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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

Vietnam’s response to climate change reinforce

Climate change would trigger harsher weather extremes in Vietnam in the coming time as it has in the past 50 years caused sea level in the country rising by 20 cm and average temperature up 0.5 degree Celsius.

At a seminar to review a project on national response capacity to climate change in Hanoi on September 20, Deputy Minister of Environment and Natural Resources Tran Hong Ha reasserted that Vietnam is one of the countries hardest affected by climate change, especially sea level rise.

The adoption of a resolution, a target programme, a strategy and a plan of action at national scale together with action plans issued by ministries, sectors and localities showed how serious Vietnam is in tackling climate change, the Government official said.

Head of the Hydrometeorology and Environment Institute Tran Thuc said the project’s four-year operation has contributed sizably to the building of the national strategy, the national target programme and the action plan in response to climate change.

The project, which also involved in how to reduce vulnerability and control green house gas emissions, has helped build up documents and technical guidelines to support activities to cope with climate change in Vietnam, Thuc added.

UNDP representative Bakhodir Burkhavov said the project worked to strengthen the policy-building capacity and scientific research on climate change as well as raising awareness and training human resources for the issue.

The same day, a discussion on how concerned parties can involve in appraising environmental impacts took place in Hanoi.

Participants voiced that an important step to verify environmental impact appraisal outcome that is to consult the community at the project site is seemingly neglected.

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Photo: PanNature.

As such consultation is not yet legalised, the role and participation of local people and social organisations have not been paid due attention, the participants observed.

The consultation and information publicity regarding environmental impact appraisal has been regulated in the revised Law on Environmental Protection since 2005. However, shortcomings in implementing the activity remained.

The event was jointly held by the People and Nature Reconciliation (PanNature), the Asia Foundation and the Vietnam Forum of Environmental Journalists (VFEJ).

Source: VietnamPlus

Environment law lifts green ethos

Deputy Minister for Natural Resources and Environment Bui Cach Tuyen has urged that environmental planning must be part of the country’s plans for socio-economic development.

Speaking at a conference earlier this month on a revision to the Law of Environmental Protection (2005), the Minister said the focus would create a better foundation for the implementation of environmental protection measures.

“This is a key measure to better the legal framework for environmental protection,” he said.

02-moi-truongTonnes of litter left on the Tan Hoa – Lo Gom canal through Hoa Binh Street in HCM CIty’s Tan Phu District. Environmental planning must be part of the country’s plans for socio-economic. — VNA/VNS Photo Hoang Hai

In an effort to encourage greater commitment to environmental protection, the deputy minister stressed the need for strategic environment assessment (SEA) and environmental impact assessment (EIA) for major project.

Tuyen also said the responsibilities of households, producers and service providers in trade villages and local authorities would be clarified.

Vice Chairman of the National Assembly Committee for Sciences, Technology and Environment Vo Tuan Nhan said current regulations on environmental protection struggled with overlapping management, a lack of co-ordination between relevant agencies and increasing environmental violations.

He expected that the revision of the 8-year-old law on Environmental Protection, including measures such as SEA and EIA, would address the limitations.

Deputy President of the Viet Nam Association for Environment and Nature Protection Pham Ngoc Dang agreed that preventative measures constituted an important factor in protecting the environment.

However, Dang expressed concerns that current environmental impact assessments seemed to provide few suggestions for enhancing proposed projects, even though there was a visible impact on the local environment.

Warning against the long-term serious consequences, Dang said most environmental-impact reports were used to complete procedures facilitating the implementation of projects.

However, participants at the conference showed concern that environmental impact assessments (EIA) would unfairly focus on the direct negative effects on the natural environment, urging a more comprehensive assessment of social and developmental gains.

Tran Hoang Phuong from PanNature, a Vietnamese conservation organization, said that the EIA should be developed in line with its project investment initiative.

She added that it was necessary to improve capacity to evaluate EIA and encourage the engagement of the public and local authorities in deciding to develop projects.

Regulations on social impacts including effects on local resident livelihood, transparency of public information and monitoring also needed to be added to the revision, Phuong said.

