Transcript スライド 1 - Tohoku University

Iron and Steel Industry of
Developing Countries in the
Era of Globalization: The
Case of Vietnam
Symposium on Advanced Material Flow
Analysis for the Sustainable Society
September 25-26, 2006, Tohoku University
Nozomu Kawabata
Graduate School of Economics and
Management, Tohoku University, Japan
1
Structure of this presentation
►1
Steel industry in the process of
industrialization
► 2 Overview of iron and steel industry in
Vietnam
► 3 New Policy Direction
► 4 Reinforcing market function
► 5 Trade Policy for Steel and User Industries
► 6 FDI Attraction as a Policy for
Industrialization
► 7 Conclusion
2
1 Steel industry in the process of
industrialization
3
Major contradictions of steel industry
in developing countries
Small domestic market
High level of minimum
efficient scale of
production capacity
Necessity of coordination
among small numbers of
big project
Necessity of competition
for efficiency
Nationalistic feeling to
basic material industries
Necessity of technology
and capital from foreign
sources
4
Industrialization strategy under
globalization
► Collapse of CPEs
► Bad performance
industrialization
of import substituting
 High protection
► Good
performance of export oriented
industrialization (Especially in East Asia)
 Lower protection
► Importance
► Policy trend
 WTO
 AFTA
 EPA
of foreign investment and TNCs
to liberalization
5
Steel strategies have changed in advanced
ASEAN countries
► Until
the midst of
1980s
 State-led promotion
 Central state of SOE
 Creation of integrated
steel works
 High level protection
 Center industry for
import substituting
industrialization
► From
the late 1980s
 FDI and private sectorled promotion
 Major role of FDI and
local business group
 Incremental building
from downstream to
upstream processes
 Reasonable level of
protection
 Backseat player for
export-oriented
industrialization
6
Policy change produced good results
► Until
the midst of
1980s
 Construction failure or
financial/technological
troubles
► NASCO
(Philippines)
► Krakatau Steel
(Indonesia)
► Perwaja Steel
(Malaysia)
► From
the late 1980s
 Import substitution of
high grade steel
sheets by FDI
companies
► SUS,
TCRSS (Thailand)
 Import substitution of
low grade steel sheets
by local companies
► SSI,
G-Steel (Thailand)
► Mega Steel (Malaysia)
7
Capacity for policy change
► Under
economic integration, developing countries
should accelerate the industrialization process
► Accelerated development necessitates the speedy
policy change
 State-led investment →Promotion of FDI and private
investment
 Direct control →Indirect support to reinforce market
function
► Promoting
policy of the Vietnamese steel industry
is one of such a case
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2 Overview of Iron and Steel
Industry in Vietnam
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Production Structure of the Vietnamese iron and steel
industry (2004)
Blast Furnace
Pro. 187
Domestic
Supply of
Scrap 718
EAF-Billet CC,
Ingot casting
factories
Pro.658
(full operation)
Import of Scrap
163
Market of long
products
Pro. 2366
About 2600
(Cap. 4600
overcapacity)
Import of billet
2174
Import of hot rolled coil,
sheet, plate and tube
products 1773
Long rolling
mills
Import of long
products 257
Pipe fitter
Pro. 236
Market of flat
and tube
products
About 2900
Import of cold rolled and
surface treated coil and
sheet products 1112
Galvanizing and color
coating factories
Pro. 176
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Unit: 1000 ton Source: Author edited from data of SEAISI and VSA.
Major problems
►
►
Large scale production and distribution systems are not
established
Long sector
 Over capacity of rolling mills
 Shortage of steelmaking capacity →Change to scrap shortage?
