A Mining Plan Tests Vietnam's Policymakers

Vietnamese environmentalists and social scientists are growing increasingly concerned over the environmental, social, economic and political implications of a government plan to allow minerals-starved Chinese companies develop massive Central Highlands bauxite mining projects.

Vietnam is estimated to have up to 8 billion tonnes of bauxite ores, used to produce alumina, a white powder that is smelted to produce aluminum. Two big projects to mine bauxite and produce alumina have been kicked off in Lam Dong and Dac Nong Provinces. The country has estimated that it will need up to US$20 billion in investment by 2025 to make use of the resource. Enter the Chinese.

The idea of exploiting rich bauxite reserves is not new. As long ago as the 1980s, when the country was a member of the Council of Mutual Economic Assistance (CMEA), an economic bloc founded by the Soviet Union and other Eastern European communist states, Vietnam brought a program to mine bauxite before the CMEA. But after Soviet analysts studied the feasibility of the program, the CMEA recommended against the idea, mainly due to serious environmental concerns.

Those concerns haven't gone away. The only thing that has changed is the intensity of the opposition and the multiplying of other concerns as well as environmentalists and social scientists have rung alarm bells over the potential destruction.

Bauxite mining involves the discharge of toxic which must be stored safely and permanently. However, the Central Highlands terrain makes it more difficult to safely store the slurry to prevent contamination to the surrounding and downstream areas. In addition, critics see high risk regarding the situation in which the Chinese companies have won both bids to construct two big alumina plants (costing nearly US$500 million each) and possibly will venture into other projects as well.

The concern is that the technologies won't be the best available. Nguyen Thanh Son, a Vietnamese expert in the area and one of the most prominent opponents of the plan, says the Chinese side won the bids is due to the lowering of technology standards by the Vietnamese side so that Chinese companies could offer attractive bidding prices.

China itself has faced serious environmental problems associated with bauxite mining, prompting it to close several mines in Guangxi even with demand for bauxite on the rise. Some critics thus view China's high level of involvement in Vietnam's bauxite projects as a form of exporting environmental degradation while trying to secure a new source of supply.

In terms of economic efficiency, the projects don't seem to fare well even with a simple cost-and-benefit analysis. The Central Highlands is home to important cash crops, coffee, tea, and rubber, that have earned increasing amounts of hard currency through exports. However, the survival of these crops will be in great danger due to two key factors.

First, as more projects are implemented, more land will be cleared for mining and storing the toxic mud. After the bauxite ores are mined, the soil is no longer suitable for growing crops without extensive remediation. Second, bauxite mining and alumina production require extensive water, which is already limited in the region. As a result, water availability for growing will be severely reduced, leading to poorer crops. Together, these two factors raise the spectre of the potential loss of the region's comparative advantage in growing the cash crops and strangle its ability to develop a new comparative advantage in ecotourism, which is increasingly popular worldwide.

The economic costs will even be much greater when other negative externalities, including environmental degradation, are factored in. On the other hand, the benefits are doubtful. It has been pointed out that with the same level of investment, the rate of return of a bauxite project is far less than coffee-growing. Moreover, to be competitive, the production of alumina requires a cheap and readily available source of electricity that Vietnam currently does not have and will not have for any time soon.

With its chronic shortage of electricity, the shifting of this type of energy toward alumina production will further exacerbate the problem, putting other types of production at risk.

With respect to the social and political impacts, the full-scale implementation of the bauxite projects will further marginalize ethnic groups in the region as their cultural green living space is drastically reduced, with the potential to create social tension in an already delicate area. In addition, the presence of Chinese bauxite-related workers in this military strategic region has created an uneased feeling in certain Vietnamese.

Government responses and actions have been inadequate at best. In November 2007, Prime Minister Nguyen Tan Dung signed a directive approving the plan for mining, processing and use of bauxite. However, up to this point, there has not any approved strategic environmental evaluation to assess the environmental impacts of the bauxite plan in accordance with Vietnamese environmental laws.

Vinacomin, the state-owned enterprise in charge of carrying out the plan, held two conferences in 2007 and 2008 to assess the impacts of the bauxite projects. During these occasions, many Vietnamese experts expressed their deepest concerns regarding the serious negative impacts of the plan. However, nothing of significance has materialized to address these concerns since the projects are still underway.

In the face of continued opposition, Prime Minister Dung held a meeting to discuss issues relating to bauxite mining in early January this year. He concluded by ordering the Ministry of Industry and Trade to seek permission from the politburo of Vietnam's communist party to continue the projects and asking Deputy Prime Minister Hoang Trung Hai to hold a scientific conference to address the issues.

Although the conference has been scheduled for some time during the first half of April, Hai already announced last week that the projects in Lam Dong and Dac Nong will continue as planned. That has prompted observers to raise the question whether the conference will produce any meaningful changes that would be accepted by the government.

Given the government's responses, one thing is clear: it has a very determined political will to go ahead with the bauxite plan in the face of opposition. The question that arises is why there is such a strong political will for a seemingly unsound plan. Critics have speculated a few possible answers. The most often mentioned is the influence of China through the political channel at the top level.

What is really at stake now is whether the Vietnamese government has the political courage to meaningfully involve all of the stakeholders and correct the shortcomings before it is too late.

Anh Le Tran teaches economics and management at Lasell College in Massachusetts in the United States.