Vietnam Cancels Joint Steel Project Due to Inadequate Funding

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Mar. 2 – The Vietnamese government is going to abolish a massive Vietnamese–Malaysian joint steel project in the central province of Ninh Thuan, by revoking its investment license, local officials confirmed on February 24.

The US$9.8 billion joint project between the local shipping company Vinashin and the Malaysian steel giant Lion Group started in November 2008 but made little progress since then. The project with plans to exploit a steel mill with initial capacity of 4.5 million tons, build up power plants, and develop a seaport have not carried out any construction yet – apart from site clearance – over the past two years.

A February 23 statement on the government web site accused investors of not fulfilling “commitments for implementation of the project as stated in the investment license.”

Referring to the statement, Director of Ninh Thuan Planning and Investment Department Pham Dong said the Lion Group, with a 75 percent stake in the project, had difficulty raising sufficient funds, probably because investors are more interested in environment-friendly projects.

Dong added that the local government’s attempt to find a new investor for the project failed as well.

The other partner, Vinashin, is suffering a serious financial crisis. It was reported to have failed in paying back the first US$60 million installment of a US$600 million loan arranged in 2007. Currently, the company is at risk of bankruptcy with its total debt stacking up to over US$4 billion.

Vinashin’s former chairman Pham Thanh Binh was also arrested and accused of violating state economic management regulations. An Agence France Presse report commented that the case will likely impact Vietnam’s global financial reputation negatively.