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3 May 2009

Vietnam keeps chasing Chinese investment in mining

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Vietnam is pressing ahead with efforts to lure investments from Chinese mining companies despite facing an increasingly bold environmental lobby at home and a deep-seated suspicion of China, a report in the Wall Street Journal said.

Prime Minister Nguyen Tan Dung calls mining an important element in Vietnam's economic development. But in recent weeks, growing opposition to mining has put his government on the defensive.

Last week, Deputy Industry Minister Le Duong Quang issued a statement saying a state-run Vietnamese company 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 emphasised that the Chinese company won't have an equity stake 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 increase exports such as minerals to its larger, more prosperous northern neighbor.

Chinese companies, for their part, are keen to participate in mining projects in the Central Highlands, which the Vietnamese government says holds 5.4 billion metric 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 make the most of its deposits.

But Vietnam's environmental lobby sees the mining industry as one of the few avenues of dissent against policy makers. In recent weeks, a chorus of critics has denounced Hanoi's plans to allow the joint venture, between state-run Vietnam National Coal & Mineral Industries Group and a unit of Aluminum Corp of China Ltd, in an area home to many of Vietnam's marginalized ethnic minorities.

Gen Vo Nguyen Giap, who was the strategist behind many of Vietnam's victories over French and US armed forces and who is now 97 years old, has written open letters to the government warning of growing Chinese influence in Vietnam and of the environmental degradation that might stem from mining in the area. His concerns have been echoed by scientists and economists who have questioned the project's feasibility amid the global downturn.

Some economists worry that contaminants from the messy process of refining bauxite into alumina -- a white powder that can be smelted into aluminum metal -- could jeopardise other businesses in the area. The Central Highlands produces 80 percent of Vietnam's coffee and has cultivation of other commodities, such as rubber, pepper and cocoa.

"There are a lot of people in Vietnam who have benefited from economic liberalisation, 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 Defense Academy in Canberra. "There is now a degree of technocratic expertise emerging to challenge the Communist Party."

Deputy Prime Minister Hoang Trung Hai pledged recently in an environmental seminar in Hanoi to impose strict controls over the open-cast bauxite project, which would leave deep scars on the Central Highlands plateau.

The issue is likely to stay on the front burner, thanks to virulently anti-Chinese sentiments expressed by many in Vietnam's environmental lobby. China, which has been increasing its investment in mines around the world in recent years, fought a border war with Vietnam in 1979. For about 1,000 years until the 10th century, China colonised Vietnam, and many of Vietnam's historical heroes fiercely resisted Chinese rule.

In comparison, there has been little outcry against a unit of US-based Alcoa Inc., which is conducting a feasibility study for a possible alumina refinery in southern Vietnam. The world's largest aluminum producer, UC Rusal, meanwhile, is planning a joint venture to build a $1.5 billion alumina refinery in southern Vietnam.





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