Foreign investors reject Hanoi's plan
Foreign investors reject Hanoi's plan
By Marc Lavine
QUANG NGAI, Vietnam (AFP): Vietnam's plan to create an Asian oil and industry hub in one of its poorest regions is threatened by investors rejection of the controversial location.
The authorities are pushing for Dung Quat, on an isolated stretch of palm tree lined coast in central Vietnam, as the site for the project, despite the objections from foreign firms.
The authorities want to boost the economy of the region, which lags behind the north and south and have seen only limited benefits from reforms.
But the future of the development, which Vietnam considers its number one industrial project and an "economic springboard into the 21st century," is in jeopardy unless overseas investors give support.
"It all depends on the intervention of our foreign partners," said Pham Huu Ton, vice president of the Quang Ngai Provincial People's Committee, which is overseeing the project. Another official said foreign cash was the only element still needed for work to start.
However, the choice of Dung Quat surprised analysts and potential investors, including France's Total oil, who expected it to be built closer to the off-shore oil fields and booming markets of the south.
"The government has proposed the Dung Quat site and we are doing a feasibility study to see if it would be possible to opt for the location," Total's chief representative for Southeast Asia Melchior de Matharel told AFP.
"The site has several disadvantages for us, including the fact the planned port is not protected from the sea, and it would take a considerable investment to do this. In addition, it is a long way from the oil fields and the markets for petroleum products," he said.
Total, which planned to take a 30 percent stake in the refinery, favored Long Son, near the oil center of Vung Tau, a corner of Vietnam's booming southern economic triangle and base for the growing off-shore oil industry.
Production is expected to be raised from around five million tons last year to more than 15 million tons by 2000.
Total is to join Vietnam's state oil firm PetroVietnam and two Taiwanese companies, Chinese Petroleum Corp. and China Investment and Development Co., in the new joint venture which has yet to be licensed.
The 1.1 billion dollar refinery with annual production capacity of 6.5 million tons is at the heart of a mammoth development worth more than 10 billion dollars if it goes ahead.
There would also be a deep sea port able to handle up to 100 million tons of cargo a year, a container port, a petrochemical plant, a steel mill and heavy industry zone and a tourist resort.
Officials insist the refinery will begin production in the third quarter of 1998, while entire scheme should be completed in 2010.
But a senior oil industry source said the refinery and surrounding schemes are a pipe dream for Hanoi.
"The Vietnamese seem to have given priority to their political agenda rather than to the demands of investment and business," the source told AFP.
"No self-respecting oil company would want to site the refinery there. It's always going to be very costly for operators to transport oil up and down the country, making almost impossible to make profitable."
The only way to lure foreign investors to the site was to offer permanent tariff cuts or tax incentives to make the site workable, a move that would hit Vietnam hard financially, he added.
But Ton rejected suggestions investors would be put off, saying overseas interest has been overwhelming. "Of course Dung Quat will be a more expensive location for refinery operators at first, but it is a much better choice in the long term because of its natural assets and position," he said.
He stressed the port enjoyed protection from the open sea and that its infrastructure -- which oil analysts say is vastly inadequate -- was "at least as good if not better than Vung Tau's."