Vietnam Aims to Attract Chinese Mining Companies

JAMESHOOKWAY IN BANGKOK

Vietnam is pressing ahead with its efforts to lure Chinese and other mining firms despite an increasingly bold environmental lobby and a deep-seated suspicion in Vietnam of the country's larger, more prosperous northern neighbor.

Growing opposition to mining – hailed by Prime Minister Nguyen Tan Dung as a key element in Vietnam's continuing economic development – has forced his government on the defensive in recent weeks. On Tuesday, Deputy Industry Minister Le Duong Quang issued a statement saying that a state-run Vietnamese firm will go ahead with a $460 million venture with a Chinese company to extract bauxite ore from Vietnam's pristine Central Highlands region. But in an apparent attempt to placate criticism, he stressed that Vietnam won't be offering its Chinese partner any equity in the project.

Mining poses a policy conundrum for Vietnam's Communist leaders. The country has a large trade deficit with China -- $11 billion in 2008 -- and is eager to attract more Chinese investment to even up the balance of trade. Chinese companies, for their part, are keen to invest in mining projects in Vietnam's Central Highlands, which the government says holds 5.4 billion tons of bauxite – the world's third-largest reserve of the ore which is used as a raw material to make aluminum. Vietnam says it needs around $15.6 billion to invest in mining and refining bauxite by 2025 in order to the make the most of its deposits.

But Vietnam's environmental lobby sees the industry as one of the few possible avenues of dissent against policy-makers in Hanoi.

In recent weeks a chorus of critics has denounced Hanoi's plans to allow the joint venture, between state-run Vietnam National Coal and Mineral Industries Group and a unit of the Aluminum Corp. of China Ltd., in an area which is also home to many of Vietnam's marginalized ethnic minorities.

The 97-year-old strategist behind many of Vietnam's victories over French and U.S. armed forces, General Vo Nguyen Giap, has written open letters to the government warning of growing Chinese influence in Vietnam and the environmental degradation which might follow the development of mining in the area. Gen. Giap's concerns have been echoed by scientists and economists who have questioned the feasibility of the project amid the current global downturn.

Some economists worry that possible contaminants from the messy process of refining bauxite into alumina – a white powder which can then be smelted into aluminum metal – could jeopardize other businesses in the area. The Central Highlands produces 80% of Vietnam's coffee output and also cultivates other commodities such rubber, pepper and cocoa.

"There are a lot of people in Vietnam who have benefited from economic liberalization and have televisions and microwaves and so on, but they are also living on crowded and polluted streets and quality of life is becoming a bigger issue," says Carlyle Thayer, a professor and Vietnam expert at the Australian Defence Academy in Canberra. "There is now a degree of technocratic expertise emerging to challenge the Communist Party."

Deputy Prime Minister Hoang Trung Hai pledged in an environmental seminar in Hanoi on April 9 to impose strict controls over the open-cast bauxite project which, like other bauxite projects, will leave deep scars on the elevated Central Highlands plateau.

The issue is likely to stay on the front-burner, however, thanks to the virulently anti-Chinese sentiments expressed by many in Vietnam's environmental lobby.

While Chinese companies have been investing in mines and other raw materials around the world in recent years, China also fought a border war with Vietnam in 1979. Prior to that, China colonized Vietnam for 1,000 years and many of Vietnam's historical heroes fought fiercely against Chinese rule.

In contrast, there has been comparatively little outcry against a unit of U.S.-based Alcoa Inc. which is now conducting a feasibility study for a potential alumina refinery in southern Vietnam. The world's largest aluminum producer, UC Rusal, meanwhile, is also engaged in a joint venture to build a $1.5 billion alumina refinery in southern Vietnam.