HT reported that TATA Steel's plan for a USD 5 billion integrated steel plant in Vietnam is coming apart because of stiff competition from a Taiwan based firm Formosa Plastics and unhelpful local Vietnamese authorities.
Particularly, galling for the TATAs is that the Vietnamese have repeatedly overturned signed agreements for the site of the 4.5 million tonne capacity steel plant. A recent notice for land evacuation may bring the entire project to an end. TATA Steel signed a memorandum of understanding with the Vietnam Steel Corporation in 2007 for a steel plant that would tap the Thach Khe iron ore deposits. TATA Steel worked out technical means to commercially process the iron ore, unviable because of its high zinc content, and built a pilot plant to test the process.
The two sides converted the MoU into definitive legal JV agreements in August 2008. TATA Steel was assigned 60% of the JV's equity. But the Vung Ang Economic Zone authorities unilaterally transferred the land assigned to the plant to another investor Formosa Plastics in 2008. After more negotiations, the VAEZ offered a smaller area in February 2009 as an alternative. In July 2010, the VAEZ then retracted this commitment as well. After another site was offered in October and TATA accepted, the JV partners resubmitted their application for an investment license in December 2009.
Though the Vietnam Ministry of Industry and Trade and other central ministries gave their approval, the VAEZ began raising objections. Most of these, say TATA sources, are frivolous and often in violation of Vietnam’s own laws. VAEZ has now said it will revoke TATA Steel’s land certificates by the end of this month.
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