The Crown Prince Couple to go on business promotional campaign in Vietnam
From 1-2 November 2022, TRH The Crown Prince and The Crown Princess will visit Vietnam to lead a large Danish business delegation.
At the beginning of November, Vietnam’s capital, Hanoi, will be the setting for a green business promotional campaign in the densely populated country, where the visit’s program will have a special focus on wind energy and energy efficiency. The Crown Prince Couple will lead a business delegation that will participate along with Their Royal Highnesses in seminars and discussions about the green transition together with Vietnamese business leaders and government representatives. At the same time, The Crown Prince Couple’s visit to Vietnam will mark that it has been 50 years since Denmark and Vietnam entered into diplomatic relations.
The upcoming visit will be The Crown Prince Couple’s second joint visit to Vietnam. The first took place in 2009, when Their Royal Highnesses The Crown Prince and The Crown Princess were on a state visit to the country together with Her Majesty The Queen and Prince Henrik. Ten years ago, The Crown Prince participated in the 40th anniversary celebration of diplomatic relations.
Vietnam’s Hai Phong: An Industrial Gateway and Port City
- Hai Phong is the biggest port city of Northern Vietnam, the third-largest city after Ho Chi Minh and Hanoi, and one of the most important industrial hubs of the country.
- Over the past five years, Hai Phong was one of the fastest-growing cities in terms of GRDP across Vietnam.
- With an upgraded infrastructure system, a favorable geographical location in addition to the immense support from the government, Hai Phong carries significant potential for foreign investment opportunities.
Located about 120 kilometers east of the capital Hanoi, Hai Phong is not only the biggest coastal city in the northern region of Vietnam but also one of the major economic centers of the nation. It is among five municipalities of Vietnam, along with Hanoi, Ho Chi Minh City, Can Tho, and Da Nang. With an area of 1,527 square kilometers and a total population of 2.07 million people as of 2021, it is the seventh-most populated city in the country.
Strategically situated on the edge of the Red River Delta and with close proximity to the border with China, Hai Phong serves as a major trading hub. Being the only city in the North that has five modes of transportation, including railways, roadways, airways, inland waterways, and maritime, Hai Phong has the potential to develop into a center of large-scale manufacturing, industrial parks, and economic zones across Southeast Asia.
Hai Phong statistics
In recent years, Hai Phong has managed to maintain its position among the top two fastest gross regional domestic product (GRDP) growing localities in Vietnam. The average annual growth rate of Hai Phong in the 2017-2021 period was 15.26 percent, which is almost double that of the 2012-2016 period, and 2.9 times higher than the national average.
In 2021, Hai Phong ranked first nationwide in terms of GRDP growth rate, reaching approximately US$13.58 billion (current price), up 12.38 percent year on year. Despite having a low growth rate compared to 2017-2019 in part due to the pandemic, the city was among the two localities in Vietnam that achieved a double-digit GRDP growth rate in 2021 (ahead of Quang Ninh with GRDP growth of 10.28 percent).
In the first half of 2022, Hai Phong’s GRDP continued to increase by 10.04 percent compared to 13.22 percent year-on-year.
The industry and construction section continue to grow the fastest at 19.04 percent in 2021. Compared to 2020, the construction sector grew by 7.43 percent, while the industry sector with a growth rate of 20.75 percent plays a vital role in the city’s economy.
The services sector increased by 5.13 percent. The agriculture, forestry, and fisheries sectors slightly increased by 1.49 percent.
Hai Phong’s economic structure continues to shift towards industrialization in the quest for economic development, in which the industry and services sectors’ share of the city’s GDP will be growing while the agriculture sector’s share will be declining.
As of 2021, the industry and construction sectors remained dominant, accounting for the highest share of 52.86 percent of the city’s GDP, followed by the services sector at 37.35 percent. The agriculture, forestry, and fisheries sectors only accounted for 3.97 percent.
