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NGOs Work for Sustainable Forest Development

Six non-governmental organisations (NGOs) in Vietnam are carrying out four UK-funded projects this year in a joint effort to manage and use forest resources in a sustainable manner, according to the People and Nature Reconciliation (PanNature).

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In Vietnam, unsustainable ‘modernization’ too much for sanitation services

In Vietnam, unsustainable ‘modernization’ too much for sanitation services.

Nhue-RiverA polluted section of the Nhue River in Hanoi’s Ha Dong District. Experts have urged Vietnam to invest more in sanitation services to reduce pollution. Photo by Ha An

Huynh Thanh Long said he and his neighbors close all their doors and windows whenever they are at home but that doesn’t keep the awful stink from the Ba Bo Canal out of the house.

“Pollution often forms a thick layer of foam on the surface of the flowing water,” said the resident of Ho Chi Minh City’s Thu Duc District.

According to the city’s anti-inundation center, pollution in the canal is a combination of wastewater from residential areas and industrial zones upstream.

Pollution in big cities is common in Vietnam, threatening public health and sustainable growth, experts say.

Vietweek recently reported serious pollution in Hanoi’s rivers, the result of untreated wastewater being discharged from series of new urban areas built without  wastewater treatment facilities.

“Over the last 20 years, the government of Vietnam has made considerable progress on the provision of wastewater services in urban areas, investing nearly US$250 million annually in recent years,” said Le Duy Hung, a senior urban specialist in Hanoi.

“However, keeping pace with rapid urbanization is challenging and it is estimated that $8.3 billion will be required to provide wastewater services to Vietnam’s urban population between now and 2025,” Hung, who is also a leading researcher at the World Bank’s Vietnam Urban Wastewater Review, wrote in a report released on January 20.

The report focuses on the specific challenges that Vietnam faces as a result of increasing environmental pollution associated with rapid urbanization. It also evaluates the performance of the wastewater sector in Vietnam.

It found that although 60 percent of households dispose of wastewater through a public sewerage system, much of this goes to the drainage system with only 10 percent of the wastewater treated.

Hung said estimated economic losses resulting from poor sanitation stood at $780 million per year, or 1.3 percent of the country’s GDP.

“Financing needs are still very high, estimated at $8.3 billion for sewerage services to an estimated urban population of 36 million by 2025,” he said.

Industrialization problem

Apart from untreated wastewater from residential areas, pollution also comes from industrial zones, threatening public health and sustainable growth.

Recently, many farmers in HCMC’s Cu Chi District complained that they do not have water for nearly 400 hectares (988 acres) of rice due to pollution in the Thai Cai and An Ha canals.

They accused the SEPZONE – Linh Trung 3 Industrial Zone of discharging untreated wastewater to pollute the canal.

Vietnam’s first industrial parks opened in 1991 as part of the doi moi reform movement, and there are currently more than 189 industrial parks and 878 export processing zones nationwide in 57 of the country’s total 63 cities and provinces.

Vo Thanh Thu of the Vietnam Chamber of Commerce and Industry’s international trade policy advisory committee said that rapid industrialization over the past 20 years had led to a boom in industrial parks and export processing zones.

However, it has also led to serious pollution, leading to conflicts with local residents.

“Only half have established waste treatment plants,” Thu said at a recent seminar on the issue, organized by the People and Nature Reconciliation (PanNature) a Vietnamese non-profit organization.

Thu said that toxic waste is discharged without treatment, causing serious pollution to the environment.

The committee urged the government to review industrial park and export processing zone zoning plans and encouraged agencies to cooperate to improve the monitoring of environment regulations.

Action needed

Researchers estimated that investment levels of at least $250 per person are needed annually in the East Asia region over the next 15 years to manage wastewater and septage that is generated by the urban population.

In another World Bank report, entitled East Asia Pacific Region Urban Sanitation Review: Actions Needed, researchers examine what is holding back the sector and recommend ways to expand and improve urban sanitation services in an inclusive and sustainable way in Vietnam, Indonesia and the Philippines.

