India's Tata International Group Plans Long-Term Investments in Vietnam

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Tata International Group (Mumbai), a member of India's largest corporate group, the Tata Group (Mumbai), has expressed interest in taking up several large projects in Vietnam. Chairman Syamal Gupta, who was attending the Asian Corporate Conference in Ho Chi Minh, disclosed that the company intends to focus on sectors such as steel, five-star hotels and automobiles.

According to Indronil Sengupta, Chief Executive of Tata Steel Limited (BSE:500470) (Mumbai) for Southeast Asia, the economy of Vietnam will recover soon, and Tata Steel intends to make long-term investments in the country. NatSteel Vina Company Limited (Thai Nguyen, Vietnam), a subsidiary of Tata Steel, has been operating in Vietnam since 1997.

In August 2008, Tata Steel signed an agreement to set up a joint venture with Vietnam National Cement Corporation (Hanoi, Vietnam) and Vietnam Steel Corporation (Hanoi) to set up a $5 billion steel complex in the Vung Ang Economic Zone located in the central province of Ha Tinh. Tata Steel holds a 65% stake in the joint venture while Vietnam Steel and Vietnam National Cement hold stakes of 30% and 5%, respectively. The companies are currently preparing for the licensing of the steel complex. A memorandum of understanding for the project was signed between Tata Steel and Vietnam Steel in 2007.

The integrated steel plant, which has a capacity of 4.5 million tons per year, will be set up in three phases. The first phase of the complex will include a cold rolling mill with a capacity of 200,000 tons per year. The unit will entail an investment of $100 million and is scheduled for commissioning in late 2010. The second phase will include a $2.5 billion steel plant with a 2.4 million-ton-per-year long-steel and plate unit. This unit is expected to be completed by 2013. The third phase, to be set up with an investment of $2.4 billion, will have an output of 2.2 million tons per year. The third and final phase of the project is scheduled for completion in 2015.

Since 1986, when Vietnam's government introduced various economic reforms, the country has been attracting foreign direct investment (FDI) quite successfully, and these investments have contributed significantly to the country's economic progress. The United Nations has declared Vietnam as the sixth most attractive destination for FDI, which will probably help the country attain an expected economic growth of 8.5-9% in 2009.

The Foreign Investment Law enacted by Vietnam in 1987 and amended in 1990 and 1992 reflects the "open door policy" or Doi Moi policy of the country towards FDI. The law is based on the principles of equal cooperation and mutual benefit, and has been strongly welcomed by investors worldwide. While the initial years saw FDI being concentrated in the oil and gas and hotel sectors, subsequent years have seen large investments in the industrial sector. Projects set up with FDI have now shifted to areas other than the economic zones. The British Virgin Islands, Hong Kong, Singapore, South Korea and Taiwan are among the leading investors in Vietnam.

The legal system, however, has presented a few hurdles in attracting more FDI. The arbitrary implementation of law has reduced the attractiveness of Vietnam as destination for foreign investment. The government is working on perfecting its legal framework and has been implementing new legal documents as well as amending the existing ones to make them more consistent with international rules and regulations. Vietnam is working hard on presenting itself as an attractive destination for FDI while keeping in view the specific conditions and situation of the country.

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