Steel production at TISCO (Photo: cafef.vn

Hanoi (VNA) – Prime Minister Nguyen Xuan Phuc recently asked the Ministry of Industry and Trade to sell the Thai Nguyen Iron and Steel Joint Stock Company (TISCO) and invest in their new factory.

The construction of TISCO’s new factory has been delayed in the last four years as the cost estimate for the project is now more than twice the initial estimate, according to TISCO.

According to the company, the total investment needed for the project is now more than 9 trillion VND (401.4 million USD), while the initial estimate is more than 3.84 trillion VND.

At the moment, some 4.5 trillion VND has been invested in the expansion project, and it will need the same amount of investment to be completed.

The other two solutions that have to be taken into consideration are selling the expansion project and calling for investment from other companies.

The ministry has to assess the expansion project in the most comprehensive and overall manner with an assessment team and independent consultants.

Additionally, the Ministry of Industry and Trade (MoIT) also has to complete negotiations with Chinese contractors to complete and operate the factory, and submit the final solution to the government prior to July.

In February, MoIT admitted to the PM that TISCO’s expansion project no longer efficient and the steel producer may need 23 years to the break-even point with such high cost estimate, but the ministry still proposed to the PM that he accept some proposals from the company over a number of tax and interest benefits.

For instance, TISCO proposed to the government that it ask the Vietnam Development Bank (VDB) to free all the loan interest of 386 billion VND during the project’s delayed period. TISCO was supposed to pay VDB an annual interest rate of 5.5 percent.

TISCO urged the government to ask the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) to free half of its loan interest to TISCO during the delayed period. Vietinbank should also allow TISCO to start repaying debts for 16 years from 2019.

TISCO also proposed to the government that it not tax Chinese contractors, including a two-per-cent corporate income tax, a five-per-cent value-added tax, which was worth 133 billion VND.

However, the Ministry of Finance has rejected TISCO’s proposal as analysts felt it was not necessary to make another investment in a steel project, which could not produce any outputs better than available products.-VNA