Formosa in Vietnam: From billion-dollar steel factory to mass fish killer

By Anh Minh   June 30, 2016 | 02:44 am PT
After two months of an investigation into mass fish deaths along a 200-kilometer stretch of the country's coast, the Vietnamese government has concluded that a Taiwanese steel plant in the central province of Ha Tinh is the culprit behind the disaster.

Giant FDI project

In 2008, Taiwan’s Formosa Plastics Groups said it would invest $28.5 billion in the Vung Ang Economic Zone in Ha Tinh Province. The project covers an area of more than 3,300 hectares, including a steel plant, a thermal power plant and a deepwater port capable of receiving 30,000-ton ships.

Upon completion, the project will generate 35,000 jobs for local people.

The steel plant is expected to produce about seven million tons of steel billet each year, equivalent to 47 percent of Vietnam’s total steel output in 2015.

The Vietnam Steel Association said in a report in January this year that: “After Formosa's steel plant goes into operation, Vietnam will become the biggest steel producer in the Southeast Asia region.”


Formosa steel plant under construction.

Before entering Ha Tinh, Formosa invested nearly $1 billion in the southern province of Dong Nai to build an industrial complex which focuses on producing fibers, plastic and dyeing.

Taiwan’s Formosa Plastics Groups were founded in 1954 and soon became one of the greatest plastic producers in Asia. The company also works on other areas like steel, electricity and semiconductors with hundreds of subsidiaries.

Last year, four subsidiaries of Formosa were listed on top 1,000 biggest public companies as voted by Forbes with their total market capitalization up to $70 billion.

Lots of investment incentives

Ha Tinh province offered Formosa numerous tax incentives to encourage the company to invest in the Vung Ang Economic Zone.

After going into operation, Formosa Hung Nghiep Steel Limited Company (FHS), the project manager, will be exempt from income tax for four years. From the fifth year, if FHS makes a loss, this sum will be deducted from tax the following year.

FHS is also exempt from land rental fees for 15 years.

Regarding raw materials, components and semi-finished products that Vietnam can’t produce, FHS is allowed to import them without paying tax duties.

Despite these incentives, FHS sent a request to the Vietnamese government in 2014 asking for approval to set up its own economic zone. The company even asked the government to apply safeguard measures on the steel industry, but its requests were turned down.

Bunch of scandals

In 2014, Ha Tinh authorities detected that more than 3,200 foreign workers out of 6,100 were working for FHS without work permits. In addition, only 34 percent of Chinese workers, equivalent to 1,400 people, had permit papers.

The following year, there was an accident on an FHS construction site that caused the deaths of 13 workers and injured 29 others.

This year Formosa reappeared in the headlines in connection with mass fish deaths along 200 kilometers of the central Vietnamese coast after local people detected Formosa's discharge pipe under the sea.

The disaster resulted in the death of more than 70 tons of sea fish and 35 tons of farm-raised fish, causing losses to thousands of Vietnamese fishermen.

Eight years have gone by since FHS kicked off the project, but none of it has been put into operation.

FHS planned to open the steel plant on June 25, but suddenly announced a delay to the opening and claimed it did not know when the plant would go into operation.

Related news:

Formosa offers $500 mln to compensate Vietnam for catastrophic environmental damage

Formosa responsible for mass fish deaths: Vietnamese government

Formosa steel firm puts off operation in Vietnam amid mass fish deaths

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