Japan's JPE Group recently decided not to create a partnership with a Taiwanese company for a major steel project in Quang Ngai Province, bringing the project to a standstill.
JPE came to the decision after two years of assessing the Quang Lien steel project, which is designed to have an annual capacity of five million tonnes.
This is considered a bad news, not only for this particular project, but also for the province's prospects of attracting further foreign investment.
Project at standstill after eight years
Eight years after the USD4.5-billion project was initiated, only offices and the factory fences have been built.
Pham Chi Cuong, former chairman of the Vietnam Steel Association, said the investor of the project is a Taiwanese company called Tycoons.
“In 2006, Tycoons pledged to invest USD1 billion in the project, quite a significant investment for Quang Ngai. One year later, it set up a joint venture with E-United Group. Tycoons divested to only a 10% stake and soon completely pulled out,” Cuong said.
A short time later, the investor pledged to increase its investment to USD3 billion, but several years after work began, there is not much to show for it. Surprisingly, the investors again raised their pledged investment to USD4.5 billion, but with the same results.
“These regular increases in pledged investment are just moves to avoid pressure from the authorities amid in light of stagnant construction. Relevant authorities have had doubts about the investor’s financial capacity since 2010,” Cuong noted.
When JPE showed interest in the project, it was expected that construction may be resumed. However, JPE's withdrawal means uncertain future for the project.
In 2012, Quang Ngai provincial authorities threatened to revoke the company's investment license unless the situation improved but it's hard to understand why it had not already been cancelled.
“In response to prompts by authorities, in early 2012, E-United proposed to raise the project’s capacity to seven million tonnes per year. The proposal was turned down because it was so unrealistic,” he said.
Vo Tien Dung, deputy chief of Dung Quat Economic Zone’s Management Board, said E-United plans to meet with provincial authorities on September 19 in order to discuss plans for implementation.
If the investor wants to continue the project, they will have to work out a detailed plan for construction, which they would be required to strictly comply with, under threat of their license being revoked. If the project is cancelled, they investor would be refunded their investment, estimated at between USD40 million and USD50 million so far, Dung added.
