Transparency in Vietnam’s extractive industry

Vietnam is among countries having the most plentiful volume of minerals in the region and the world. However, the Southeast Asian country is facing issues related to the transparency in exploiting and using minerals. The question is that in the upcoming time whether Vietnam is able to take part in the Extractive Industries Transparency Initiative (EITI) or not. This is also the most concerned question at conference on the Extractive Industries Transparency Initiative (EITI) and Vietnam’s possibility to participate in the Initiative held recently in Hanoi by the Vietnam Chamber of Commerce and Industry (VCCI) and the Constancy on Development Institute (CODE).

Unsound management

Looking at the figures to the GDP growth, it is obvious that Vietnam’s extractive industries play an important role, particularly the industry of oil and gas. However under the view of investment, the achieved results are not par with potentials. According to the VCCI’s statistics, during the period of 2005-2008, total investment for the extractive industry ranked fifth among 18 sectors, but the effectiveness kept only the eight. Moreover, below 50 per cent of laborers in the extractive industry is in regular full-time employment while the remaining has short-term and unstable employment.

There are other shortcomings like the economic efficiency which remains not high, the unequal division of benefits, consequences to the environment and society, the restrictive role of private and foreign-invested enterprises as well as social organizations; exhaustion of natural sources like oil and coal. For these reasons, the loss is something mostly unpreventable. Lai Hong Thanh, Deputy Chief of Office of the Natural Resources and Environment Ministry said declaring false figures to authorities regarding annual mining yields is a basic cause leading to the big loss of mineral tax. At present, according to the law on minerals, revenue from the sector was subject to a mineral tax. The mechanism of collecting and paying the tax is entrusted to enterprises by themselves. However in fact, except for the oil and gas industry which was monitored and controlled, it is very difficult to supervise the exploitation output of other minerals. Lai expressed the necessity to build an effective and transparent mechanism in providing information. One of the most effective ways is participation in the EITI.

Solutions and possibility

Speaking at the conference, Deputy Head of VCCI’s Legal Department Dau Anh Tuan especially emphasized the EITI. This is an initiative based on a voluntary alliance between governments, companies, social and international organizations to enhance transparency in the mining sector. The EITI is based on two main mechanisms: Mining companies must make comprehensive reports on expenditure for governments, while governments must publicize the revenue it receives from the companies. An independent agency then compares the data.

By taking part in the initiative, Vietnam will be able to limit losses and ineffective mineral exploitation. Enterprises as the subject handed over a property of minerals from the state will be responsible in managing, protecting, exploiting reasonably and efficiently in order to meet the demand of minerals for the economic sectors in parallel with bringing in profits for themselves. The enterprises will have duty of adjusting benefits via implementing obligations on tax, fees and other expenses in accordance with the law. Under the research of the CODE, Vietnam will not meet lots of difficulties of human resources and financial issues as participating in the EITI because the country can combine the available management model and would be supported financially by the World Bank. The admission to the EITI could help Vietnam to increase source of revenue for the state budget and ease the financial loss from exploitation activities. More importantly, it will help improve the faith of people to the government’s management, reduce conflicts among related parties as well as to fight corruption more effectively. Mr Tuan affirmed the EITI participation will also help Vietnam to increase its prestige and attract more foreign investors into the field.

After all, to get the initial advantage, it is necessary to make careful preparation and research as well as define clearly the initiative scale to outline specific working programs. Regarding the responsibility, it is vital to assign the Ministry of Industry and Commerce or the Ministry of Finance to be in charge. Based on which, the participation and implementation of the EITI in Vietnam will be able to bring into efficiency and benefits from the major industry. – VCCI

Tags: Vietnam extractive industry

Posted by VBN on Apr 24 2011. Filed under Industry. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry