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Industrial projects idle, hoping for capital   2010-08-09 - Dau tu

A lack of capital is the biggest reason for slow implementation of industrial projects.

 

 
Hai Phong DAP Factory initially planned to provide 290,000 tons of DAP products. However, by the end of July 2010, the factory had provided 75,000 tons, or just 30 percent of its yearly plan.

 

Construction of Hai Phong DAP Factory, covering an area of 72 hectares and capitalized at $172.3 million, started in 2003. The factory is expected to meet 30 percent of DAP domestic demand and will save $45 million a year by reducing the need for imports.

 

Yet construction has been very slow because commercial banks disbursed the capital incrementally. The speed of the project has only improved since 2007, but the factory still cannot run at full capacity.

 

The fact that a $170 million project is still uncompleted after seven years is not a unique case in the industrial sector. Many other projects report the same issue.

 

A recent study released by the Ministry of Industry and Trade showed that many projects have fallen into a vicious cycle: as projects do not have enough capital, they cannot be implemented, so they use cheap equipment, and, as a result, the factories regularly have operations troubles.

 

Besides Hai Phong DAP Factory, others like Song Tranh 2 Hydropower Plant, Se San 4 Hydropower Plant and Phuong Nam Paper Plant are operating, but contractors are still at work. Other power projects in Hai Phong and Quang Ninh also have instabilities and must halt operations to fix problems.

 

When big projects cannot be implemented as scheduled, this leads to many other consequences. Warnings have been issued at many meetings and capital shortage is discussed by management officials, but the situation is not resolved.

 

By the end of June 2010, the total implemented capital reserved for big projects of economic groups, general corporations and units belonging to the Ministry of Industry and Trade had fulfilled only 36.5 percent of their yearly plans with disbursed capital of 81,667 billion dong. A lot of power projects of big state-owned enterprises cannot be implemented due to the lack of money.

 

Vietnam is also unable to find a breakthrough in foreign direct investment (FDI) capital for the industrial sector. In the first six months of 2010, registered FDI capital in the industrial sector was just $8.43 billion, or 80.9 percent of that of the same period of 2009.

 

Meanwhile, analysts have warned that Vietnam should not hope that newly registered projects will be rapidly implemented or churn out products soon.

 

As for the 2.2 billion Mong Duong BOT (build-operation-transfer) power project by AES group, for example, the investor acknowledged that it will only be able to open after one year of arranging capital. The Kobe Steel project to make steel ingots, capitalized at one billion dollars and expected to have a capacity of two million tons per annum, will only become operational in 2013.

 

Many investors kicked off projects over the last two years, but implementation has been going very slowly. After a grand ground-breaking ceremony for the $9.8 billion Ca Na Steel project, the investor has made no move. The project on the southern petrochemical complex, capitalized at $3.7 billion, has also made no progress since its September 2008 ground-breaking ceremony.

 

Dau Tu newspaper has listed a series of slow industrial projects. More than ten years ago, Vietnam kicked off numerous projects in textile, dying and fibre, hoping they would allow domestic companies to increase local content ratios. However, to date, these firms must still outsource to foreign partners.



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