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Vietnam suitable for investment: Formosa Plastics

TAIPEI, Taiwan -- Formosa Plastics Co. (台塑) maintained that Vietnam is a country suitable for steel plant investment, but also said is unsure when plant construction can be resumed after the anti-China riots that broke out in May.

In a shareholders' conference held yesterday, the company was pressed by shareholders about its investment progress in Vietnam, which has cost Formosa Plastics millions of dollars.

Due to the anti-China protest that broke out in May, Formosa Plastics' 3,000-plus Chinese contract workers have left the country. If Chinese workers go back to work within two months, there will be enough progress made that a furnace can be put into use by the end of 2015, the company estimated. If not, however, the company will suffer a loss of NT$360 million per day of delay, Formosa Plastics said.

The anti-China riots resulted in four deaths of Formosa Plastics' workers and 166 people being injured. The company's ranking officers led a team to Beijing to explain the incident afterwards.

With all workers back in China, there is no set work resumption schedule. Formosa Plastics said it very much depends on the Vietnam government's standpoint, for the company cannot get entangled in political issues. Formosa Plastics Group Chairman William Wong (王文淵) is scheduled to fly to Vietnam at the end of the month to obtain a better grasp of the situation.

Vietnam Still Considered a Suitable Location

Some shareholders opined that Formosa Plastics should withdraw its investment from Southeast Asia and halt plant construction in Vietnam.

Formosa Plastics Chairman Lee Chih-tsuen (李志村) said in response that there are few locations in the world suitable for steel facility construction. According to Lee, plant construction cannot be carried out in industrialized countries due to their restrictions on carbon dioxide emissions. Vietnam is an exception, due to its low industrialization level, Lee added.

Since the country has little industrial investment, establishing steel manufacturing plants would not cause much of a problem, Lee said.

Singapore is another Southeast Asian country that invests in steel and petrochemical facilities. Due to its relatively small domestic market, most of Singapore's products are for exports, Lee said, adding that they are a competitor to Taiwan's industry.

China's Overheated Petrochemical Industry

Lee also commented on the petrochemical industry in mainland China. While Western countries are experiencing economic recovery, there is overproduction in mainland China, which is likely to impact the petrochemical market in Asia. The government's stimulus policy resulted in the overproduction, Lee said. However, he is still optimistic that Formosa Plastics will reap higher revenues this year compared with the last year.

With the oversupply of raw materials, it will take another two to three years before they can be all consumed, Lee said, adding this it is likely to impact the Asian market and Formosa Plastics.

According to Lee, there is plan in China to build facilities capable of producing seven million tons of ethylene. They will be derived not from oil but coal. How the plan will implemented in provinces experiencing water shortages remains to be seen, he said.

1 Comment
June 15, 2014    nguyenvn@
While visiting Vietnam, the Formosa management should explore with the Vietnamese authorities, corporate accountability and cultural sensitivity oriented processes to minimize potential repeats of recent violence. At the heart of these condemnable riots are widely use of Chinese nationals by foreign owned factories in Vietnam, in particular Taiwanese. How else can you explain 3,000 Chinese nationals amongst the total 5,000 construction workers at the Formosa Ha Tinh Steel Plant, even if technical skills and language barriers possibly will be cited as the rationale? For years, Vietnamese daily newspapers have been reporting unfair labor practices such as pay discrepancies, biased hiring and even violent enforcements... often with a common theme: the use of legal and illegal Chinese nationals over locals. Together with the failures of Vietnamese Courts to prosecute foreign invested entities for fear of disinterests, many Chinese owned projects (constructions, mining, agriculture...) also strictly, exclude Vietnamese and elude local enforcement authorities with their own dormitories, fenced in and guarded villages... Grievances, outrages and resentments had built up, suppressed and of course triggered by legitimate reasons such as the Chinese oil rig violation of Vietnam's territorial rights. After-the-fact damage controls by Vietnamese authorities and/or rightful compensations to impacted business owners can temporarily, produce superficial appearance of calm and normal but, unless and until Vietnamese authorities and Taiwanese work to remove the above mentioned root causes, risks of future outburst can't be assured. After all, these are the very shortsighted and bad business practices that globally, reputed leaders of corporate accountability and cultural sensitivity look to eliminate everywhere, not just Vietnam.
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