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Environmental Challenges in Vietnam


Like many other developing countries, Vietnam is currently facing serious problems because of the degradation of its natural resources and the resulting decline in environmental quality. After more than 30 years of war, the Vietnamese people and government are making significant efforts to develop the country, while trying to conserve its resources and protect the environment.

The ongoing transition from a centralized planned economy to an open market, with accelerated economic growth, the liberation of agricultural and industrial production, as well as the development of exports and participation in regional and international trade, all present great benefit to the people of Vietnam, as they strive to increase the living standards of the country.

The agriculture and forestry segments have traditionally been the major contributors to the national income in Vietnam, providing 30% of GDP and employing 70% of the labor force. Over the past 5 years, the industrial sector has grown at an average of 13.6% per annum and reached 14.1 % in 1996, generating 31 % of GDP. Foreign investment has increased since the implementation of the Foreign Investment Law in 1988. As of early 1998, foreign investment commitments totaled $30 billion.

On its economic development path, Vietnam is being confronted with a number of significant trade-offs in its developmental objectives, particularly between growth and the environment. Trade-offs involving the environment are particularly problematic because economic growth and preserving the environment for future generations are sometimes in direct conflict with one another.

Current situation:

Vietnam is presently faced with serious environmental problems. Water and air pollution, deforestation, degradation of land resources, soil erosion, over-exploitation of natural resources, threats to ecosystems and depletion of genetic resources are among the most alarming challenges.

Water supply and sanitation

Water-related issues are now the major emphasis, because of the direct correlation between mortality rates and diseases linked to water supply and sanitation. Today, about 20% of child deaths are a result of dysentery from water-borne sources. About 53% of the urban population and 32 percent of the rural population has access to potable water. For those that have water access, existing water supply facilities have been deteriorating due to insufficient investment, poorly trained personnel and uncoordinated planning. Water supply and distribution facilities are generally old and in poor condition throughout the country. The water supply in urban areas is substandard. Urban districts that are not serviced by piped water supplies must rely on alternative sources, such as shallow wells, rivers, canals, and water vendors.

Regarding waste water, most urban areas have basic combined drainage systems for stormwater, septic tank effluent, and suage. Many were constructed several decades ago and are beyond repair, leading to cross-contamination. Others have deteriorated significantly and require increasing maintenance and rehabilitation. There are no municipal water and sewage treatment facilities operating in Vietnam.

Pollution in urban centers

Urban centers, especially Hanoi and Ho Chi Minh City, are feeling the burden of increasing urban migration. While today 80% of the population is rural, the World Bank predicts that by the year 2030, 50% of the population will live in urban centers' This migration has created severe pressure on the already dilapidated municipal water supply and drainage systems. It has also overloaded solid waste collection and disposal systems. Currently, the country generates 9,000 cubic meters per day of solid waste, mostly domestic (organic) waste. Only 4,000 cubic meters per day is collected and put in landfills, with the balance burned or dumped into rivers, ponds, lakes, canals and uncontrolled sites. Annually, this amounts to almost 2 million cubic meters of solid waste which is dumped, unsupervised, into the environment.

The air quality within urban areas is deteriorating. The rapid growth of motor vehicles on the road, all using leaded gas, has increased ambient concentrations of pollutants such as carbon monoxide, nitrates, suspended particles and lead. Vietnam's industrial growth has brought with it air and water pollution. The most notable polluters in the heavy industry sector are the power plants, iron and steel mills, pulp and paper factories, cement plants, chemical plants, and the fertilizer companies. The more serious pollution problems in the light industrial sector involve companies in the food processing, textile dyeing, electroplating and leather tanning sub-sectors.

Ecology imbalance

However, the most serious environmental problems have been on the ecological side. Over two-thirds of Vietnam's people depend on agriculture, fishing, forestry and other natural resource-based activities. Deforestation, soil erosion and degradation, drought and flooding and dwindling fish stocks are threatening the livelihood of significant numbers of people. With a population growth rate of around 2 percent per year, the pressures on a dwindling resource base can be expected to intensify. Overuse of fertilizers and pesticides is giving rise to an accumulation of dangerous levels of toxic substances in soils in the Mekong Delta and the Red River Delta that may adversely affect crop production. The fishing industry has been damaged by the clearing of mangrove forests, pollution of fresh water habitats, and unsustainable fishing practice.


Deforestation is a key issue. Extensive deforestation has resulted in widespread soil erosion, siltation, flooding, and periods of drought. Over the past fifty years the forest cover has shrunk from 14.3 million hectares to less than 9 million hectares. Natural forest cover has dropped from 43% in 1943, to 23% in 1982 and down to 20% today. The Red River's water quality has deteriorated significantly due to deforestation upstream. The main causes of deforestation now include "slash and burn" practices, primarily by ethnic minorities in the highlands, and the use of forest cover as a source of fuel and commercial logging. Vietnam banned the export of logs, but transboundary illegal logging activities seriously violate this regulation. Energy alternatives to fuel wood must be developed and slash and burn practices curtailed, although solutions have been elusive so far. Investment priorities for the forestry sector include re-greening of barren lands, reforestation of mangrove forests, and incentives to minority people, and settlers in the new economic zones for replanting trees. The re-greening of barren lands is dependent on identifying and supplying fast growing species that require little care and maintenance, while at the same time finding marketable products from these species.

