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SAN FRANCISCO SÃO PAULO SEOUL SHANGHAI SINGAPORE TOKYO TORONTO ZURICH

Há Tĩnh
Investment Opportunities for the Province
26 April 2011
40

Copyright © 2011 by Monitor Company Group, L.P.

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COMPANY CONFIDENTIAL
 Agenda
 Mining

– Waste Management Plant

– Mining College

 Metals

 General Manufacturing – Metal Products

 General Manufacturing – Textiles

 General Manufacturing – Wood Products

 Agriculture

 BPO – ITO

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 Mining
Waste Management Plant
Market Opportunity

 The demand for iron ore and steel in Asia is expected to increase as a result of industrialization and increasing investment in infrastructure
 This demand will be met by limited supply of iron ore globally
 Vietnam can leverage the growing demand through its vast iron ore reserves, measuring up to 1,200 Mn tons in 2008
 Large-scale mining operations will create an opportunity for developing effective waste management systems
 Ha Tinh could develop advanced waste management systems, and later transfer the knowledge to neighboring provinces and countries

Factor Conditions and Enabling Infrastructure

Ha Tinh’s Industrial Growth & Employment
 Mining has displayed high industrial growth rate in Ha Tinh. The growth rate of the sector will further
increase once Thach Khe mine, one of the largest iron ore deposits in Asia, becomes operational Mining
Growth in employment in the mining sector in Ha Tinh (12.9% during 2009–2010) will enable easy access

CAGR (Real GDP



to labor. Also, availability of cheap labor (at ~60% of the national labor cost average in 2008) will

2001–2009)
substantially reduce the operational cost of the plant
 Growing partnerships between local firms and experienced firms (e.g., Cavico Mining) could drive
innovation in waste management projects
 Ha Tinh has access to roads and railway lines for transport of waste
# of Employees (Persons)

Indicative Incentives
 The government is providing financial support for Thach Khe and assistance in securing investors
 Thach Khe Iron Ore JSC is increasingly focusing on solid waste dump construction at Thach Khe for environmental protection
 Railways and roads between Vung Ang and Thach Khe iron mine are being planned and constructed

Target Investment
 Investment Capacity: Investment of up to USD 5 Mn for a plant with capacity for treating 120 tons of waste per day
 Potential Locations: Vung Ang Economic Zone

Key Risks Mitigating Factors

 Weak government support in infrastructure  Construction of Vung Ang Thermal Power plants and hydro power plants

 Lack of low cost transportation from iron ore mine  Government and donor loans for development of infrastructure

 Frequent power cuts disrupt mining operations

Source: General Statistics Office of Vietnam; Ha Tinh Statistical Books; Mining Weekly Website; U.S. Geological Survey; Vietnam News Agency; Monitor Analysis

CAS-COD-Prez-Date-CTL Copyright © 2011 Monitor Company Group, L.P. — Confidential 3

 Mining
Mining College
Market Opportunity

 Mining is a fast-growing sector in Vietnam. Given that the country has vast exploited and unexploited mineral reserves, Ha Tinh can gain first mover advantage
by developing a trained workforce to exploit these resources
 Productivity of Ha Tinh in mining and quarrying is as low as 4% of the national average. The productivity, and hence the industrial output of mining, can be
improved significantly by a trained workforce
 If successful, Ha Tinh will be able to transfer highly developed skills, vast amounts of labor, and capital equipment to nearby mines

Factor Conditions and Enabling Infrastructure

 Exploitation of the Thach Khe mine, which is expected to begin in 2014, will require a large and trained Iron Ore Exploitation of Thach Khe,
labor pool 2011–2057 (Mn tons/year)
10
 Increasing rate of employment in mining sector in Ha Tinh (employment grew at a 12.9% rate during 2009–
2010) demonstrates the interest of the population in mining as a profession 8
 With 97.2% adult literacy rate and nearly half of the working population under 35 years of age, Ha Tinh has 6
access to the required student pool 4
 Increasing internet access in Ha Tinh can facilitate e-learning and distance education
2
 Access to roads and railway lines and can attract students from neighboring provinces
0
2010 2020 2030 2040 2050 2060