According to the Environmental Police Department under the Ministry of Public Security, nearly 25,000 environmental violations were detected across the country in the last three years, of which, 350 violations were prosecuted and fined nearly VND200 billion (US$9.5 million).

About 60 per cent of waste water in industrial zones go untreated before being discharged into the environment, including the Dong Nai River in the south and Cau, Nhue and Day rivers in the north.

About 70 per cent of factories located along these rivers do not take measures for environmental protection and waste water treatment systems.

All trade villages were found to violate environmental regulations, including the need for waste treatment systems.

Source: Vietnam News

Consensus – key to protect lower Mekong River

As a nation in the lower Mekong River basin, Vietnam potentially bears serious impacts from programmes and development projects deployed on the mainstream of the upper river, and therefore needs to put forward solutions to deal with different development scenarios.

Vietnam’s territory accounts for eight percent of the basin’s total area and 11 percent of its total water volume.

The territory, which is home to 20 million Vietnamese people, includes the source of Nam Ron River in northern Dien Bien province, the upper Se Kong and Se Ba Hieng Rivers, the Se San and Srepok River basins, and the Mekong River Delta.

Development in the Mekong River’s upper area will have environmental and social impacts on the lower Mekong River.

Under the Strategic Environmental Assessment of Hydropower on the Mekong Mainstream conducted by the International Centre for Environmental Management (ICEM), Vietnam may suffer greater economic losses if a dam system is constructed on the mainstream.

Xayaburi-photo

The Mekong River in Laos. Photo: PanNature.

The construction would result in a reduction in the river’s water volume in the dry season, which combined with climate change impacts and rising sea water levels will lead to increased sea-water intrusion and affect the Mekong River Delta’s agriculture and aquaculture sectors.

It will also reduce the amount of silt from 26 to seven million tonnes per year to seven million tonnes annually, while the delta’s aquatic sector will see an annual estimated loss between 500 million and one billion USD.

According to Tran Thi Thanh Thuy from People and Nature Reconciliation (PanNature) – a non-governmental organisation dedicated to protecting the environment, Vietnam may execute solutions to deal with the losses by stepping up cooperation through the Mekong River Commission.

The Agreement on the Cooperation for Sustainable Development of the Mekong River Basin has been the best cooperation framework to exchange, negotiate and seek consensus on issues relating to the basin’s development.

The Vietnam National Mekong Committee needs to improve its organising capacity, implement programmes and projects to survey impacts, and seek out solutions to support Government policymaking and cooperation with other countries in the region.

Vietnam needs to create consensus in the ASEAN community on the orientations of the basin’s development, she added.

It should also encourage social organisations and non-governmental organisations to enhance national and regional cooperation and dialogues so as to create social support and consensus to protect local people in the basin and Vietnam in particular.

The country must cooperate with sponsors and partners from Laos and Cambodia to seek optimal and sustainable development solutions that are in line with each country.

With its experience in economic growth and poverty reduction, Vietnam could help neighbouring countries apply the development models effectively, and avoid any negative impacts that may emerge in the process of development.

The efficient implementation of programmes, investment projects and development aid is another critical solution. As investors, Vietnamese enterprises need to study and apply international standards to their projects deployed in neigbouring countries to minimise environmental and social consequences.

Vietnam’s ways to rationally deal with the issues depends on each development scenario. However, the most crucial factor is still a consensus on development cooperation between relevant countries to protect the lower Mekong River, Thuy stressed.

Source: VietnamPlus

Conservation hell Vietnam pulls plug on park’s UNESCO recognition

In what was apparently a face-saving move, Vietnam opted to withdraw its nomination of a major national park for UNESCO heritage status two days ahead of an annual session that opened June 16 in Cambodia.

But even if Vietnam had gone ahead with nominating the Cat Tien National Park, the United Nations Educational, Scientific, and Cultural Organization would have probably rejected it following a recommendation to the effect by the International Union for Conservation of Nature (IUCN).