►
Flat sector
 Shortage of rolling capacity
 Over capacity of galvanizing and pipe fitting factories
 Lack of production capacity of high grade steel
►
Foreign trade system
 General direction to liberalization and impromptu protection
 Underdevelopment of concrete arrangements
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3 New Policy Direction
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The Market Structure is Changing
►
1990s
►
 VSC Group: Major player
for modernization
► Subsidiaries
(TISCO, SSC,
Danang Steel, Cevimetal)
► Foreign affiliated JVs (Vina
Kyoei, VSC-POSCO,
Vinausteel, SSSC,etc)
 Small companies and
households
► Opportunistic
entry and
exit
► Outdated technology
Now
 VSC Group
► 2.7
mil ton of annual
capacity
 Private and 100% FDI
companies (Hoa Phat,
Pomina, Sunsteel, etc)
► 2.23
mil. ton
► Standard technology
► Expansion from rolling to
steelmaking
13
Investment by VSC(PFS, SSC)(1)
► SSC/VSC’s
Phu My Steelworks (started in
2006) is the most modernized EAF-rolling
mill in Vietnam
 EAF-billet CC: 500,000 t/y
 Long rolling: 300,000 t/y
► PFS
(started in 2005) is the first cold rolling
mill in Vietnam
 Pickling and Cold rolling: 400,000 t/y
14
Investment by VSC(PFS, SSC)(2)
Phu My Steelworks under
construction,
Taken by the author, May 2005
Reversing cold rolling mill of PFS.
From leaflet of the company.
15
Significance of new factories
► VSC(SSC/PFS)
competitive
should make new factories
 It is the test case for VSC’s future.
 If VSC fails to operate these new factories,
foreign inventors will suspect the VSC’s
capability as a business partner.
16
Necessity of policy change
► VSC’s
overinvestment in long sector (EAFrolling mill) may lead to troubles
 Exacerbating overcapacity of rolling mill
 Crowding out the investment of private
companies
 Distortion of market selection
► VSC
cannot work on a big project (especially
in flat sector) by itself
 Financial and technological problems
17
New direction of promotion policy
► Government
should give all companies
equal footing
► Reinforcing the function of market economy
 Construction of infrastructure
 Setting rules on quality, safety an environment
 Amendment of market failures
► Absorbing
the shock of liberalization
► FDI attraction
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4 Reinforcing Market Function
19
Example: Scrap import problem(1)
 Situation in
2004
Pig Iron 187
Scrap 718
EAF-Billet CC,
Ingot casting
factories
Long
rolling
mills
658
2366
Import of Scrap
163
Import of
billet 2174
 Possible
situation in
near future
Pig Iron 200
Scrap 720
Import of
Scrap
About 2000
EAF-Billet CC,
Ingot casting
factories
Long
rolling
mills
About 2500
Import of billet
20
Example: Scrap import problem(2)
► In
keeping with construction of EAF, fatal
point will change
 Billet import → scrap import
► Urgent
challenge for government
 Support to construction of port facility
 Establishment of import procedures
 Adjustment between import promotion and
environmental regulation
21
Proper regulation to reinforce
market function
► Reinforcing
the Construction Law
► Reinforcing the industrial standard
→Exclusion of under qualified products (rerolled scrap, narrow strip, fake brand etc)
► Standard
of safety and environment
→Exclusion of inferior machines (Pollution from
EAF, induction furnace etc)
22
5 Trade Policy for Steel and User
Industries
23
Two-tiered market structure of
cold rolled and surface treated
sheet products
Import of high grade
cold rolled sheets
(Deep drawing sheet,
electrical sheet, IF
steel, loam plate,etc)
Import of hot
coils
Customer I
Import of high
grade surface
treated sheets
(Galvannealed,
color-coated,
tinplated)
(FDI
manufacturers
like car,
motorbike,
export-oriented
appliance
producers)
No competition
Import of normal
grade cold rolled
sheets
Competition
Cold Rolling
Mill (PFS)
Pro. 180-240
(Cap. 400)
Galvanizing and
color coating
factories
(BlueScope,
SSSC etc)
Customer II
(Mainly
construction
industry, partly
domestic
manufactures)
Competition
Import of normal
grade galvanized
and color-coated
sheets
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Irrationality of current import duty
on sheet products
► Current
import duty
 Cold rolled sheet product: 7%.
 Surface treated sheet (including GI): 0-10%
► Taxation
on high grade sheets does not improve
the status of PFS and galvanizing companies
 No competition between sheets for Customer I and
sheets for Customer II
► Import
duty on high grade cold rolled sheets and
surface treated sheets have a damaging effect
on Vietnamese economy
 Damage on competitiveness of FDI manufacturers
25
Differentiation between high grade
steel and conventional steel
►A
problem: HS code system is not always
relevant to the classification of steel
products by quality
Same HS code
Galvannealed sheet
for automotive
Galvanized sheet for
construction
26
New option: “User Specific Duty Free
Scheme (USDFS)”
► When
specific industries import the specific
parts and materials classified by HS code,
such imports are duty free.