Indicative Incentives
 The government is providing financial support for Thach Khe and assistance in securing investors
 Railways between Vung Ang–Tha Khek (Laos) and Vung Ang–Thach Khe iron mine are under planning

Target Investment

 Investment Capacity: Mining college that can train 1,000 students per year
 Potential Locations: Vung Ang Economic Zone

Key Risks Mitigating Factors

 Weak training and research infrastructure  Government and donor loans for development of infrastructure

 Limited availability of qualified labor in supporting industries  On-going development plans, such as mineral exploration, would create

 The population prefers to study in colleges outside the province jobs

Source: General Statistics Office of Vietnam; Ha Tinh Statistical Books; Mining Weekly Website; U.S. Geological Survey; Vietnam News Agency; Monitor Analysis

CAS-COD-Prez-Date-CTL Copyright © 2011 Monitor Company Group, L.P. — Confidential 4

 Agenda
 Mining

 Metals

– Refractory Material Production

– Maintenance Services and Engineering

– Steel Service Providers

 General Manufacturing – Metal Products

 General Manufacturing – Textiles

 General Manufacturing – Wood Products

 Agriculture

 BPO

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 Metals
Refractory Material Production
Market Opportunity

 The demand for refractory material in Asia/Pacific grew at a 9.8% rate during 2004–20091
 In Ha Tinh, four steel mill complexes are being developed that can produce 22 Mn tons of steel per year. The demand for refractory material will further
increase in the province once these complexes are operational

Factor Conditions and Enabling Infrastructure

 Access to international trade routes for convenient import of raw materials such as aluminium, silicon, and Refractory Material Demand
magnesium Worldwide, 2004–20091 (Tons) CAGR
– Proximity to international shipping lines through Vung Ang–Son Duong port 25,000
20,000 + 9.8%
– Access to raw materials in Laos and Thailand via Cau Treo border gate
15,000
 Employment rate is expected to increase in the metal cluster in Ha Tinh. Also, availability of cheap labor (at 10,000
~60% of the national labor cost average in 2008) will substantially reduce the operational cost of the plant - 1.8%
5,000
 Access to roads and railway lines for transport of refractory material to neighboring provinces - 5.2%
0 - 5.9%
– Connected to Hanoi, Da Nang and HCMC through highway 1A and Ho Chi Minh highway 2004 2009
– Existing and planned national, regional and local railway lines
North America

Indicative Incentives

 Initiatives to decrease national trade deficit will drive in-house production of refractory material, which is currently imported
 Tax benefits for investments are available for Vung Ang EZ, including 4 year income tax exemption and 50% tax reduction for the following 9 years

Target Investment

 Investment Capacity: USD 20 Mn investment in a refractory material plant with estimated annual capacity of 10,000–20,000 tons
 Potential Locations: Vung Ang Economic Zone

Key Risks Mitigating Factors

 Limited availability of raw materials  Newer mining avenues are being explored, e.g., MITRACO is exploring

 Unreliable electricity supply titanium and manganese in Thach Ha district

 Coal-fired and hydro power plants are being developed

Source: General Statistics Office of Vietnam; Ha Tinh Statistical Books; VN Steel Website; Business Economics, Palgrave Macmillan; 1’ World Refractories to 2014’,
Feedonia Group; Monitor Analysis

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 Metals
Maintenance Services and Engineering
Market Opportunity

 GDP contribution of the metal cluster is expected to increase at a fast pace for the next 20 years
 This growth will be substantiated by the development of four large steel mill complexes in Ha Tinh and increasing investments in the sector
– Investments from Ha Tinh Iron Steel JSC, Formosa, TATA and VN Steel
 Growth in the metals cluster will lead to increased opportunities in maintenance services and engineering
 Ha Tinh can utilize the investments to develop its maintenance services and engineering industry, and aid the growth momentum of the metals cluster