The region’s rapid urbanization is an engine of economic growth but poor quality sanitation leads to unsustainable development, with economic losses of 1.3, 1.5 and 2.3 percent of GDP in Vietnam, the Philippines and Indonesia, respectively.

“Worldwide, about 2.5 billion people lack adequate sanitation and 660 million of them live in East Asia and the Pacific Region,” said Charles Feinstein, World Bank sector manager for energy and water.

“Inadequate sanitation takes a tremendous toll on the quality of peoples’ lives, the environment, and the economy,” he said. “But the good news is investments in sanitation yield high returns.”

According to the report, poor sanitation has a significant impact on public health in the region including chronic poor health caused by diarrheal disease and an increased risk of disease epidemics such as cholera.

It calls for developing people-centered policies, promoting cost-effective technical solutions, developing sustainable institutions for quality services and developing viable financial schemes.

Returns on sanitation investments are also high.

Worldwide, every US dollar invested in sanitation yields $5.50 in return in terms of economic benefits.

In East Asia, this rate of return is even higher, with every US dollar spent yielding $8 in return, according to the World Health Organization.

Source: VietWeek

HCM City seminar addresses industrial waste

Pollution caused by industrial parks and export processing zones was addressed at a seminar held in Ho Chi Minh City last week, reports the Vietnam News Service. The seminar was organised by the People and Nature Reconciliation (PanNature) a Vietnamese non-profit organisation and was attended by among others Members of the Viet Nam Chamber of Commerce and Industry’s International Trade Policy Advisory Committee.

drvothanhthuDr. Vo Thanh Thu presenting at the workshop. Photo: PanNature.

Committee member, Dr Vo Thanh Thu, said that rapid industrialisation in the past 20 years had led to a boom in industrial parks and export processing zones. She said that Vietnam has 289 industrial parks and 878 export processing zones.

“Only half have established waste treatment plants,” she says.

Dr Vo Thanh Thu said that toxic waste is discharged without treatment causing serious polution to the environment.

The committee urged the government to review the industrial park and export processing zone zoning plans and agencies to cooperate to improve the monitoring of environment regulations.

Source: The Southeast Asian Times

Pollution originates in legal loopholes

It is the unreasonable legal framework which has made the environment pollution in industrial zones (IZ) and export processing zones more serious.

20131231132900-envir303The barrels of toxic chemicals buried by Nicotex Thanh Thai under the earth.

People complain, competent agencies plug their ears

According to Dr. Vo Thanh Thu from the HCM City Economics University, who conducted a state’s research work on the development of industrial zones in Vietnam, 289 IZs have been licensed, but only 184 have become operational. The IZ investors have been trying to attract investment at any costs, while they do not pay appropriate attention to the environment protection.

It is estimated that the IZs put out 47 million cubic meters of waste water every year, including a high volume of untreated waste water. A report showed that 85 percent of the small-scaled industrial clusters and 75 percent of IZs still don’t have concentrated waste water treatment systems or discharge substandard waste water.

PanNature, or the People and Nature Reconciliation center, which conducted a survey in northern IZs, discovered the serious pollution caused by production factories.

In Tang Loong IZ in Lao Cai province, though the phosphate plant seriously polluted the nearby area, 69 households still have not been relocated. Since the day the factory became operational, local people have suffered the bone-and-joint diseases, while more and more buffalos and cows have died.

Meanwhile, in Phu Tho province, 30 hectares of cultivated land has been left idle because of the black water discharged from the Thuy Van IZ in Phu Tho province day and night.

Bui Manh Hung, a National Assembly’s Deputy from Binh Phuoc province, said the local people many times complained about the bad odors and pollution, but competent agencies affirmed that the indexes were within the safety line.

Especially, local people complained that their houses got cracked due to the mine detonation in the nearby stone exploitation site. However, the competent agencies still affirmed that the vibration was within the allowed level.

Environment-related disputes on the rise

A senior official of the Vinh Long provincial IZ Management Board noted that in many cases, consultancy firms could anticipate the negative impacts the projects will have on the environment, but they did not tell the truth, just because the local authorities showed their strong determination to develop IZ to attract as much investment as possible.