Compared to the same period last year, Hai Phong’s total export turnover in 2021 is estimated at US$26.51 billion, up 23.99 percent year on year. Meanwhile, total import turnover in 2021 is estimated at US$25.77 billion, up 25.84 percent year on year.
In addition, the local authorities are stepping up the city’s infrastructure system. According to the People’s Committee Chairman of the city, Hai Phong plans to build another 100 bridges with a total investment of US$3.6 billion. Hai Phong’s Lach Huyen port – the largest deep-sea port in Northern Vietnam will also be expanded with the construction of Terminal 5 and 6. Upon completion, the two terminals are expected to be able to receive vessels of 100,000DWT, facilitating shipments from Northern Vietnam directly to the EU and the US markets.
The Hanoi – Hai Phong Expressway and Hai Phong – Ha Long Expressway are parts of a series of important regional infrastructure projects. Once the Van Don – Mong Cai Expressway’s construction in Quang Ninh is completed, it will create the longest highway in Vietnam, linking all major economic centers, industrial zones, and international airports in the North, including Noi Bai (Hanoi) – Cat Bi (Hai Phong) and Van Don (Quang Ninh), all the way up to Mong Cai international border gate. This will bring down the time and thereby the cost of transportation, fostering cross-border trade between Vietnam and China and other ASEAN countries.
Foreign direct investment
FDI figures and performance
According to the Ministry of Planning and Investment (MPI), as of 2022, Hai Phong was the sixth-largest recipient of FDI in Vietnam with a total registered investment capital of US$24.15 billion. As of January 2022, the city has 12 industrial parks in operation, in which there were 420 FDI projects by foreign investors coming from 36 countries and territories. Most investors are from Japan, South Korea, China, the EU, the US, and Taiwan.
Some major projects include the LG Display project from South Korea (worth US$5.84 billion), the Bridgestone tire plant from Japan (worth US$1.2 billion), and Microsoft and Apple assembly partner – Pegatron electronics manufacturing plant from Taiwan (worth US$481 million).
As reported by the Hai Phong Economic Zone Authority (HEZA), the FDI projects in Hai Phong industrial parks and zones account for more than 60 percent of the city’s industrial production and more than 70 percent of its export turnover.
In 2022, Hai Phong aims to achieve between US$2.5 – 3 billion in FDI, stated by the Head of the management board of HEZA. In the first five months of 2022, the total value of newly registered capital from 30 new projects, adjusted capital from 19 existing projects, and capital contribution or share purchase by foreign investors in Hai Phong reached US$832.72 million. This made up 33.5 percent of 2022’s goal.
The majority of new foreign capital is invested in the manufacturing and processing industry.
Following Resolution No.45-NQ/TW focusing on the economic development of Hai Phong City for the 2021-2025 period, the authorities encourage foreign investments in the high-tech industry, seaports-logistics, and tourism-commerce as the three pillars of Hai Phong’s economy. HEZA also aims to build 15 more new industrial parks with a total area of 6,418 hectares, in preparation for the new wave of foreign investment opportunities.
Government incentives in Dinh Vu – Cat Hai Economic Zone
The Dinh Vu – Cat Hai Economic Zone is one of the major coastal economic zones in Vietnam and is currently home to eight industrial zones in Hai Phong. Under the current law, Dinh Vu – Cat Hoi enjoys many investment incentives:
- Incentive tax rate of 10 percent within 15 years (calculated from the first year the enterprise has revenue from new investment projects); and
- Tax exemption for 4 years, and reduction of 50 percent for the next 9 years (calculated from the date of taxable income from the new investment projects);
- Personal income tax: reduction of 50 percent for those who directly work in the economic zone; and
- Import-export tax, value-added tax, special consumption tax: tax exemption in non-tariff zones.
Hai Phong as a China+1 location
With such rapid development into a major manufacturing hub, Hai Phong is a strategic investment location for foreign investors considering supplementing their manufacturing operations based on the China plus one strategy. Investors can choose to set up alternate production facilities in another competitive market such as Vietnam for supply chain diversification. In May 2020, Germany’s Tesa, an industrial adhesive tape manufacturer, confirmed to invest US$55 million into Haiphong following the China plus one model and reiterating Hai Phong as a manufacturing base.
