Apr 2, 2013

Vietnam - Exporting raw materials, Vietnam eats itself

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VietNamNet Bridge – Natural resources and minerals exports bring tens of billions of dollars to Vietnam every year. However, the loss it suffers from mineral exports is much bigger than the sum of money.

Dreaming of enriching with mineral exports

Just over the last 7 years, Vietnam’s coffee exports increased by 2.5 times, natural rubber exports by two times. And during the same time, in the Central Highlands only, 206,000 hectares of forests has disappeared.

In 1980s, natural resource exports were the main source of income of Vietnam. Nowadays, though the turnover from natural exports just accounts for 1/10 of the total export turnover, Vietnam remains a natural resource based economy.

A report by the Vietnam Chamber of Commerce and Industry (VCCI) showed that mining industry makes up 10-11 percent of GDP. In 2012, Vietnam earned $9.6 billion from mineral exports, of which the crude oil alone brought $8.22 billion and coal $1.23 billion.

However, in order to obtain the turnover, Vietnam had to pay a heavy price with land and forests being devastated.

To date, geologists have discovered 60 kinds of minerals at 5,000 mining places. However, since Vietnam mostly exploits raw minerals, the mining has not made any contributions to the development of its industries.

A report of the General Department of Customs showed that in 2009-2011, Vietnam exported 2.1-2.6 million tons of minerals of different kinds, not including coal and crude oil, mostly to China, which brought $130-230 million only. In 2012, Vietnam exported 800,000 tons of minerals, not including the exports through unofficial channels.

According to Pham Quang Tu, Deputy Head of CODE, a research and consultancy institute, many localities have been living on mineral exploitation or strive to develop the local economies based on the mining industry.

Quang Ninh, for example, has its income depending on the mining industry. What will happen with Quang Ninh if the coal mining industry development slows down?

Dak Nong also put a high hope on the development of the bauxite industry, planning to develop Gia Nghia town into an industry – service city. However, with the current difficulties with bauxite projects, it’s obviously unfeasible to build a Gia Nghia industrial city with the focus on the bauxite – aluminum industry.

Vietnam needs to be wiser in using natural resources

Exploiting and exporting natural resources still can bring fat profits. However, the profits do not go to the state budget, but fall into the hands a small group of businesses. While miners pocket money from mineral resources, the country pays a heavy price for the money with environment pollution and land erosion.

Crude oil is the mineral that brings the highest export turnover. However, the turnover is just big enough to import petrol and finished products for domestic consumption.

According to Nguyen Thanh Son from the Vietnam Coal and Mineral Industries Group, in 2012, Vinacoal exported 13.5 million tons of coal. If it had sold the volume of coal domestically, the turnover would have been lower by VND9.6 trillion. However, since the State fails to control the coal smuggling, Vietnam lost 5-6 million tons of coal a year, of VND10 trillion. As such, the smuggled turnover was even higher than the additional value earned from exports.

Experts have said that Vietnam needs to be wiser in using its natural resources. Instead of letting enterprises export raw materials in big quantities, Vietnam should use the natural resources as the “bait” to lure foreign investments into the processing industries. If the raw export continues, Vietnam will lose the opportunity to develop important industries.


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