Nguyen Van Hau from the HCM City Bar Association has noted that the higher environment degradation level has led to the sharp increase in the number of the disputes relating to the environment.

The problem is that the waste discharged by industrial factories has affected people’s livelihood. In many cases, local people raised lawsuits against the producers for damages. Vedan, Sonadezi Long Thanh in Dong Nai province and Tung Kuang in Hai Phong City were once the defendants.

Hau stressed that while the pollution is so obvious, which can be seen with naked eyes, competent agencies still deliberately close their eyes.

Hau said local people have sued Nicotex Thanh Thai company which buried the barrels of pesticide under the earth, thus causing the serious land and underground water pollution.

Both the Hanoi and Thanh Hoa provincial Bar Association have agreed to give legal support in the lawsuit, while the Environment and Natural Resources Institute has agreed to take land and water samples for testing.

“We are awaiting the document from the Thanh Hoa provincial people’s committee on the issue. However, things seem to be stuck because of the creepy silence of the local authorities,” Hau said.

Source: VietnamNet

Nation pays heavy price for industrial gains

The excessive number of industrial parks and export processing zones have caused serious environmental pollution in the country, experts said at a seminar held in HCM City last Friday.

Dr Vo Thanh Thu, member of the Viet Nam Chamber of Commerce and Industry’s International Trade Policy Advisory Committee, said that rapid industrialisation in the past 20 years had led to a boom in IPs and export processing zones.

o-nhiemPeople from authorised agencies inspect the Ba Bo Canal, which receives wastewater discharged from HCM City’s Dong An Industrial Park. Industrial parks and export processing zones have caused serious environmental pollution in the country. — VNA/VNS Photo Phuong Vy.

As of last year, the country had 289 IPs, EPZs and hi-tech parks, and 878 industrial clusters.

Thu said the development of IPs and EPZs had contributed to the country’s economic development but those without master zoning plans had low occupancy rates and caused pollution.

“Provinces and cities have raced to set up IPs,” she said, adding that Ha Noi, the country’s administrative centre, was now the largest industrial one, with 19 IPs and EPZs and 40 small IPs and industrial clusters.

However, as of today, only eight out of the 19 IPs have been put into operation.

“In the Cuu Long (Mekong) Delta, 74 IPs are idle, representing a total area of 14,394ha, accounting for 60.2 per cent of the region’s total IP area,” she said.

In addition, up to half of IPs and EPZs have not built waste treatment systems.

Many companies have built such systems but have not used them.

Instead, they directly discharge waste water into the environment, causing serious pollution in local areas and affecting the lives of local residents.

In the past, most localities neglected the issue of environmental protection, as many projects in IPs and EPZs are labour-intensive. Few companies have high-tech equipment.

Workshop attendees also pointed out that laws on IP development contained many loopholes and unreasonable regulations, while penalties were not strong enough.

There is also an overlap in environmental management at IPs, causing difficulties for agencies, said Cao Tien Si, deputy head of the Dong Nai Province Industrial Parks Authority.

Many workshop attendees said that more hi-tech “green” projects were needed at IPs.

They also suggested that the Government and localities review IP zoning plans based on local economic planning, regional development, land use, urban infrastructure and local advantages.

They suggested that agencies work together to improve the monitoring of environmental protection regulations.

The seminar was organised by PanNature (People and Nature Reconciliation), a Vietnamese non-profit organisation established by a group of Vietnamese environmental professionals, in collaboration with other organisations.

By 2015, half of the industrial complexes in Ha Noi will be equipped with collective waste water processing systems, the Ministry of Industry and Trade has said.

Under the VND145 billion (nearly US$7 million) project, which was approved by the city’s People’s Council in the beginning of this month, the systems will be set up in 16 industrial complexes across 14 districts such as Gia Lam, Hoai Duc, Ha Dong, Dong Anh, Thanh Oai, Ninh Hiep, and Thuong Tin during 2014-15.