Factor Conditions and Enabling Infrastructure

Illustrative Maintenance Services
 Large mineral reserves in Ha Tinh can provide the raw material for the production of required
1 Laser Survey and Alignment
machinery
 Low labor cost in Ha Tinh, about 60% of the national average in 2008, can attract maintenance 2 Fabrication and Welding
services business from neighboring countries and provinces Oil and Gas Maintenance
3
 Access to roads and railway lines can facilitate the travel of service staff
4 Repair and Overhaul
– Connected to Hanoi, Da Nang and HCMC through highway 1A and Ho Chi Minh highway
– Existing and planned national, regional and local railway lines 5 Fuel Injector Maintenance

6 Connecting Rod Maintenance

7 Turbocharger Maintenance

Indicative Incentives
 Tax benefits for investments are available for Vung Ang EZ, including 4 year income tax exemption and 50% tax reduction for the following 9 years

Target Investment
 Investment Capacity: USD 10 Mn investment
 Potential Locations: Vung Ang Economic Zone

Key Risks Mitigating Factors

 Limited supply of technical specialists in engineering and science  Employment rate is expected to grow in the metals cluster

 Unreliable electricity supply  Coal-fired and hydro power plants are being developed

Source: General Statistics Office of Vietnam; Ha Tinh Statistical Books; Global Equipment Services Corporation website; Metal Machines Engineering Services website;
HotFrog UK Business Directory; Monitor Analysis

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 Metals
Steel Service Providers
Market Opportunity

 Steel demand in Vietnam has grown at a 17% rate during 2000–2010; it’s predicted that steel demand will further increase with industrialization
 Vietnam has historically imported steel to meet this high demand; trade deficit of total steel products was 5,877 Mn tons in 2009
 Ha Tinh can aid the development of steel service providers, and enable Vietnam to move towards greater import substitution
– Steel service providers will provide steel plates, sheets, slabs, pipes, etc. to industries such as ship building, automobiles and heavy machinery

Factor Conditions and Enabling Infrastructure

 Four steel mill complexes are being developed in Ha Tinh that can produce 22 Mn tons of steel per year. Trade Deficit of Vietnam Total Steel
Once operational, these complexes can provide large quantities of raw material to steel service providers Products, 2005–2009 (Mn tons)
 Low labor cost in Ha Tinh, about 60% of the national average in 2008, will facilitate low operational cost 7,000
 Proximity to international shipping lines will allow Ha Tinh to trade processed steel easily with East and 6,000
South Asia, especially China, Japan, Korea, and India, who will be major trade partners for steel 5,000 Imports
– Trade through Vung Ang and Son Duong ports, and Cau Treo border gate 4,000 Trade 5,877 Mn
 Access to roads and railways will enable transport of products within Ha Tinh and to nearby provinces 3,000 Deficit tons
– Connected to Hanoi, Da Nang and HCMC through highway 1A and Ho Chi Minh highway 2,000 Exports
1,000
– Existing and planned national, regional and local railway lines
0
2005 2006 2007 2008 2009

Indicative Incentives

 Initiatives to decrease national trade deficit will drive in-house production of steel
 Tax benefits for investments are available for Vung Ang EZ, including 4 year income tax exemption and 50% tax reduction for the following 9 years

Target Investment

 Investment Capacity: USD 50 Mn investment in a steel factory with estimated annual capacity of 5 Mn tons
 Potential Locations: Vung Ang Economic Zone

Key Risks and Mitigating Factors Mitigating Factors

 Unclear supply of non-ore raw materials (e.g., coke, oxygen)  Newer mining avenues are being explored, e.g., MITRACO is exploring

 No supporting industries (machine maintenance or manufacturing) titanium and manganese in Thach Ha district
 Investments from Ha Tinh Iron Steel JSC, Formosa, TATA and VN Steel

could aid the development of supporting industries

Source: General Statistics Office of Vietnam; Ha Tinh Statistical Books; Interview with Thach Khe JSC (2011); Interview with Vung Ang Economic Zone Management
Board (2011); Formosa Investment Certificate; Monitor Analysis

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