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Incentives key to forest protection

Like many farmers living near the Ngoc Son-Ngo Luong Nature Reserve, Bui Van Benh of the Muong ethic group used to go into the forest to collect timber when he wanted to build a new house.

“We rely on the forests not only for timber but also firewood, foodstuff, medicine… everything,” he said.

The reserve, situated to the southwest of Ha Noi, is surrounded by a community of 12,300 Muong people. The group has a long tradition of living in stilt houses made of sturdy wooden beams and walls. It is estimated that to build such a house, it takes from 15 to 20 cubic metres of timber.

There was a period not so long ago when dozens of houses sprang up each year, creating remarkable pressure on the reserve’s forestry resources. Even though it was illegal to harvest timber inside the reverse, local residents still managed to obtain timber to build houses.

The situation was made worse as better roads enabled illegal logging and trade to flourish.

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Mr. Nguyen Viet Dung of PanNature opens the workshop “Co-management of Special-use Forests in Vietnam: Pratices and Policy Implications” organized in Hoa Binh in May 24th. Photo: PanNature.

“Logging became a common occurrence, despite our round-the-clock patrol efforts,” recalled Bui Binh Yen, a member of the reserve’s management board.

He said locals turned to logging because they had no alternative. The main source of income for them was from agriculture. However, the rice yields were low due to the limestone soil, and after the reserve was established in 2005, the natural forests belonged to the reserve and was not open for exploitation.

“This created even more drive for them to exploit the forests,” he said.

A survey made by PanNature, a local nature conservation NGO, pointed out that after the establishment of the reserve, the majority of local residents understood that the forests were no longer theirs, so they had no responsibility to protect them. That was the business of forest rangers and local authorities.

In 2010, faced with increasing threats on forestry resources, the reserve’s management put in place a new mechanism which emphasised the role of the local community in forest protection.

cm-workshop-02

The recent workshop discussed multi-facetted aspects around co-management of protected areas. Photo: PanNature.

“The local community was urged to get involved in the process along with other stakeholders. We discussed and came up with an agreement on the responsibilities of protecting the forests,” Yen said.

A radical element of this agreement was that the community would be granted a number of benefits if they could deliver their commitment.

For example, they would receive allowances for patrolling the forests, and allocated some of the land to cultivate. They would also be given preferential policies such as access to loans, training and developing social infrastructure.

Locals would be also instructed to use forest resources in a sustainable way.

When the agreement was signed, it created a major shift in the attitude towards forests among locals. They went on patrols with forest rangers on a monthly basis. During these patrols, they helped detect hundreds of violation cases and confiscated timber.

Yen said: “The results are very encouraging. Members of the community who signed the agreement have stopped logging and poaching.”

Viet Nam National Parks and Protected Areas Association Secretary General Le Van Lanh said engaging different stakeholders to take part in protecting forests was a promising approach because it included both the responsibilities and rights of those involved.

However, Nguyen Viet Dung from PanNature said the adoption of such an approach was limited because it did not have sufficient legal support. But a number of new legal documents have been an encouraging move because they paved the way to expanding the success story at Ngoc Son-Ngo Luong Nature Reserve.

As farmer Benh put it: “If we can make a living out of the forests, I see no reason why we won’t protect them.”

Source: VietnamNews

Yesterday mining tells on Vietnam today

The report which has been released by the environment organization PanNature showed how Vietnam has to pay the penalty for the natural mineral exploitation, hailed as a key industry which creates more jobs, enriches the local budgets and helps eliminate hunger and reduce poverty.

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Second Mekong Resources Forum opens

The second Mekong Resources Forum on investment cooperation and the sustainable development of the Greater Mekong Sub-Region (GMS) – was held in the northern province of Vinh Phuc on May 10, 2013.

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Central coastal areas turn topsy-turvy with mineral exploitation

20130327095623-dThe whole land strip in the central region, which is believed to possess big tourism potentials with beautiful beaches, has been damaged by the mineral exploitation activities.

For the last many years, central region’s people have been nourishing the dream of getting rich from titanium exploitation.

