Formosa seeks steel economic zone

VietNamNet Bridge – Formosa Ha Tinh Steel Corporation, the big investor from Taiwan, has proposed that the government set up the Vung Ang steel economic zone and offer special investment incentives to it. The government has not yet replied to the proposal, but economists caution that the request is an excessive one.

Formosa, steel economic zone

The firm’s proposal for investment incentives that go beyond the current package of preferences stipulated by law has elicited a strong reaction from investment promotion officers, steel manufacturers and economists.

Le Dang Doanh, a renowned independent economist, commented that the proposal is “unusual” and does not fit the Vietnamese current legal framework.

“If the government gives the nod to Formosa’s proposal, it will have to do the same with other investors,” Doanh warned, adding that it is necessary to clarify whether Formosa deserves the special treatment.

An analyst said he thinks there is a connection between Formosa’s proposal and the riots in Binh Duong in May, during which many foreign firms suffered damages.

“The government then released a message that it will do everything it can to protect and retain investors. Some of Formosa’s requests have already been satisfied by the local authorities,” he said. “This could be the reason that Formosa has decided to follow up its advantage and continue making claims”.

Regarding the matter, Doanh commented that though investors did suffer some hardships, this is not a good enough reason for the government to so readily comply with all investors’ demands.

“Under the current conditions, investors tend to be more demanding. Therefore, the government needs to be very cautious when considering investors’ claims,” Doanh said.

He personally thinks that Formosa’s claim is unreasonable and groundless.

Sharing the same viewpoint with Doanh, Pham Chi Lan, also a renowned economist, stressed that the questions of whether to set up economic zones and where to set them up must depend on the government. The state must make objective judgments after considering all conditions, and must not cede the job of making such decisions to any corporation, foreign or domestic.

Phan Huu Thang, former Head of the Foreign Investment Agency, has cautioned that the government needs to be skeptical with the investor’s proposal.

Thang said Ha Tinh, in the central region of Vietnam, has an important strategic position in Indochina, as it connects traffic between the north and south of the country. It would be unreasonable for a special economic zone to be established in the area, with the zone’s board management put under the control of the government’s office, as Formosa proposes.

If so, the local authorities of the host province would not be able to intervene in the zone when necessary, which would be a problem for state management work.

Thang emphasized that the investment incentives claimed by Formosa do not exist in the Enterprise and Investment Laws. Therefore, if the government accepts the proposal, it will break the legal framework.

Pham Chi Cuong, former Chair of the Vietnam Steel Association, commented that though Formosa plans a large-scale investment project which would help foster the local economy, steel manufacturing is not a high-technology sector that Vietnam needs to encourage, and hence, there is no compelling need to set up a special steel economic zone.


Formosa, steel economic zone