements likely to be signed this year, including the possible Trans-pacific Partnership, Chinese textile and garment businesses have been keen to visit Vietnam to seek investment opportunities by exploiting the advantages offered by the deals.

China is also encouraging its firms to invest in mergers and acquisition deals. Meanwhile, Vietnam is accelerating its equitisation of state-owned enterprises, especially state-run corporations and groups.

In a recent interview with VIR, chairman of the Vietnam Association of Foreign Invested Enterprises Nguyen Mai said that Vietnam should focus on the quality rather than the quantity of foreign invested projects.

Other economist suggested that while working out measures to attract more Chinese investments, Vietnam should make more efforts to narrow the trade gap with China, which widened to US$28.9 billion in 2014, up 21.8 % from 2013.

Additionally, if China’s investment projects in Vietnam’s textile and garment sector concentrate on raw material and accessory production, it will greatly contribute to reducing the bilateral trade gap.

VIR

Chinese projects, quality control scrutiny, bilateral trade gap
 
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