(example)
For motorbike
For construction
High grade one
for motorbike
Conventional one
72・・・・
7209.15
7209.16
7209.17
7209.・・
Duty
Free
Subject to “USDFS”
Taxatio
n 27
USDFS as a proven scheme in
several countries
► USDFS
will strike a balance between the
promotion of competitiveness of FDI
manufacturers and the protection of steel
sheet producers
► USDFS and similar policies are/will be
installed by Mexican, Malaysian, Indonesian
governments
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6 FDI Attraction as a Policy for
Industrialization
Blast furnace and basic oxygen furnace of Nippon Steel Kimitsu
Steelworks. From Company Pamphlet
29
Possible projects in flat sector
► Large
scale galvanizing factory for high
grade sheets
► Large scale cold rolling mill for high grade
sheets
► Compact hot strip mill next to PFS
► Large scale hot strip mill
► ISW
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Necessity of FDI in flat sector
► VSC
cannot work on a big project in flat
sector by itself
► Unlike the advanced ASEAN countries,
there is no private big business group in
Vietnam
↓
► FDI attraction is necessary
 FDI cannot be attracted by laissez-faire
regime
31
Conditions for FDI attraction(1)
► Consistency
among market size, product mix,
technology, feature of FDI companies
Market size of specific segment
Ex. million tons of sheets for
automobile
Product mix of new factories
Possible FDI companies
Ex. CR, GI, GA
Ex. Japan, South Korea
Technology
Ex. State of the art ISW
32
Conditions for FDI attraction(2)
► Ex.
Production of high-grade steel sheet
 Vietnam has to wait some years until market
expansion
 State of the art technology for integrated
production is necessary
 Candidate list of FDI producers is short one
►OK:
Integrated producers in advanced countries
(including South Korea)
►Questionable: Integrated producers in Taiwan and
BRICs
►Impossible: Producers with no experience in high
grade steel
33
Role of government in attracting FDI
► Giving
a welcome to majority ownership of
FDI produces
► Capacity of review and approval is
necessary at MPI and MOI
► Reliability as a partner is critical for joint
ventures
 VSC should prove its managerial capacity as a
reliable partner in Vietnam
► In
case of ISW, strong commitment to
provision of infrastructure is necessary
34
7 Conclusion
Hot strip mill and continuous
descaling and cold rolling mill of
Nippon Steel Kimitsu Steelworks
From Company Pamphlet
35
The time of policy change in
Vietnamese steel industry
►
1st stage
 Market underdevelopment
 Absence of modern players
 Central role of
governmental plan and
SOEs
 Construction of model
factories
► Beginning:
Drafting of
Master Plan
► End: Building completion
of PFS and Phu My
Steelworks
►
2nd stage
 Effective market
competition
 Global pressure to
liberalization
 Growing importance of
private sector and FDI
sector
 Changing role of
government
► Abolishment
of privilege of
SOEs
► Amendment of market
failure at some point
► Commitment to FDI
attraction
► Commitment to provision
of infrastructure
36
Reference
►
Kawabata, Nozomu(2005), Higashi Ajia Tekko-gyo no Kouzou to
►
Kawabata, Nozomu(2001), “The Current Vietnamese Steel
Industry and Its Challenges,” in Study on the Economic
Dainamizumu (Structure and Dynamism of the Iron and Steel
Industry in East Asia), Kyoto: Minerva Publishing (Japanese).
Development Policy in The Transition toward a Market-Oriented
Economy in The Socialist Republic of Vietnam (Phase 3) Final
Report Vol. 2, MPI and JICA.
http://www.econ.tohoku.ac.jp/~kawabata/VietnameseSteelEnglish.pdf
Ohno, Kenich and Nguyen Van Thuong eds.(2005), Improving
Industrial Policy Formulation, The Publishing House of Political
Theory, Hanoi. http://www.vdf.org.vn/bookad.htm
► Vietnam Development Forum(2006), Supporting Industries in
Vietnam from the Perspective of Japanese Manufacturing Firms,
April 24.
http://www.vdf.org.vn/WS/WS%202006/Ohno12April06/VDFrepo
37
rt.pdf
►
Thank you for your kind
attention!
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