Vietnam's Development Dilemma

Last December, the five-nation Mekong River Commission agreed to delay the Xayaburi dam project on the lower Mekong River in Laos pending further study, with Vietnam playing a major role in the decision.

It was a rare victory for the environment in Vietnam, however. At a national level, the country remains far from implementing the environmental laws and regulations necessary to guarantee the government’s stated goal of sustainable development. In fact, the Xayaburi opposition appears to critics to be an anomaly. In recent years, not only Mekong projects have raised criticism, but also many others that Vietnamese authorities have planned, including the Son La dam project in Northwest Vietnam, whose construction has already forced the relocation of 100,000 people--mostly from ethnic minority groups.

“Vietnam needs energy to support its economic growth” is the refrain. With economic and industrial growth second only to China, Vietnam’s economic targets are linked to significant increases in air pollution and environmental problems.

According to data published by the UN, Vietnamese greenhouse gas emissions in 2007 were 111.38 million metric tons of CO2, an increase of 420.3 percent since 1990. This raises a number of interconnected problems. First, foreign direct investment is not yet regulated in accordance with rules aimed at sustainable growth, and thus risks undermining the country’s future.

In many cases, Foreign Invested Enterprises are guilty of using equipment and machines that cause environmental pollution, or continue to defy business ethics and sometimes even violate the law. Second, Vietnamese environmental laws lack real enforcement, according to ministry officials and local media.

With gross domestic product (GDP) per capita at $1,160 in 2010, Vietnam is now in the group of low medium-income nations. Even in the midst of the global economic crisis, GDP continued to grow at 6.2 percent in 2008, at 5.3 percent in 2009 and at 6.78 percent in 2010. These numbers clearly show the results in which FDI, together with domestic investment, contributes an important part. By the mid 1990s, FDI into Vietnam was over US$2 billion per year. Due to regional economic crises, the flow then decreased, only to surge once again in 2006 when Vietnam was admitted into the World Trade Organization, reaching an estimated US$10-11 billion in 2010.

Apart from the positive results, however, FDI has focused on short to medium-term targets and the large number of projects in real estate and the hospitality and mining industries confirms this. By contrast, few can be considered long-term investment projects in sectors such as technology, environment, renewable energy or training.

Tran Dinh Thien, director of the Vietnam Institute of Economics, estimates that on average, the capital of FDI projects in the hospitality sector is US$160 million, in real-estate US$150 million, and in the mining industry US$79 million.

Vietnam's ability to attract outside capital and foreign companies' tendency to skirt the rules have contributed to stellar economic results and to a poverty reduction trend welcomed also by international organizations. But at what cost? The young do not receive adequate training, with the country still lacking a highly-skilled workforce that can compete with those of other countries.

“It seems that foreign investors come to Vietnam to set up production bases because they want to exploit the cheap and large labor force in the country,” a Vietnam Business News article complained in November 2010.

But more serious is the environmental impact in a region that is experiencing the effects of climate change. In the medium to long term, the cost of environmental rehabilitation, adaptation and mitigation may exceed the income derived from mining, tourism and the export of low-cost commodities.

The law on environment protection was promulgated in 2005, but as reported on the web site of the Ministry of Natural Resources and Environment, “only in December 2010, the decree on specifying damages was promulgated.” Although the 1999 Criminal Code included a chapter stipulating 10 counts of environmental crimes, “until 2009, the competent agencies still had not released any legal document guiding the investigation and judgment of the criminals.”

Amendments to some provisions of the 1999 criminal code took effect on Jan.1, 2010. But “Meanwhile, the legal document guiding the investigation, prosecution and judgment of environmental criminals has not come out yet,” The ministry said

By the end of 2010, environment police had detected more than 11,000 violations over the previous four years including discharging polluted wastewater, smoke and hazardous solid waste into the environment without treatment.

The Bay Ha Long Company Ltd in the Hiep Phuoc commune of the Nhon Trach district in Dong Nai province, is just one example. The enterprise “received money every month to treat waste, but it never treats waste, and just dumped rubbish at refuse tips,” the environment ministry reported.

More recently, in late November, two companies in the southeastern province of Dong Nai, AB Mauri Ltd. Co and Kim Phong Commercial Production Investment JSC, were suspended for polluting the environment. The cases bring back memories of Vedan, a Taiwanese-invested monosodium glutamate maker caught discharging untreated effluent through secret underground pipes into a local river for at least 14 years. The company was fined 267 million dong (US$13,000), and was asked to pay 127 billion dong ($6.3 million) in order to compensate communities polluted by its operations.

The Vedan case exemplifies Vietnam’s main two problems: lack of rule implementation at national and local levels and a lack of ethics on the part of foreign companies, as always ready to exploit the situation.

“Actually we decide to invest in countries like Vietnam just because of this lack of rules and the ambiguity of clear procedures. We do in developing countries what is no longer permitted in ours,” a western entrepreneur who asked for anonymity told Asia Sentinel.

This behavior also relates to trade. According to the environment ministry: “From 2003 to September 2010, more than 3,000 containers of waste docked at Vietnamese ports which were found unable to meet the requirements to be imported,” containing dioxin and outdated equipment used in the 1960s.

Last but not least, a government announcement that Vietnam will establish a legal environment for green economic development lacks credibility because of the delay in applying the laws already in place.

Vietnam's location makes it one of the countries most vulnerable to the impact of climate change. The rise in sea levels could submerge tens of thousands of hectares of cropland, forcing thousands of families in coastal areas to relocate and dramatically affecting the rise in production.

If Vietnam wants to realize a truly sustainable economic growth, trying to improve its efficiency on mitigation and adaptation programs, it is crucial that the government review the entire policy of foreign and domestic investment and force private companies doing business locally to invest in renewable energy, training and technology, rather than on large resorts with golf courses.

It would be encouraging if Vietnam acted firmly, forcing foreign governments and companies to support decisions based on sustainable economic and industrial growth, a path with substantial room for improvement and development.

Looking at the internal debate among ministerial agencies and a growing public awareness of environmental problems, there are signs that the government is slowly forging this approach. But it is very slowly indeed.

(Roberto Tofani is a freelance journalist and analyst covering Southeast Asia. He is also the co-founder of PlanetNext, an association of journalists committed to the concept of information for change.)