Is there any reason – or reasons – why information on Vietnamese mining is so patchy? Is it improving?
There is little press reports, news, or other kind of medium about the mining industry in Vietnam. One can find the most information in the general reports on the performance of industrial and trade industries issued by the Ministry of Industry and Trade (MOIT) (i.e. these reports are not produced for mining industry specifically), which are updated either monthly, annually or in a 5-year period.
For your information, below is an excerpt from the report of MOIT on the coal industry:
“Coal industry has basically completed the general goal of building, becoming an important economic – technical branch, synchronous from the stage of exploration, exploitation, transportation, processing and product consumption; basically completed the planned goals and plans. Domestic produced coal is mainly balanced for domestic economic sectors (especially to provide enough coal for electricity production) to serve socio-economic development; In addition, a reasonable part is also reserved for export in order to help the coal industry to exploit foreign long-term credit sources, to have more foreign currency sources to serve the import of materials and equipment for production. For the whole period 2016 – 2020: Clean coal production will increase from 38.7 million tons in 2016 to about 48.17 million tons in 2020; domestically produced coal consumption will increase from 41.1 million tons in 2016 to over 47.2 million tons in 2020.”
How sympathetic – or otherwise – is the Vietnamese Government to Foreign Direct Investment (FDI)?
The Vietnam Government highly encourage foreign direct investment, evidently through its unparalleled commitments under, namely, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam Free Trade Agreement (EVFTA), UK-Vietnam Free Trade Agreement (UVFTA) as well as numerous other free trade agreements and bilateral agreements.
Some background information: The EU-Vietnam Free Trade Agreement (EVFTA) is the most comprehensive and ambitious trade and investment agreement that the EU has ever concluded with a developing country in Asia and since its effective date on 1 August 2020, has intensified bilateral relations between Vietnam and the European Union. Coupled with the trend of investors continuously withdrawing capital and production out of China in the last months due to the country’s political instability and poor reaction to the novel corona virus, the EVFTA plays an important part in turning Vietnam into the manufacturing hub of Asia. Under the Agreement, Vietnam has not only opened additional sub-sectors for EU service providers, but also made commitments deeper than those outlined in the WTO Agreements or CPTPP, offering the EU the best possible access to Vietnam’s market. Specially, Vietnam has eliminated import duties on 48.5% of tariff lines, equivalent to 64.55 of EU exports immediately after the Agreement came into effect. After 10 years, nearly all 100% if Vietnam’s exports to the EU will be eliminated import tax.
Regarding the mining industry specifically, statistics from 2017 show that FDI for the sector in the first 6 months of that year reached USD 7.7 billion, accounting for 10.6% of total FDI in Vietnam. According to a report issued by HSBC in 2017, investment in the mining sector ranked second only to the manufacturing and assembling industry, reaching 66.7%.
Are financial/tax incentives available? If so for which aspects?
There are no financial/tax incentives available for the mining industry.
The corporate income tax rate is 22%, except when the enterprise has the total annual revenue of no more than twenty billion VND and applies the tax rate of 20%.
The corporate income tax rate applicable to the search, exploration and extraction of oil and gas and other rare and precious resources in Vietnam ranges between 32% and 50%. With regard to oil and gas prospecting, exploration and exploitation activities, based on the location, exploitation conditions and field reserves, the Prime Minister shall decide on a specific tax rate suitable to each project, each facility at the request of the Minister of Finance.
For platinum, gold, silver, tin, wolfram, antimony, gemstones, and rare earth resources mines, the tax rate of 50% is applicable to mines with 70% or more of the mining area located in areas with difficult socio-economic conditions.
Does Vietnam have its own mining machinery sector?
Yes, Vietnam has 2 business lines categorized as (i) Manufacture of special-purpose machinery and (ii) Manufacture of machinery for mining, quarrying and construction.
Are there any plans for joint ventures between government-owned mines and other investors?
Do such ventures concentrate on coal and bauxite? – No, projects are very diverse.
All mines in Vietnam are Government-owned.
According to the latest update from Vietnam Association of Small and Medium Enterprises dated September 2019, there are approximately 20 joint ventures between Vietnam government and foreign investors, with the lowest investment capital being USD 1 billion. The list doesn’t specify which countries such investors come from.
Are the markets for minerals mainly domestic or is there much production aimed at export?
The market for minerals in Vietnam is mostly to serve domestic demand, exportation only takes a small part of the market.
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Please do not hesitate to contact the author Dr. Oliver Massmann under [email protected]. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