Of this amount, the Thanh Oai industrial complex in the suburban district of Thanh Oai and the Ninh Hiep industrial complex of the Gia Lam District will receive the highest investment of approximately VND14 billion ($660,000) each, according to Pham Dinh Duong, vice head of the Industrial Complexes Management Board under the Ministry of Industry and Trade.

“Between 40-45 per cent of the project’s total cost will be funded by the State budget while the rest will be paid for by the complex’s investors,” said Duong.

The State budget is to cover works such as waste water collection, construction of waste water reservoirs, operating house of the waste water treatment station and a fence to protect it as well, he added.

Meanwhile, industrial complex investors will cover expenses for installing the equipment, technology and materials to operate the waste water processing systems in compliance with the Ministry of Natural Resources and Environment’s standards.

Ha Noi will conduct measures in order to effectively reduce the industrial pollution in the city by 2015, such as co-operation with relevant departments to increase awareness among the people about the issue as well as involve them further in environment protection.

The project is scheduled to start in the beginning of next month and will hopefully tackle the pollution occurring for years at the industrial complexes, according to Duong.

“After the processing systems are put in place at the industrial complexes, each enterprise is expected to pay VND4,000-8,000 ($0.2-0.4) for every cubic metre of treated waste water,” Duong said.

According to Ha Noi’s statistical data, up to 107 industrial complexes have been built in the city on a total area of 3,200ha. Nevertheless, only seven of them were equipped with collective waste water treatment systems.

Source: Vietnam News

Expert says neglect of duty in mining a form of corruption

The neglect of obligations in protecting the environment in exploiting natural resources can be seen a delicate form of corruption, an expert said at a seminar on Wednesday on transparency initiatives to protect the environment.

Dang Hung Vo, former deputy minister of natural resources and environment, told the meeting that many investors belittle the task of environment protection in their projects, thus doing harm to the environment and the community.

The strategic environment assessment and the environment protection statement required for such projects, especially those in mining, have not properly attended to by project owners, and in many cases, investors prepare such studies only to gain regulatory approval for their projects, Vo said.

The community can hardly get access to information on environment protection from each project, while compensations for the community due to environmental damages have not been properly enforced, he said.

toadam24122013Photo: PanNature.

“The failure to fulfill environment protection obligation in projects to tap natural resources is therefore a form of corruption,” he told the seminar organized by the non-profit organization PanNature in Hanoi.

Do Thanh Bai from Chemistry Society of Vietnam said thousands of licenses had been issued to investors as of may 2013 to tap natural resources nationwide. These include 79 licenses issued by the Ministry of Natural Resources and Environment, 530 licenses issued by other central agencies, and 4,200 licenses granted by provincial governments.

However, between 30% and 40% of mining enterprises do not make periodic reports on their operations as required, he said.

Under prevailing regulations, of all the taxes payable by mining enterprises, 30% is to be paid to the central State Budget, while the remaining 70% is paid to provincial coffers. Information about the payment of such taxes is not transparent, Bai said.

Source: The Saigon Times

Strategic Environmental Assessment for Each River Basin

On November 25, Vietnam River Network (VRN), Center for People and Nature Reconciliation (PanNature, Vietnam Union of Science and Technology) and Centre for Promotion of Integrated Water Resources Management (Ciwarem) sent a recommendation document to the National Assembly (NA) on planning and management of hydropower projects on rivers’ basin.

As assessed by VRN and PanNature, with a dense network of rivers and favorable geological conditions, Vietnam is considered as one of the countries with hydropower potential. For over 20 years, this potential source has been strongly exploited to serve the objectives of socio- economic development of the country. Currently, Vietnam has 268 hydroelectric projects of large, small and medium scale that have gone into operation, contributing 45.17 % of the total power output of the national electricity grid. However, a large area of forestland, agricultural land and other types was permanently acquired by these works. Worse still, hydropower plants alter natural flow of rivers in both flooding season and dry season, which significantly reduces the amount of the downstream sediment.

thuydienHaGiangPhoto: PanNature.

