The slow confirmation of incentives for the Southern Petrochemical Complex project in Ba Ria-Vung Tau Province, southern Vietnam has created a high risk of slowing down the execution of the project, which requires an estimated investment of US$5.1 billion.
The Ministry of Planning and Investment has written to the Ministry of Finance, asking the latter to deal with the project’s financial issues.
Long Son Petrochemicals Company Limited, the developer of the project, had earlier sent a report to the two ministries pointing out difficulties in applying preferential tax policies during the execution of the project.
In particular, the company proposed maintaining incentives for the project, which is currently 97 percent complete and began operating on a trial basis in January of this year.
According to Long Son Petrochemicals, the project is entering its final phase, so the application of preferential policies approved for the project is critical.
These preferential policies include an import duty exemption applicable to key materials for production for 30 years from the operation date of the project.
In addition, polypropylene, polyethylene, sodium hydroxide, and vinyl clorua monome used in the project are entitled to a three-percent most favored nation import tariff within 10 years from the commercial operation date of the project.
Furthermore, the project will also enjoy a 10-percent corporate income tax for three decades from the time it generates revenue as well, as a tax exemption for four years and a tax reduction by half in the next nine years after it reports a taxable income.
Long Son Petrochemicals said that that adjustments in the scale, investment, and progress of the project for the 2019-22 period in its investment certificate were approved in 2020.
The prime minister also asked the Ministry of Finance to instruct the People’s Committee of Ba Ria-Vung Tau Province to review the application of incentives for the project.
However, since the approval of adjustments to the investment certificate in April 2020, the revision of preferential policies for the project has yet to be completed.
In December 2021, the investor wrote to the Ministry of Finance proposing speeding up the process.
Key material imports, which are entitled to a tax exemption, were planned to be shipped to Vietnam last month and the company should confirm the orders one to two months in advance.
The company has worked with customs agencies in Ba Ria-Vung Tau Province to adopt preferential policies but the confirmation of the General Department of Vietnam Customs or the Ministry of Finance is required.
However, both agencies have yet to make the confirmation, resulting in the project’s slow progress.
Therefore, Long Son Petrochemicals proposed the Ministry of Planning and Investment and the Ministry of Finance quickly draw a conclusion on incentives for the project and guide the implementation of these incentives.
The Southern Petrochemical Complex project was kicked off in February 2018 in the Long Son Industrial Park in Ba Ria-Vung Tau Province.
The investment certificate for the project was passed in 2008. After five adjustments, Vietnam Oil and Gas Group and Vietnam National Chemical Group withdrew from the project.
Thailand’s Siam Cement Group, the investor of the project, later raised its investment in the project from $3.7 billion to $5.1 billion.
The project, once completed, will help reduce petrochemical imports and supply materials for domestic industries.