Foreign miners find Vietnam no El Dorado HANOI - Geologists should be crawling all over Vietnam, scouring a land that experts believe could hold significant mineral deposits. But tough regulations and high costs have made Vietnam too risky for all but the most hardy foreign miners. Lawyers and diplomats say Hanoi has squandered a golden opportunity to attract foreign capital into the mining sector, create jobs, obtain advanced technology and learn about international industrial safety and environmental standards. They said a critical problem was the 1996 Mineral Law, which governs mining in communist-ruled Vietnam. ``Vietnam could have a very vibrant mining industry but the law is just not conducive to large-scale foreign investment,'' said Australian Ambassador to Hanoi Michael Mann, who has urged the government to make regulatory changes. Under the law, firms can apply for a mining licence only after completing exploration. But the law does not give the explorer exclusive rights to mine their discovery, only so-called ``special rights,'' a term lawyers say is too vague. In addition, miners need a separate investment licence. But the conditions of that licence cannot be negotiated until after exploration, leaving miners exposed to the risk of unfavourable terms on royalties, taxes and other obligations after having sunk funds into exploration. The result: Since the Mineral Law came into effect no big foreign investors have sought mining licences, or even tested the ``special rights'' clause. Hanoi says around 26 exploration licences have been issued under the law. NAME YOUR MINERAL Geologists say Vietnam has significant quantities of copper, gold, tin, lead, zinc, gem stones, nickel, industrial and non-ferrous metals, clay and phosphate. Large deposits of coal have already been surveyed. Mining does take place in Vietnam, but apart from coal extraction much of it is small-scale, illegal and sometimes dangerous -- mercury is still dumped in streams after being used to extract gold from rock. Vietnam has seen little major mining in recent decades also because of war and then central planning policies that only began to be rolled back a decade ago. Mann said the government had agreed to review the Mineral Law. But foreign lawyers involved in the industry said early indications were not encouraging. An April submission by Australian law firm Freehill Hollingdale & Page outlining proposed regulatory changes had not yet received any official response, lawyers from the firm said. The submission said that besides the problems with mining and investment licences, areas allocated for prospecting were too small and the duration of exploration licences too short. The report, which has been seen by Reuters, also said prospecting fees were excessive while Hanoi's right to ban or restrict export of raw minerals increased risks for miners. Requests to interview senior officials in the Department of Geology and Minerals have been unsuccessful. But the Hanoi Moi (New Hanoi) newspaper on May 2 quoted a department official as saying the government saw no problem with the Mineral Law. Indeed, lawyers and foreign miners who have discussed the Mineral Law with officials say the general response is that foreign companies should trust the system. STATE COMPANIES BLOCK THE SHAFT Robert McLean, a geologist who has lived in Vietnam for eight years, said beyond the Mineral Law another problem was that state firms had the industry in a tight grip. ``The state-owned enterprises don't want foreign investment in the sector. There are a lot of vested interests in mining,'' Maclean told Reuters. ``Vietnam has a lot of potential for mining, maybe not as much as Indonesia or the Philippines but better than other countries in the region. But there are very few drill holes out there and very little money being spent on exploration.'' That potential was good enough to attract big players in the early 1990s, but many have since left, including Newcrest Mining Ltd and Westralian Sands Ltd. Westralian recently changed its name to Iluka Resources Ltd Other problems in Vietnam include poor infrastructure for transporting mined minerals, while state and foreign miners have complained about a lack of law enforcement when local people, seeking to exploit minerals, encroach on concessions. Industry executives also say that Vietnam is only focused on attracting big mining players, not realising that a lot of exploration, especially in remote areas, is conducted by nimble entrepreneurial companies. Reuters - July 12, 1999.