In 2020, Hai Phong ranked 2nd out of 63 provinces in Vietnam, in terms of provinces having the most favorable business environment, according to the 2021 Provincial Competitiveness Index (PCI) assessment. The Index of Industrial Production (IPP) of Hai Phong in 2021 is estimated to increase by 18.15 percent year on year, which is among the highest growth rates of provinces and cities with large industrial-scale production in Vietnam.
With an advantageous geographical location, in addition to the infrastructure boost as well as numerous incentives to attract FDI from the authorities, the ongoing industrial development of Hai Phong will not only strengthen Vietnam’s connection with the global supply chain, but also make it one of the ideal locations for investors who are considering shifting their manufacturing operations and increase trade with the East and Southeast Asian countries.
FROM THE BEGINNING OF THIS YEAR
Sweden exports to Vietnam
Sweden imports from Vietnam
Denmark exports to Vietnam
Denmark imports from Vietnam
Norway exports to Vietnam
Norway imports from Vietnam
Bright prospects for EU-Việt Nam trade
The EU has always been the most important partner of Việt Nam as the latter has always been an attractive investment destination for European firms.
The EU has always been the most important partner of Việt Nam as the latter has always been an attractive investment destination for European firms, according to Phạm Tấn Công, Chairman of the Vietnam Chamber of Commerce and Industry, at the Việt Nam-EU Agribusiness Forum on July 11.
Công said the EU-Vietnam Free Trade Agreement (EVFTA) has improved bilateral trade and kept Việt Nam afloat at a growth rate of 2.58 per cent during the pandemic. In 2021, Vietnamese exports to the EU hit US$40.6 billion and imports hit $16.89 billion, up over 14 per cent year-on-year.
The EU remains Việt Nam’s third-largest agricultural importer with an annual turnover of $5.5 billion. However, the figures account for just 4 per cent of the EU’s total agricultural imports, indicating that room for trade growth is still ample for Vietnamese producers.
He recommended EU investors consider pouring money into four northern provinces – Hưng Yên, Quảng Ninh, Hải Phòng and Hải Dương – since they are the most economically dynamic provinces in Việt Nam.
These provinces boast energic local governments, favourable conditions for investment, the best highways, international airports, deep-water ports, industrial parks and a population of seven million, well-suited for high-quality agricultural production that would bring more Vietnamese tropical produce to the EU market.
Phùng Đức Tiến, Deputy Minister of Agriculture and Rural Development, remarked that EU and Vietnamese agricultural exports never compete but support each other.
Việt Nam exports coffee, nuts, pepper, seafood and wood products to the EU whereas trade includes agricultural equipment, machines and animal feed in the other direction.
Agro-forestry-fishery trade between the two partners rose from $4.3 billion in 2015 to $5.2 billion in 2021, and reached $2.7 billion in the first five months of 2022.
The deputy minister underscored the EU as a key partner and a large importer of Vietnamese farm produce. Bilateral commercial figures have been increasing steadily since the EVFTA came into effect.
He said his ministry is ready to closely cooperate with the EU in trade facilitation, to ensure technical requirements be applied in line with global norms and no trade barriers be established without adequate evidence.
He also said Việt Nam aims to leverage more EU foreign direct investments to develop agricultural knowledge and establish a circular and organic agriculture to help Vietnamese producers gain ground in global markets.
“We hope that Vietnamese and European firms join forces to build strong agricultural value chains that help bring the two markets closer,” he added.
Janusz Wojciechowski, EU High Commissioner for Agriculture, asserted that Việt Nam has become an important partner of the EU in Southeast Asia since the EVFTA took effect in 2020.
Thanks to the agreement, EU customers have had a chance to get a taste of Vietnamese tea and coffee and get their hands on various other products including nuts, spices and fruit.
