Formosa Plastics Group’s $8.9 billion steel and seaport project is under threat from fund mobilisation woes and water supply concerns.
| illustration photo |
A source at Formosa Ha Tinh Steel Corporation, a subsidiary of Formosa Plastics Group and investor of the project, told VIR that the Taiwanese group faced difficulties in mobilising funds for the project in central Ha Tinh province, because of lending limitations at foreign bank branches in Vietnam.
According to the Law on Credit Institutions, which took effect on January 1, 2011, a foreign bank branch or a locally incorporated foreign bank is not allowed to provide a loan exceeding 15 per cent of its own equity for a single borrower.
“This is a very big issue. The lending limit means that we cannot borrow much money from foreign bank branches in Vietnam,” said the source, who declined to be named.
Formosa Plastics Group in 2008 registered to build a 7.5 million tonne steel factory and a deep-seaport. However, the source said the price tag had ballooned to $10 billion. The group, at the end of 2010, revealed that it had planned to increase total annual output capacity to 22 million tonnes.
The investor is constructing the first phase which includes a 14-berth Son Duong port, a hotel for workers, office buildings and a 427-room guest house. It plans to put the project into operation at the end of 2015. “We are now using our own capital for the construction. But we need to mobilise $3 billion from a foreign bank outside Vietnam and $3 billion from foreign bank branches in Vietnam,” the source said.
Formosa also faces water supply problems. According to Ha Tinh People’s Committee, water supplied to this steel factory will come from a Rao Tro reservoir project, which broke ground in January. The committee plans to complete this project in June 2014. However, construction has been slow, raising concerns it will not be put into operation once Formosa completes the factory.