A view of the construction site of the Nhan Co plant, Vietnam's second bauxite processing plant
Rejecting pressure to halt its construction of Vietnam's second bauxite plant, state-owned group Vinacomin could only cite the project's tax exempt status as to why it would prove effective.
On May 16 spokesman for the mining group Nguyen Tien Chinh said the group had made "detailed" calculations for the next 30 years and had determined that the Nhan Co plant expected to open next year, would be "effective."
Vinacomin said the same thing regarding its Tan Rai plant, which is currently undergoing a trial period and is expected to be fully operational by later this year. The two projects are both located in Vietnam's Central Highlands.
Chinh admitted that each project has seen a 30 percent increase in costs, citing hikes in the foreign exchange rate as the main and "objective" reason.
The government has promised to impose no tariffs on refined bauxite produced by Vinacomin, he said. Export tariffs on refined bauxite, used to produce aluminum, would normally be between 15-40 percent.
But economists said that projects that can only profit due to tax exemptions are ineffective by definition. They also pointed out the unfairness of the policy that favors Vinacomin.
With every ton of refined bauxite exempted from export duties of $47.4, the state budget would lose some $60 million annually, Nguyen Thanh Son, chairman of Vinacomin's Red River Coal Project management board, said.
Vinacomin expects the Nhan Co project to incur an estimated loss of over VND1 trillion in the first five years of operations due to economic stagnation, and then estimate it will earn VND15.2 trillion in profits over the next six to seven years.
Thus the plant would have to make an annual profit of roughly VND2.3 trillion ($109.9 million) during the period.
Son told Tuoi Tre that would constitute a "rare" level of earnings for the bauxite processing industry.
He said the two projects cost a total of VND30 trillion ($1.43 billion), but will only create some 1,500 jobs compared to the population of six million people in the Central Highlands.
Some million locals could be employed if the same amount of money went toward the development of industrial plants, Son estimated.
In February the government canceled Vinacomin's plans to construct the Ke Ga Port, which had been expected to be Vietnam's main port from which refined bauxite would be exported, raising doubts about the plants' potential effectiveness.
The government ordered Vinacomin not to begin building the port in Binh Thuan Province as the latter had failed to implement the project five years after conception.
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