While trade officials and steel producers argue over the effect of lifting duties on Russian steel imports; investors worry the local industry is as good as dead.
Ministry of Trade officials are engaged in the seventh round of talks on a pending free trade agreement with the Russia-Belarus-Kazakhstan Customs Union between September 15 and 19.
Among other things, the union would eliminate taxes on some 170 Russian steel and iron products starting in 2015.
Domestic steel investors say they won’t survive once the world’s leading steel producer is let loose on the local market.
An executive from the country’s biggest steel producer, Hoa Phat, estimated that 70 percent of Vietnam's steel businesses “will be dead in a year” and others will follow soon.
Last Friday, the ministry's European Market Department issued a statement saying such worries are groundless.
The Customs Union can offer many kinds of products Vietnamese businesses aren't producing and will have to compete with other foreign providers in Vietnam, the statement noted.
Vietnam and the union came up with terms to ensure mutual benefits, it said, adding that taxes on “sensitive” products will be cut gradually instead of reduced to zero all at once.
According to the department, Russia's steel and iron plants are concentrated in its central region and in the long haul Vietnam will leave them less competitive than domestic products.
“Thus, all concerns about the steel industry going bankrupt when the deal is signed are completely groundless,” it said.
Insiders have growled back.
In a response issued Sunday, the association said that the distance from the Russian plants to Vietnam is roughly the same as from South Korea and China.
As such, removing the existing duties will make Russian steel stand out.
Shipment from Vladivostok port to Vietnam takes 12 to 15 days, roughly the same amount of time and money it costs to ship steel here from Chinese plants, it said.
Chinese products are already weighing heavily on the sale of local products.
Pham Chi Cuong, former chairman of the Vietnam Steel Association, also told Thoi Bao Kinh Te Saigon Online that he didn't buy the argument that the distance is a disadvantage to Russian steel.
Cuong pointed to the fact that for many years, steel and billet products from Russia have been sold in Vietnam at such a low price that some Ho Chi Minh City businesses can actually profit by reselling them.
Th association’s statement also said there won’t be mutual benefits when a young and weak industry is set to compete with the world’s fifth largest steel producer in volume - -one that already occupies 8.1 percent of the Asian steel market.
“It’s too soon,” he said.
The association objected to the elimination of duties in a statement sent to the ministry on August 27, which asked for a five to ten year grace period for the elimination of duties on 41 products.
Russian products in Vietnam already enjoy Most Favored Nation Treatment -- which limits taxes to between 7-15 percent.
The taxes are allegedly the only thing keeping Russian steel investors from rushing into Vietnam, the association said.
A member of the association said they are not seeking protectionism, but the chance to prepare for reasonable competition.