Southeast Asia | Formosa factory restart favors foreign over local interests

Formosa factory restart favors foreign over local interests

Vietnam is set to allow a Taiwan-owned steel plant to restart operations one year after a toxic spill that sparked nationwide environmental protests

Phnom Penh, April 10, 2017 3:12 PM (UTC+8)
Vietnamese protesters demonstrate against Taiwanese conglomerate Formosa during a rally in downtown Hanoi on May 1, 2016 against a toxic spill that caused massive fish deaths along the country's central coast. Photo: AFP/Hoang Dinh Nam
Vietnamese protesters demonstrate against Taiwanese conglomerate Formosa during a rally in downtown Hanoi on May 1, 2016 against a toxic spill that caused massive fish deaths along the country's central coast. Photo: AFP/Hoang Dinh Nam

Vietnam is poised to permit the Taiwan-owned Formosa Plastics Corp. steel plant to restart trial operations a year after the facility dumped toxic waste into the sea that polluted more than 200 kilometers of Vietnamese coastline spanning four provinces.

The toxic spill, widely considered the country’s worst ever environmental disaster, resulted in massive fish deaths and adversely impacted at least 250,000 workers and others who rely on fisheries for their livelihoods, according to official estimates. Independent analysts put the environmental and human costs even higher.

The environment ministry announced this month that Formosa Ha Tinh Steel, a local unit of Taiwan’s Formosa Plastics, has solved 52 of 53 violations identified in an official investigation into the spill’s causes and effects. The government still needs to give its final approval before tests can commence on the US$11 billion mill’s blast furnaces, reports said.

Formosa has said it will invest an additional US$350 million in the project, part of which will be spent on improving environmental safety measures.  However, the plant will not replace its use of the ‘wet’ coking system, which reportedly caused last year’s toxic spill, with a safer but more expensive ‘dry’ coking system until at least 2019.

The firm has said it hopes to restart commercial production by the end of the year. “We will allow no room for further mistakes,” a company executive told Reuters.

This picture taken on April 20, 2016 shows a man walking among dead fish lying on a beach in Quang Trach district in the central coastal province of Quang Binh. Taiwanese conglomerate Formosa was under attack in Vietnam's normally staid state-media on April 25 over allegations of industrial pollution leaching from a multi-billion dollar steel mill that may have caused mysterious mass fish deaths. / AFP PHOTO / STR
Past mistake: This picture taken on April 20, 2016 shows a man walking among dead fish allegedly killed by toxic waste emitted by Formosa’s factory lying on a beach in Quang Trach district in the central coastal province of Quang Binh. Photo: AFP

That wasn’t the case previously. Last April’s spill sparked rare large-scale demonstrations, including emotive calls for government accountability and punitive measures against Formosa, that some analysts estimated as Vietnam’s largest civil disobedience movement in over four decades of Communist Party rule.

The government responded with its usual heavy hand, arresting an estimated 500 people, several of whom remain in detention on anti-state or other criminal charges. They include independent activists and bloggers who raised questions about high-level Party members’ connections to Formosa and the opaque terms of their settlement.

In June 2016, more than two months after the initial spill, the government finally acknowledged that Formosa was responsible, pledged to investigate the disaster and demanded US$500 million compensation from the Taiwanese firm. At the time, some interpreted the response as a rare government response to public pressure.

A year after the disaster, public dissatisfaction remains acute as perceptions gather that the government has favored foreign over local interests. On April 6, fresh demonstrations were held in Nghe An, Ha Tinh and Quang Binh provinces, all areas adversely impacted by the toxic spill.

Fishermen in those provinces say the waters are still polluted, according to news reports and social media postings. Many have been forced to leave the fishing industry for other professions, decimating communities that have long relied on the sea for their livelihoods. The environment ministry maintains that the affected areas may take as long as ten years to fully recover.

A photo posted to Facebook of this month’s rallies showed a protestor carrying a banner that read: “Government takes money, people take disaster.” But in a country devoid of democracy and rights, the communist regime knows that a fast-growing economy, fueled by foreign industrial investments, is its chief source of legitimacy.

This picture taken on December 3, 2015 shows Vietnamese workers riding motorcycles as they leave the site of the Taiwain-owned steel plant Formosa in the central province of Ha Tinh.This picture taken on December 3, 2015 shows a couple riding a motorcycle pulling a cart on a road past a newly developped residential area for resettled families who were displaced from the site of the Taiwain-owned steel plant Formosa in the central province of Ha Tinh. / AFP PHOTO / HOANG DINH NAM
Expansion plans: The Taiwan-owned Formosa steel plant in the central Vietnamese province of Ha Tinh. Photo: AFP/Hoang Dinh Nam

Gross domestic product (GDP) growth has averaged 6% over the past decade, with GDP per capita more than doubling since the early 2000s. But Southeast Asia’s recent top economic performer could be in for tougher times ahead. Ngo Thang Loi, an economist from the National Economic University, recently described the economy as “a train running on an inclined plane at a slow speed.”

Vietnam recorded its slowest first quarter growth rate in three years, according to figures released by the General Statistics Office last month. Privatization of inefficient state enterprises, known locally as “equitization”, has not happened as quickly as many had hoped, resulting in a substantial drag on government resources.

US President Donald Trump’s decision on his first day in office to withdraw from the Trans-Pacific Partnership (TPP) multilateral trade deal hit Vietnam especially hard. The export-driven economy sells almost 40% of its shipments to the US. Those receipts were set to grow substantially under the US-led deal.

A year after the disaster, public dissatisfaction remains acute as perceptions gather that the government has favored foreign over local interests.

Trump’s subsequent threat to impose border taxes and higher tariffs on certain country’s imports, if implemented to target Hanoi, could mean that Vietnam’s GDP contracts by 0.9% this year, Credit Suisse, an investment bank, estimated in a January report.

Those economic uncertainties likely explain why the government has moved so rapidly to reopen Formosa’s facility, one of the largest foreign invested factories in Vietnam. Apart from the steel-making plant, Formosa plans to expand the wider facility to include a deep-water port and thermal power complex that once complete will be the largest of its kind in Southeast Asia.

Last April, at the height of the environmental disaster, a Formosa spokesman suggested that Vietnam would have to decide between catching fish and building a modern steel industry. That callous comment gave rise to the popular hashtag on Vietnamese social media, “#IChooseFish.”

Women in Mui Ne, Vietnam, wait for the fishing boats to come in.
#IChooseFish: Vietnamese women waiting for fishing boats to return to shore. Photo: Getty Images

An estimated 70% of Vietnam’s 90 million plus population still live and work in rural areas. The Communist Party-led government has put forward a vision to create a modern and industrialized nation by 2035, a plan that depends on consistent high-levels of foreign investment-driven economic growth.

The Formosa controversy has not only pitted the forces of tradition against modernization, it has also laid bare many of the underlying challenges faced by the one-party state. Commentators have noted that the environmental activism that has coalesced around the Formosa spill creates unique problems for the regime.

The government’s response – listening to the broad environmental message but censoring and repressing individuals leading the campaign – may have placated certain pro-Party constituencies.

But the demonstrations, now bubbling up again amid plans to restart and expand Formosa’s previously polluting plant, have proven seminal for a segment of society that feels increasingly emboldened in its opposition to Communist Party rule.

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