In that context, VRN, PanNature and Ciwarem have recommended the NA and management agencies urgently implement a comprehensive assessment of the operational process of hydropower projects as well as separate projects as ladder works, dam and downstream safety; continue reviewing hydropower development planning, consider delaying construction projects in planning without adequate assessment of the environmental and social costs. It is essential that the government prioritizes strategic environmental assessment of hydropower development plan in each river basin to examine related issues, such as environmental and social impacts; coherence with development planning or other nature conservation plans before shifting to the investment phase.

Source: MONRE

Call for rethink on hydro-power plants

Four non-government organisations (NGOs) have called on the National Assembly for tighter controls on hydro-power plants to prevent loss of lives and widespread damage during storms.

The recommendation was made by the Viet Nam River Network (VRN), People and Nature Reconciliation (PanNature), Centre for Sustainable Development of Water Resources and Adaptation to Climate Change (CEWAREC), and the Centre for Promotion of Integrated Water Resources Management (CIWAREM).

The NGO leaders said that the operation of existing power plants had created severe impacts on residents lives, property – and the environment.

thuydien112013Photo: PanNature.

“We understand the contribution these plants make to the economic development of the nation, but we call for reconsideration on planning future ones and their impacts on rivers and environment in general,” said Lam Thi Thu Suu, VRN’s chief coordinator.

“We also call for more responsible management by Government on sharing water resources and water discharges during the flood season.

“For years, locals in Central region have experienced so much loss, including loss of lives, properties, livelihood and culture,” she said.

In early November, the unannounced discharge of a huge volume of water from Huong Dien and Binh Dien power plants in Thua Thien Hue Province killed three people on their way to school and on work.

Later, continuous water discharges of water from power reservoirs added to the floods caused by heavy rains in Central provinces from Thua Thien Hue to Khanh Hoa. The size of the floods was described as historic. They claimed 43 lives, destroyed concrete bridges and roads, and wiped out thousands of hectares of crops.

The record floods created an emergency situation for thousands of people in the southern Central region and Central Highlands.

At a NA session last week, Prime Minister Nguyen Tan Dung admitted that the management of power plants had been loosely handled and pledged that the National Assembly would tighten up the situation.

The four local NGOs also recommended forcing power plant developers, managers and central and local governments to comply with strict regulations.

They asked for a detailed assessment on the losses caused by power plants so that those affected could be properly compensated and enabled to get on with their lives.

The NGOs recommendation called for environmental-impact assessments for power projects to be carefully implemented by the scientific community before any new work was done.

Source: VietnamNews

Vietnam pushing ahead with nuclear power expansion

Vietnam is more committed than ever to meet its growing energy needs with nuclear power while its energy-hungry neighbors have become more cautious of the energy source after the Fukushima meltdown.

Nuclear plans are set to be on the agenda as Russian President Vladimir Putin visits Vietnam Tuesday. Vietnam is working with Russian utility and energy company Rosatom on its first two-reactor nuclear power station in the south-central province of Ninh Thuan, whose construction has been delayed by three years, from 2014 to 2017.

Workers repair electric grid in HanoiWorkers repair an electric grid in Hanoi. Facing a chronic power shortage, Vietnam has chalked out an ambitious plan to supply at least six percent of its electricity needs from nuclear power by the year 2030. PHOTO: REUTERS

Last month, the US and Vietnam also inked a deal allowing American companies to develop civilian nuclear power here. Japan and South Korea have also exhibited interests in gaining a foothold in an industry that could be worth US$50 billion by 2030, according to US estimates.

Talks about funding the construction of the second nuclear power plant, also in Ninh Thuan, have been underway between Japan and Vietnam. Meanwhile, during her visit to Vietnam last September, South Korean President Park Geun-hye said her country was interested in introducing its nuclear power technology here, adding that a joint study on a project to build a nuclear power plant in Vietnam had been launched, the Wall Street Journal reported.

Facing a chronic power shortage, Vietnam has chalked out an ambitious plan to supply at least six percent of its electricity needs from nuclear power by the year 2030. With the first nuclear plant set to come on-stream in 2020, the country envisages building eight nuclear plants and 13 reactors by 2030.

“I believe nuclear power is a very reliable and economical source of energy,” said Joonhong Ahn, a nuclear professor at the University of California in Berkeley.

