Industry insiders fear that a new export tax may drive foreign investors away from Vietnam's gold production sector, which could send the industry reeling back into amateur speculation.
On January 1, the Finance Ministry levied a new 10 percent export tax on unrefined gold.
The director of one gold mining company in the central province of Quang Nam told Thanh Nien that the new tax could force foreign investors to abandon gold production in Vietnam for more lucrative business.
Without investment, he said, the local gold sector could regress to its previous state "” when the country lacked modern production facilities and illegal miners ran rampant.
The tax should have started small and gradually risen to make sure investors had enough time to recoup their huge outlays on production facilities, the director said.
Canadian gold miner Olympus Pacific Minerals Inc., Vietnam's primary foreign gold explorer, announced last December that it would delay plans to invest US$100 million in Vietnam. The firm cited the new 10 percent tax as the inspiration for its delay.
The company now plans to invest $25 million this year, saying that it will "cautiously" revive plans to expand its mining operations here, based on hopes that it can refine gold locally to ensure that it will eschew the new export tax.
"We're more prepared now than we were before to go ahead with our investment plans, but rather than go full speed ahead we'll go step by step," Olympus Pacific Chief Executive David Seton told Bloomberg last week.
The investment should increase annual production from about 45,000 ounces to about 75,000, he said.
Industry insiders have closely followed Olympus Pacific's plan. The firm has long been referred to as a "test case" for the role that foreign companies can play in Vietnam's mining industry.
The company, which began mining in Vietnam in 2005, is a rare success story. Bloomberg said it was the first Western miner to operate in the country since a series of failed attempts in the 1990s.
Nguyen Van Thuan, director of the Department of Geology and Minerals, confirmed that Olympus Pacific is now the only foreign gold miner in Vietnam, apart from another foreign firm engaged in exploration in the northern province of Lai Chau.
Thuan said that many foreign companies came to look into opportunities in Vietnam's gold sector but "they left as quickly as they came."
Geologists have estimated that Vietnam is sitting on top of some 1,000-3,000 tons of gold. Many mining sites exist throughout the country, from Quang Nam and Thanh Hoa in the central region to Cao Bang, Bac Kan and Hoa Binh in the north.
The gold sector has been open to foreign investors since the country joined the World Trade Organization in 2007. However, since then, few foreign firms have thrown their hat into the ring.
Thuan said tax policies, poor infrastructure, and a dearth of skilled workers have hindered foreign investment in the sector, in addition to Vietnam's complicated administrative procedures.
He also noted that the country has yet to produce a truly scientific estimate of its gold reserves. However, as mineral research and exploration can be quite exorbitant, an official assessment does not yet appear to be on the horizon, he noted.