Feb 15, 2013

Vietnam - A heavier hand to slap polluting FIEs

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Many foreign invested enterprises have contributed to Vietnam’s economic growth—but some have also damaged  the country’s land, water and air, as VIR’s Khoi Nguyen reports.

In late January 2013, Taiwan-backed rubber processing firm Chyun Jaan in northern Hai Duong province was found to have illegally dumped 12 tonnes of harmful waste, including mud and untreated oil, at the fences of its factory.

Earlier in January, China’s sanitary product maker Italisa Vietnam in northern Bac Giang province was found to use a large underground pipe for discharging untreated waste water into the environment.

More investigations of the Italisa Vietnam’s $20 million, 80,000 square metre factory and the Chyun Jaan’s factory are underway.

And in December 2012, South Korea’s fiber maker Sea Han Vina was fined VND176.5 million (almost $8,500) for discharging untreated waste water into the nearby river in southern Binh Phuoc province.

The three latest violations add to a long list of environmental transgressions in Vietnam over the years with many involving foreign-invested enterprises (FIEs).

The Minister of Planning and Investment Bui Quang Vinh said Vietnam’s economic growth over the past years had been fueled remarkably by many FIEs.

“But many FIEs have failed to invest in environmental protection. They are trying to dirty Vietnam’s environment via their backward technologies,” Vinh added. “We cannot sacrifice the target of environmental protection at any price. Especially now is the time for the Vietnamese government to build its green economy,” Vinh said.

A big propellant for growth

The Ministry of Planning and Investment (MPI) reported that from 1987 when Vietnam enacted its Foreign Investment Law to late December 2012, Vietnam cajoled over 14,100 foreign direct investment (FDI) projects registered at over $206.5 billion, of which over $96.6 billion was disbursed.

Most FDI projects were focused on the construction sector (occupying 54.8 per cent of Vietnam’s total FDI registered capital) and the service sector (40 per cent). Localities with the most FDI capital included Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong, Ba Ria-Vung Tau, Haiphong, Quang Ninh, Vinh Phuc and Bac Ninh. Some 96 nations and territories have had their investment projects in Vietnam.

According to the MPI, the FDI sector has made great contributions to Vietnam’s gross domestic product (GDP) growth. This sector occupied 2 per cent of GDP in 1992, but this rate soared to 12.7, 16.98, 18.97 per cent in 2000, 2006 and 2011, respectively.

Do Nhat Hoang, director of the MPI’s Foreign Investment Agency said the FDI sector’s annual growth was always bigger than that of the whole Vietnamese economy. In 2005, while the sector grew 14.98 per cent, Vietnam’s GDP grew 9.54 per cent. The respective rates were 11.44 and 6.79 per cent in 2000, 13.22 and 8.44 per cent in 2005, and 8.12 and 6.78 per cent in 2010.

The other side of the coin

However, Vinh said one of the FDI sector’s most negative impacts on Vietnam was “seriously destroying the environment.”

According to the MPI, many localities have unselectively coaxed FDI projects, which prompted many FIEs, particularly those operating in garment and textile, leather, footwear and packaging production, to use outdated technologies. Some FIEs deliberately exploited natural resources and took advantage of loopholes in Vietnam’s environmental regulations.

For instance, local authorities accused UK’s Rochdale Spears, a manufacturer of high-quality export-oriented wooden furniture at Dong An Industrial Park in southern Binh Duong province, which had intentionally repeated discharging toxic waste into the environment since it became operational in September 2012. Rochdale Spears’ action was opposed by its neighbouring firms such as Rinnai Vietnam, HaSan – Dermapharm and Thien Nam Investment and Development which were badly influenced by the polluter.

The firm was forced to stop production until it could upgrade its waste water treatment facilities.
The Ministry of Public Security’s Environmental Crime Prevention and Fighting Police Department, known as C49 last year discovered nearly 10,000 environmental violation cases, up 27 per cent on-year, with 284 cases and 423 people prosecuted. Of those there were so many foreign polluters.

According to the World Bank, environmental pollution annually cost Vietnam 5.5 per cent of its GDP, with $2.9 billion in 2007 and $4.2 billion in 2008, for example.

Environmental pollution poses both short-term and long-term risks to human health. Annually, Vietnam also suffered from a loss of $780 million for treating pollution-related diseases, the World Bank reported.

“We will have to pay greater prices for damaging the environment if we take no sturdy actions against environmental crimes,” said Deputy Minister of Natural Resources and Environment Bui Cach Tuyen.

In need of tougher punishment

Over the last five years, C49 handled with over 20,000 law environmental violation cases, but none of them were forced to shut down forever.

According to the Ministry of Natural Resources and Environment (MoNRE), authorised agencies’ responsibilities in environmental management at cities and provinces’ industrial parks (IPs) were unclear or overlapped. For instance, environmental police, IPs’ management authorities and local departments of natural resources and environment were entitled to inspect environmental issues at IP tenants. But after a violation case was uncovered, no state management body was defined to be responsible for such case.

Tuyen said it was difficult to shut down operations of polluting firms. For example, Vietnam’s Law on Environmental Protection is being overlapped by some specialised laws on urban planning, investment, construction and water resources.

Under the governmental Decree 177/2009/ND-CP issued four years ago on fining environmental violations, environmental polluters are subject to fines of between $5,300 and $26,300.

However, Tuyen said: “Such fines are too low. Polluters are ready to face punishments rather than investing much cash into developing waste water treatment facilities, which are often expensive.”
Articles 24 of the Law on Fines ratified by the National Assembly in June 2012, stipulates that the maximum fine for environmental violation is VND2 billion ($96,600), a four-fold rise against the current highest level in the existing Ordinance of Fines. This law will take effect in July 1, 2013.

Under this law, violators may also have their licences revoked for one or two years, and foreign violators could be booted out of Vietnam.

The MPI said under its new FDI attraction strategy, specific environmental criteria would be imposed to protect the environment in Vietnam.

“Only when meeting such criteria will a foreign invested project be licenced,” said MPI Deputy Minister Dao Quang Thu, adding that the strategy would include regulations to force operating FDI projects with outdated technologies to upgrade systems to save energy.


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