Government actions:

In December 1993, Vietnam adopted the country's first Law on Environment Protection (LEP). The law is seen as not only a framework for addressing many issues relating to the environment and pollution abatement, but also a mandate by the government for municipalities and industry to finally focus on the problems and solutions. In late 1994, the government issued Decree 175/CP on "Guidance for the Implementation of the Law on Environmental Protection", which provides significant guidance to the implementation of the law. The law gives authority to the Ministry of Science, Technology and Environment (MOSTE) for the management of the environment throughout Vietnam. A special unit of MOSTE, the National Environmental Agency (NEA), has been formed to assist MOSTE in these duties. The NEA is the Vietnamese government's equivalent of the U.S. Environmental Protection Agency (EPA). MOSTE serves as a coordinating body to manage interministerial efforts involving the environment and pollution protection and control. The LEP also clarifies that Departments of Science, Technology and Environment (DOSTES) of each province's People's Committee are responsible for the management of environmental protection activities in that locality.

A National Conservation Strategy was prepared in 1985. In June 1991, The "National Plan for Environment & Sustainable Development 1991-2000: A Framework for Action" was approved by the Chairman of the Council of Ministers. On the basis of this national plan, various activities are being carried out in the country in regards to environmental legislation, institution, management, education, research and experimentation.

In April 1996, the Prime Minister signed Decree No. 26/CP on Administrative Sanctions Regulations of LEP's Violations. Since the promulgation of the decree, several local companies have been sanctioned for violating the environmental protection regulations required for their operations.

Several nation-wide mass environmental movements, such as tree planting, have been launched by the government in order to re-green the barren land and to correct the shortcomings caused in the development process. The aim of this movement is to reforest 40-50% of the countryside by the beginning of the 21st century.

With a population base of around 77 million and a predicted population of 100 million by 2020, the Vietnamese government is fully aware of its challenging task to harmonize rapid economic development with a healthy environment and sustainable natural resources. Vietnam has been successful in seeking international aid and assistance in dealing with its environmental issues. Since 1990, international financial institutions including the World Bank, ADB, UNDP and OECF and some bilateral aid agencies have granted Vietnam ODA funding for its environmental-related projects. There is also significant local and international non-governmental organization (NGO) work in this area. Besides ODA, several agencies develop Technical Assistance (TA) programs to help the government. These programs, intended to educate the government and industry and develop appropriate policies, both prepare for assistance projects and enhance capacity building within the government.

Water resource projects have been prioritized by the government as well as the donor community. The Vietnamese government has announced a list of priority water resource projects totaling $2.5 billion. These include Urban Water Supply ($872m), Urban Drainage ($890m), Irrigation, Drainage and Flood Control ($653), Waterways ($116m) and finally, Rural Water Supply ($30m). Bilateral and multilateral aid in the water resources sector will approach $1 billion by 2000.


The Vietnamese government is serious about its efforts to protect the environment. While it is unfortunate that Vietnam's environmental degradation may worsen before it improves, the recent efforts by the government to enforce its environmental legislation opens a new, untapped, market for international suppliers of environmental equipment and services.

Periodically, the Vietnamese government issues lists of projects for various investment areas including environmental equipment and services. These projects include a long list of needed water supply treatment plants, water distribution systems, waste water treatment plants, and solid waste disposal technologies.

In terms of actual opportunities for the sale of equipment and services, foreign companies should focus on those projects which have been funded by the multilateral/bilateral ODA agencies, and foreign investors. Generally speaking, there are no funds available from the Vietnamese government for environmental projects.

Therefore, the potential customer base for this industry can be divided into four segments: 1) the bilateral aid agencies (Finland, Sweden, Japan and France), 2) the multilateral aid agencies such as the WB, ADB, UNDP and OECF, 3) foreign-invested Export Processing Zones (EPZS) and Industrial Zones (lZs), and finally 4) foreign joint-ventures and 1 00% foreign-owned enterprises. It may also help to talk to some of the NGOs doing work in this sector.

The ADB gives most attention to water resource projects: 6 (totaled $338m) out of 7 environmental loan projects and 10 ($5,5m) out of 17 TA (Technical Assistance) projects.

The World Bank is currently involved in 3 environment-related projects, of which the water supply project enjoys the largest funding of $99 million. The World Bank is said to be planning a major urban environmental project for 1998, for which it will hire staff and seek supervision from its regional office.

The UNDP gives priority to projects which help strengthen the country's understanding, awareness and management ability of environment. It has also funded some industrial pollution reduction projects in highly contaminated industrial centers. UNDP's total committed capital for environmental projects amounts to approximately $15 million.

The OECF are presently involved in two environment-related projects: Hanoi Urban Infrastructure Development Project (JPY1 1,433) and Pha Lai Thermal Power Project (Environmental Protection portion) (JPY32,529).

In terms of qualifying for projects, U.S. companies can only compete in bilaterally funded projects if they partner with a firm from the aid granting country or if they maintain qualifying registered companies in the aid granting country. The current U.S. market share is relatively small compared to its vast potential ( approximately 7%), mainly due to the trade embargo, which existed until 1995. American products have a good reputation for quality and reliability. American companies should position themselves now to benefit from the recent efforts made by the Vietnamese government and ODA funding agencies to improve the environment of Vietnam.

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