Russian FTA could kill Vietnam's steel market

By Manh Quan, Thanh Nien News

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Vietnamese investors are seeing a near end of their business as Vietnam considers letting the global steel giant Russia sell its products here without tariffs. Photo: Hung Nguyen Vietnamese investors are seeing a near end of their business as Vietnam considers letting the global steel giant Russia sell its products here without tariffs. Photo: Hung Nguyen

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Domestic steel investors anticipate industry-wide bankruptcy as the government prepares to lift export tariffs on over a hundred products from Russia, the world’s leading steel producer.
Between September 15 and 19, Vietnamese officials will engage in their seventh round of talks on a pending free trade agreement with the Russia-Belarus-Kazakhstan Customs Union.
An executive from the Hoa Phat Group, Vietnam’s biggest steel producer by market value, said the Ministry of Finance is preparing to eliminate taxes for Russian steel and iron products.
“If the agreement includes that point, I’m sure 70 percent of Vietnamese steel businesses will die in a year,” the businessman said, asking not to be named.
“We will try, but only to die last, since it’s impossible to compete with an industry as grand and powerful as Russian steel.”
'Extremely awful competition' and bankruptcy
Chu Duc Khai, general secretary of the Vietnam Steel Association, said Vietnamese construction steel will suffer “extremely awful competition.”
Khai said Russia was the world’s fifth largest raw steel producer in 2013 and produced 68.7 million tons--23.6 million of which went abroad. 
He believes Russia will have a much bigger impact on Vietnam's market than Chinese steel, which is already causing problems for domestic firms due to preferential taxes of 5-10 percent.
Vietnamese factories produce 5.6 million tons of raw steel a year.
“Local steel producers will face bankruptcy when the agreement is signed,” Khai said.
He said his association has suggested the Ministries of Finance and of Industry and Trade reconsider the tax by, for example, reducing it to zero in ten years according to the country’s World Trade Organization commitment.
Immediate tax clearance will be harsh and eliminate the young steel industry at home, he said.
Five-year delay at most
A Vietnamese official from the negotiation group said they are aware of the losses the anticipated bankruptcies could bring--nearly VND10 trillion in annual taxes and hundreds of thousands of jobs.
Russia named 167 steel products it wanted Vietnam to eliminate export taxes on immediately, but the Vietnam Steel Association has asked for a ten-year gradual easing for 41 of them.
“A ten year road map is too long and can hardly win Vietnam a deal, but five years is possible,” the negotiator said.
The official also said that by opening the steel market, Vietnam can boost exports from other sectors such as agricultural products and garments.

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