Titanium is a very important material in the aviation and cosmology industry. Titanium and its products have become more and more expensive in the last 10 years.

The titanium dream

According to Truong Duc Chinh from the Vietnam Coal and Mineral Industry Group (Vinacomin), Vietnam ranks the 11th in the world in terms of titanium reserves. Of the 14 million tons worth of titanium reserves, 9 million tons are believed to be situated in the coastal areas from Quang Ninh to Ba Ria – Vung Tau, mostly in Ha Tinh.

The latest report of the Vietnam General Department of Geology and Minerals showed that a huge titanium source in the red sand layer, estimated at 200 million tons of heavy minerals, has been found in the south of the central region, from Ninh Thuan to Ba Ria – Vung Tau province.

The latest optimistic estimates say the reserves could be 650 million tons, a huge number if noting that the total titanium reserves all over the world are just 1,400 million tons.

The figures have made people hope that Vietnam would become a “titanium power.”

However, Pham Quang Tu, MA, Deputy Head of CODE, a development consultancy institute, stressed that the figure was just the predicted reserves, while it does not mean the figure Vietnam can exploit and sell for money.

“One must not entertain the illusion about the huge titanium reserves. It may happen that Vietnam can only exploit titanium in the areas with easy exploitation conditions, while the remaining would still be in earth’s crust forever, or they would be exploited, but have no economic value,” Tu said.

Hurrying to exploit titanium for sale for money

CODE and PanNature, which once conducted a survey in Binh Dinh province, the locality with the largest-scale titanium exploitation on the black sand layer, met a Chinese language interpreter, who did the marketing for a Chinese enterprise specializing in collecting titanium to export to China.

The interpreter said that the Chinese enterprise would buy all the titanium to be offered to it.

The years 2008-2009 were the highest peak time of titanium exploitation. At that time, 800,000 tons of titanium was exploited every year in Binh Dinh. The figure did not count on the illegally exploited titanium, which was not shown on the report. The figure 800,000 tons was much higher than the amount of titanium the Prime Minister allowed to exploit every year.

The Binh Dinh provincial authorities granted 36 licenses to enterprises, allowing to exploit titanium on an area of 656 hectares. Meanwhile, the Ministry of Natural Resources and the Environment granted 7 licenses.

On March 19, 2013, the People’s Committee of Ninh Thuan, the neighboring province of Binh Dinh, granted a license to Vinaminco Ninh Thuan, allowing the enterprise to exploit titanium on the area of 1,200 hectares in Thuan Nam district.

On the central beaches, titanium exploitation sites have mushroomed. It’s too easy to get titanium from the black sand layer. According to Dr Dang Trung Thuan, in Binh Dinh province, ore can be found just several meters beneath the sand layer.

The large-scale uncontrollable titanium exploitation has damaged a lot of beaches in the central region.

Source: VietNamNet Bridge

Improving the economic efficiency of the mining industry

On March 20, 2013, in Binh Dinh, the People’s Committee of Binh Dinh, People and Nature Reconciliation (PanNature) and Consultancy on Development Institute (CODE) have jointly organized the workshop on “Revenue management measures and improvement of the economic efficiency of the mining industry.” This is an opportunity for managers and experts to share experiences and methods for management of revenues from mineral resources in the world, discuss the cooperation to develop a revenue management model for mining activities in Binh Dinh, and propose policies for better governance of mineral resources at the national level.

titanium-miningTitanium mining in Binh Dinh.

It is known that Binh Dinh has abundant mineral resources. To date, the province has identified 24 kinds of mineral with 154 mines. The minerals with potential, both in terms of volume and quality, are titanium, building stone and hot mineral water. Each year, the revenues from resource and environmental charges of Binh Dinh are up to hundreds of billions of VND. However, a recent study of the Consultancy on Development Institute (CODE) has pointed out a number of shortcomings, in economic efficiency and revenue management, in mining activities in Binh Dinh that need to be addressed.

Source: MONRE

People and Nature Reconciliation | Office: 24 H2, Khu do thi moi Yen Hoa
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