Ministry of Industry and Trade: Hoa Sen does not build, Ca Na Steel is still in the planning

The leader of the Heavy Industry Department said that steel production in Ca Na was previously approved and even if Ninh Thuan did not propose Hoa Sen to do it, the project would still be put back into planning.

ProjectHoa Sen Ca Na - Ninh Thuan Steel Rolling Complex with a total investment of 10.6 billion USD is causing much controversy in public opinion after being approved by Ninh Thuan province andHoa Sen Group proposed to deploy. After the incident in May at a similar-scale project, Formosa Ha Tinh, many questions were raised about Ca Na regarding planning, environment, supervision responsibilities and transparency of the project.VnExpresshad a conversation withMr. Truong Thanh Hoai - Director of Heavy Industry Department (Ministry of Industry and Trade) on this issue.

-According to the saved documents, the decision to add the Hoa Sen Ca Na – Ninh Thuan steel project to the industry planning was signed by the Ministry of Industry and Trade just 2 days before the project was widely announced at the Investment Promotion Conference in Ninh Thuan (August 27). What do you say about this?

Mr. Truong Thanh Hoai affirmed that industry planning is "soft" but there is no such thing as following businesses. Photo: HT

-In fact, the Hoa Sen Ca Na steel project was “inherited” from the Vinashin – Lion steel complex project that was considered and approved by the Prime Minister 8 years ago. That means, this project was previously included in the steel industry’s planning. In 2008, the enterprise received the Investment Certificate, but was then unable to implement it due to Vinashin’s collapse, and its partner Lion also faced financial difficulties… Therefore, the Ministry of Industry and Trade at that time decided to temporarily withdraw it from the planning.

However, in the process of reviewing the implementation of the planning from the end of 2014 until now, we have researched possible locations for the steel factory, including considering bringing back the steel project in Ca Na.Planning is always based on the potential of the area, specifically the Ca Na area and the initial capacity of the investor.

I affirm that the addition of the Hoa Sen Ca Na – Ninh Thuan steel project was not a “step-cutting” or hasty decision. We also did not bypass the authority or fail to comply with the planning addition process.According to regulations, the adjustment and supplementation of detailed planning is under the approval authority of the Ministry of Industry and Trade, based on the proposal of the Provincial People's Committees. Only when approving the master plan is it necessary to consult with ministries and branches.

- SpecificallyHow has consideration been given to adding this project to the sector planning?

- After reviewing from the end of 2014, by January 2016, the Minister of Industry and Trade issued a decision to adjust the planning for the entire Vietnamese steel industry. By July,Ninh Thuan province sent a document to the Ministry proposing and the location of Ca Na is also consistent with our previous research, so the Ministry has added it to the planning.

After this step, the investor will prepare a pre-feasibility report to submit to the Ministry of Planning and Investment for appraisal, and submit to the Prime Minister for decision on the policy. After that, the investor will prepare a feasibility study report, then the basic design….Since this is a large-scale steel project, estimated at 16 million tons per year, approval will be considered in phases, not all at once. Phase I will only be licensed after Phase II is successfully implemented...

For the project to be implemented and built, it still has to go through many more steps.But even if Ninh Thuan province does not propose Hoa Sen Group as the investor, the Ministry will still put the steel project in Ca Na back into the industry planning and find an investor later, because this is a potential time to invest in the steel industry.

- Figures from factories show that domestic steel production is in excess capacity. How can the granting of additional licenses for a large project in such a context be understood?

-Vietnam possesses a large source of iron ore. After assessment, the Thach Khe iron mine (Ha Tinh) alone can exploit 10 million tons of ore each year. The iron ore reserves in the Central Highlands have not been assessed, but are estimated at about 2.2 billion tons. There are ore sources for domestic production, but businesses still import large amounts of steel, resulting in a steel trade deficit of about6-7 billion USD.In the first 8 months of 2016 alone, Vietnam imported 14 million tons of steel and the whole year is expected to be 22 million tons of equivalent crude steel. If there is a surplus of steel, how can we import so much?

Such imports have greatly affected the trade balance, reducing the competitiveness of manufacturing and supporting industries.It is forecasted that in 4 years, the national steel demand will be at 27 million tons, but even when Formosa phase I comes into operation, the country will still lack 15 million tons of steel and will increase to more than 22 million tons by 2025.

In addition, a series of steel projects, although licensed, have been implemented slowly or cannot be put into operation... Therefore, if new projects are not added soon, in the next 4 years, the steel industry will become increasingly dependent on imports, and the trade deficit will become more and more serious.

- Obviously, there are many licensed projects that are shelved. So what do you think about the view that industry planning is following businesses, rather than the real needs of the market?

- According to the provisions of Decree 92/2006, industry product planning is "soft", with an orientational nature associated with market factors. The market is constantly changing, investing enterprises may do well this year, but face difficulties and failures next year... so they cannot continue to implement the project. Any projects that are stopped due to reasons from the investor will be withdrawn from the planning, and vice versa.

The industry planning also has a 5-10 year cycle. During the production process of an enterprise, if the management ministry finds that the enterprise no longer has the potential to ensure market supply and demand, it will find another investor to replace it, making up for the supply and shortage of projects that have not been invested in.

In the marketplace, what to produce and for whom is up to the enterprise to decide. Where the highest profit is obtained, the enterprise will calculate and invest. That is their business problem.

-Apart from planning, the biggest concern with the project is environmental protection. What responsibility will the Ministry of Industry and Trade have in this matter?

- Currently, the laws on environment and construction investment are relatively strict. From the Formosa lesson, we have clearly learned a lot of experience, including in the process of environmental impact assessment, trial operation of steel projects and later operation.The investor himself will also gain experience when implementing this project.

Simulation of super steel project in Ca Na (Ninh Thuan).

By law, the Ministry of Natural Resources and Environment is the lead monitoring agency, but the Ministry of Industry and Trade will also participate to ensure compliance with the planning.Specifically, the basic design and investment project stages of this project are also different from the stage in which Formosa made the investment. Instead of just giving comments on the basic design, according to the new regulations, for large projects, the governing ministry will directly appraise the basic design and require the investor to comply with that appraisal.

People can also participate in supervision, of course not technical or professional supervision, but rather supervision of the “promises” of the investor. During the implementation process, if any problems arise from the project, they can report to the competent authority for handling and resolution.

Actually, the most important thing when implementing a project is cash flow, financial capacity, and good management. With this project, we also considered the cash flow, financial reports over the years of the business... only when we found it feasible did we put it into planning.

Ninh Thuan province has also committed to providing water for this project. Phase I of the project is expected to have a capacity of 4.5 million tons of steel per year, with an average water consumption of about 7m3 of water per ton of steel, meaning about 8,500 m3 of water is needed per day. According to the province's commitment, by 2017 it can supply 30,000 m3 of water per day and night, enough for the project's production needs.

According to VNE