Taiwanese-invested Guang Lian Steel Vietnam is seeking approval to raise the design capacity of its multibillion dollar steel project, but an industry official said the move is only a ploy to stall for more time.
Construction of the Dung Quat Steel Plant was scheduled to start in March 2008. However, the project in the central province of Quang Ngai has since been put on hold due to financial problems.
In an unexpected move, Guang Lian Steel recently asked the authorities for permission to expand the project, increasing its annual capacity to seven million tons from the previous five million and raising the cost estimate from US$3 billion to $4.1 billion.
According to the steel producer, the capacity increase is necessary so that the plant can have a "better chance of competing with other megaprojects in the country."
But Pham Chi Cuong, chairman of the Vietnam Steel Association, doubted that was the real motive, saying the investor only wanted more time.
"We have just found out that the works so far only accounted for around $20 million, which is too small compared with the total cost of $3 billion, not to mention the recently revised estimate (of $4.1 billion)," Cuong said in a report published by the Vietnam Investment Review on Monday.
By expanding the project, the investor will not have to start it any time soon as site clear-ance will take a lot of time, he said.
Deputy Director of the Dung Quat Economic Zone Authority, Le Van Dung, was quoted in the report as saying that the steel company had difficulties in finding capital.
It had secured loans from banks in the US and Europe but after the crisis the loans became hard to obtain, he said.
Cuong said his association had asked the government to revoke the licenses of large foreign invested steel projects that have been delayed for a long time due to financial problems.
Steel projects require huge land areas and opportunities should be given to more capable investors, he said.