MAXIMISING THE VALUE CHAIN AND CONSOLIDATION SUSTAINABLE SOLUTIONS FOR ASEAN STEEL INDUSSTRY

Speech of Dr.Do Huu Hao, Vice Minister of MOI at SEAISI Hanoi Conference in Hanoi, Vietnam on May 16-19, 2005

Distinguished guests, Ladies and Gentlemen It is my great honor to attend the SEAISI conference firstly held in Vietnam. On behalf of the host country, I welcome all distinguished guests and wish the conference to be successful. It is a tradition that on beautiful summer days all SEAISI members and its partners meet together to review the last outcome as well as to discuss solutions for further development of the regions steel industry. I hope you will enjoy these days in Hanoi. Here, I would like to share some views on how to develop the Vietnams steel industry under international integration. Ladies and Gentlemen, In the socio-economic strategy for next period, the Vietnam Government firmly defined that the National goal is to become an industrial country by 2020. Toward to this goal, a number of leading industries should be promoted. The steel industry is selected as a key industry in the industrialization process. Over the past decade Vietnams steel industry has made remarkable achievements. During this period, steel consumption grew very sharply, going with industrialization and the steady economic growth of the country. For the last 10 years, steel apparent consumption has grown at an average rate of about 20%. As the Vietnamese economy continues to grow steadily in the future, domestic demand for steel products will also increase at a fairly rapid pace. It is forecast that
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domestic steel demand, currently 6 million tons, will jump to 15 million tons by 2015. In response to rising demand, steel production in Vietnam has undergone tremendous progress. Starting at low level of 100,000 tons in 1990, the steel industry with installed capacity of nearly 6 million tons, can fully satisfy domestic demand for construction steels. Production of construction steel in 2004 reached about 3 million tons. Due to the open policy of the Government, the steel market, previously dominated by the state-owned VSC, is now vigorously invested by local and foreign producers. The product range does not limit to easy kinds like steel bars, wire rods, galvanized sheets but also expands to steel billet and flat sheets. Some modern technology has been applied in the industry. Integrating with the global economy brings the steel industry of Vietnam not only opportunities but also challenges. Viet Nams steel industry faces an alarming challenge. The dramatic increase of prices for raw materials and steel products in 2003 and 2004 confirmed the fact that the Vietnams steel industry is weakly resistant to the fluctuations in the international markets. As the country deepens its integration with the global economy, especially through AFTA implementation and WTO accession, the steel industry has only a very limited time to renovate in order to survive and compete in the more open economic environment. The basic problems are insufficient management skills, overstaffing, unbalanced structure, outdated equipment and the lack of financial resources to invest in new technology. Distinguished guests, Steel remains one of the most important basic raw materials and plays a central role in building the infrastructure of a modern society. It is most widely used in roads, railways, power generation, household appliances, and construction and manufacturing industries. Growth and development of the industry is directly related to the level of economic activities in the respective regions.

To meet rising demand for steel and to avoid heavy reliance on imported steel during process of industrialization, there is a great need to rapidly upgrade Viet Nams steel industry. Toward to this target, Ministry of Industry, as a Government agency in charge for industrial development, would like to confirm that: - Vietnam is deeply committed to international integration and the market-oriented economy. The goal of industrialization and modernization should be achieved through improved competitiveness of the national economy. - The Government will play a crucial role in promoting industries as well as reducing social costs. - Reform of state sector should be accelerated. Going with this, the development of private and FDI sector will be speed up. As an established and maturing industry, the world steel industry has entered into a new age of competition. Spearheaded by China, Asia is now at the core of this global drive. It is projected that demand for steel in Asia will be equal to 50% of the world, and it will be the focus for the global steel industry in the future. In this context, Asean region and China stand as the most promising markets. How can the Asean steel industry prepare to take advantage of this opportunity? Despite of having their own problems, unbalanced and fragmented developments with weak competitiveness are common for steel industry of Asean countries. Ups and downs in prices of raw materials and steel products in the international markets heavily influence the producers in SEA region. The most concerns are material supply, its availability and prices. These factors force steel producers in the region to improve their operation to maximize the production chain value from the front-end side of iron making to the finishing stage of steel products. Another important issue for producers in the region is how to compete with larger and powerful steel producers in their markets. It may be necessary for Asean region to consolidate to be stronger. Taking this opportunity, I would like to call all to strengthen our co-operation for the competitive steel industry in the region.

Finally, I wish you good health, every success and have a nice stay in Hanoi. Thank you for your attention.