“I cannot think of any national energy plan without nuclear power for such a big country with a lot of potential as Vietnam,” he told Vietweek.

If things go as planned, Vietnam will be the first Southeast Asian nation to commission a working nuclear plant, though other neighbors have talked about the idea for years.

Southeast Asia has no working nuclear power plants, but more than half of the countries in the region plan to develop nuclear power as a solution to looming energy shortages. Indonesia, Singapore, Thailand, Malaysia, and the Philippines are also looking to build nuclear plants or start up non-operational ones in the next few decades.

But after Japan’s Fukushima nuclear meltdown in March 2011, the world’s worst nuclear disaster in 25 years, some officials and activists in the Southeast Asian region are asking that the pursuit of nuclear power be rethought.

“Among the ASEAN countries, it appears that Vietnam possesses the most concrete plans for developing nuclear power, including both a definite timeframe for the construction of nuclear plants and business deals concluded with Russia,” Kevin Punzalan, a researcher at De La Salle-College of St. Benilde in the Philippines who has surveyed plans for nuclear energy development across Southeast Asia, told Vietweek.

In contrast, Malaysia and Indonesia have set “target dates” for the construction of plants that have not been backed up by more detailed plans. The Philippines has the Bataan NPP, but no government has been willing to rehabilitate it for operation, especially after Fukushima.

“Vietnam will prioritize nuclear power development” to address its power crunch, Deputy Prime Minister Hoang Trung Hai said at a Vietnam-Russia business forum last month.

With countries trying to limit greenhouse gas emissions from coal and other fossil-fuel based power plants, and questions over nuclear power, energy-hungry Vietnam, with a population of 90 million, is following its own energy path.

The country generates 40 percent of its power from hydropower plants. Oil and gas reserves deliver 31 percent of energy, but crude oil output has peaked. Under a government blueprint, coal is projected to cover over 56 percent of all electricity production capacities in Vietnam by 2030, making the country an important coal importer.

But that is not a good thing.

“Coal is producing high levels of emissions and it is also polluting in other senses, whereas mining is causing destruction of landscapes, biodiversity and is causing health problems in itself,” said Koos Neefjes, the policy advisor on climate change for the United Nations Development Program (UNDP) in Vietnam.

“Coal is cheap, comparatively, even imported coal. But in all cases coal poses an enormous logistical challenge [with] huge ships, harbors required,” Neefjes said.

Although the government has enacted a green growth strategy, experts say other renewable resources — such as wind, solar and biofuels — have not been given priority.

“Vietnam has still not paid enough attention to energy efficiency,” said Trinh Le Nguyen, executive director of People and Nature Reconciliation, one of Vietnam’s few locally based conservation groups. “Nuclear, hydropower, and coal will remain the main sources of energy of Vietnam,” he said.

“Perhaps Vietnam won’t plan to invest much in renewable resources itself.”

Source: VietWeek

Foreign pressure forces Vietnam house to shelve hike in mineral royalties

Mining companies worry that digging up Vietnam will no longer be as profitable.

In an unprecedented move, three foreign embassies have jointly urged Vietnam’s legislature not to approve a government proposal to increase royalties on minerals mined in the country out of fear it would hurt companies’ profits.

Gold bars are counted before given to a customer at a gold shop in HanoiGold bars are counted before given to a customer at a gold shop in Hanoi. Vietnam’s legislature has put off the hike in royalty rates on gold to 17 percent from the current 15 percent after three foreign embassies said it would hurt companies’ profits. PHOTO: REUTERS

According to a joint letter read out aloud at a meeting of the National Assembly’s Standing Committee on October 12, the embassies of Canada, Australia, and New Zealand said the proposed hikes in mining royalties will affect the investment climate in Vietnam and the country’s ongoing negotiations on the Trans-Pacific Partnership, an ambitious US-led free trade agreement.

The national legislature yielded to the pressure, shelving the planned increases and asking the Ministry of Finance, which put forth the proposal, to reconsider them.

At the October 12 meeting, house leaders expressed concerns that the hike in royalty rates on gold to 17 percent from the current 15 percent would have a bearing on foreign investment. The house returned the proposal, which also sought to increase the royalty rates on other key minerals, to the Ministry of Finance for “further consideration”.

“We need to tread very carefully on this issue,” house speaker Nguyen Sinh Hung said at the meeting.

The ball now is in the court of Prime Minister Nguyen Tan Dung, who will review the issue and consult with the National Assembly. His say on the matter will likely sway the legislature to vote one way or the other.

Royalty payment is a unique feature of the extractive industries. It is not tax paid on profits earned from minerals but the price that mining companies must pay for the minerals if they want to take them out of the ground.

This was the second time in three months the nation’s legislative body had deferred voting on the hikes in mineral royalties.

In August, it also rejected a government proposal to increase the royalty rate on gold to 22 percent. The Ministry of Finance then adjusted the rate to 17 percent but still, a number of businesses, foreign trade associations and embassies have vehemently objected to it.

The three embassies declined to reveal the full content of the letter when contacted by Vietweek, but their position appeared to be in line with a letter sent last July to the ministries of Finance and Planning and Investment by the Vietnam Business Forum, a consortium of international and local business associations and chambers of commerce.

“The existing mining legislation in Vietnam and the fiscal regime to which miners are subject already causes foreign investors to rank Vietnam as one of the worst places in the world in which to invest in the industry,” the letter said.

“These proposed royalties will not improve investors’ perception and provide further evidence that investors cannot trust the Vietnamese government to maintain a stable fiscal regime once they have committed investment to projects,” it said.

Canary in the hole?

Foreign gold producers have welcomed the decision to put off the royalty hikes.

“We… see it as a positive step for the growth of a sustainable mining industry in Vietnam and a positive signal to foreign investors,” David Seton, Chairman of Besra Gold Inc, told Vietweek. The company runs the Bong Mieu and Phuoc Son mines in central Vietnam.

But Vietnam is not the only country thinking about increasing mining royalties this time. Elsewhere in the world, Canada’s Quebec, Western Australia, and India also have plans to do so.

A study in India indicates that miners have been making “substantial profits” and recommends increases in royalties of key minerals.

Do Hoang Anh Tuan, deputy minister of finance, said the proposed hikes in mining royalties would ensure gold producers reap “reasonable benefits.”

The ministry has defended the move by saying it would help deter the already dire hemorrhage of natural resources in the country.

Geologists believe that Vietnam has substantial reserves of minerals such as iron ore, coal, copper, bauxite, gold and zinc.

In the past, foreign mining companies operating in Vietnam have warned that they would pull out investment and go elsewhere in the region because of the government’s tinkering with the tax and royalty regime.

“By way of comparison, we have a major project in East Malaysia in which we will be investing over the next three years. There we have a 0 percent royalty and half the corporate income tax rates of Vietnam,” Seton said.

Experts say it is no surprise that companies and their embassies are so resentful against such increase in mining royalties.

“The reaction from companies and mining lobby groups is the same, including threats to close mines,” said Trinh Le Nguyen, executive director of People and Nature Reconciliation, one of Vietnam’s few locally based conservation groups.

“Nevertheless, if the government of Vietnam plans to hike the royalties, they should keep in mind the principle of ‘no surprise’ to consult the industry carefully,” Nguyen said.

Gold producers blame their dissatisfaction on Vietnam’s knee-jerk tax regime and often threaten to pull out of the country. They say the government has in the past signed 25-year contracts with companies only to “unilaterally change” the contracts every ten years or so to hike royalties.

But experts say the most recent proposed royalty increases are still within the framework defined by the 2009 Law on Royalties, which “companies are obviously well aware for their business plan development,” Nguyen said.

Vietnam will slash corporate income tax to 22 percent from the current 25 percent from January 1 next year. The country plans to bring it down further to 20 percent in the 2016-2020 period.

At the end of the day, in the case of economic downturn, the mining industry and the government can negotiate tax cuts or other measures, experts say.

“But again, the industry should not lump royalties with taxes,” Nguyen said.

Source: VietWeek

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