Some of these products were granted Protected geographical indication such as Lục Ngạn seedless lychees and Bảo Lâm seedless persimmons. Others products benefited greatly from the preferential tariffs under EVFTA, entering the EU market duty-free.
However, the commissioner remarked that bilateral trade has been skewed in favour of Việt Nam by around 1 billion euros. He opined that both sides should create a more balanced trade pattern in the short term to maintain sound commercial relations.
He also expressed his wish to discuss with Vietnamese authorities on the abolishment of some existing trade barriers related to phytosanitary standards to further boost bilateral trade. Việt Nam’s mounting excise tax on alcoholic beverages is also a matter of concern for EU exporters.
He revealed that the EU will support Vietnamese cacao through a project of around 1.6 million euros in the coming years. The project is part of a series of EU projects designed to help Việt Nam develop sustainable agriculture and deal with environmental problems.
Industrial production up 8.48 per cent in H1
The IIP in the second quarter also saw a positive increase of 9.87 per cent year-on-year as many industrial firms have resumed and recovered their business activities, the GSO said.
The index of industrial production (IIP) in the first half of this year surged 8.48 per cent over the same period last year, according to the General Statistics Office (GSO).
The GSO said that the IIP in the second quarter also saw a positive increase of 9.87 per cent year-on-year as many industrial firms have resumed and gradually recovered their business activities.
During the six months, the processing and manufacturing industry posted the highest industrial output growth of 9.66 per cent. It was followed by electricity generation and distribution (6.51 per cent), electricity production and distribution (6.1 per cent) and the mining industry (2.28 per cent).
Key industries that recorded high increases in H1 include clothing, up 23 per cent; electrical equipment (22 per cent); pharmaceutical and medical materials (17.5 per cent); leather (13 per cent); and electronics, computers and optical products (11 per cent).
On the contrary, several industries saw a decline in industrial production, such as repair, maintenance and installation of machinery and equipment, down 11 per cent; rubber and plastic products (8.5 per cent); coke and refined petroleum products (1.4 per cent) and crude oil and natural gas (1.2 per cent).
Several key industries recorded high growth in the period, including clothes (up 22 per cent); electricity equipment (20.4 per cent); leather and leather products (13.5 per cent); electronics, computers and optical devices (11.6 per cent); and metal production (11.5 per cent).
The GSO also named key industrial products with strong IIP increases, including telephone components with 22 per cent; beer (14 per cent); urea fertiliser (13.5 per cent); processed seafood and automobiles (12 per cent) and clean coal (10 per cent).
Some products decreased compared to the previous year, such as televisions (18 per cent); aquatic feed (7 per cent); mobile phones (4.3 per cent); NPK fertiliser (4 per cent) and motorbikes (3.5 per cent).
From January to June, the IIP rose in 61 out of 63 provinces and cities, with significant growth seen in several localities, which experienced a strong recovery in the manufacturing and processing industry thanks to the successful containment of COVID-19 such as Bắc Giang (46 per cent); Lai Châu (45 per cent); Quảng Nam (25 per cent) and Hà Giang (24 per cent).
According to the GSO, the consumption index of the processing and manufacturing industry in H1 rose 9.4 per cent compared to last year’s corresponding period. In June, the index dropped 1 per cent month-on-month and advanced 9.4 per cent year-on-year.
The average inventory rate of the processing and manufacturing industry in the six months was 78 per cent, much lower than the 92 per cent recorded in the same period last year, the GSO noted.
As of June 1, the number of employees working in industrial enterprises rose 1.3 per cent over the previous month and 5.8 per cent compared to the same month last year.
The number of employees in State-owned enterprises decreased 4.8 per cent year-on-year, while those in non-State firms slumped 0.3 per cent, and those in foreign-invested businesses increased by 7 per cent.
Manufacturing sector expansion
According to S&P Global, the Vietnamese manufacturing sector ended the first half of 2022 firmly in expansion mode as a lack of disruption from the COVID-19 pandemic supported demand and production.
Firms were also increasingly successful in hiring additional staff, with the rate of job creation quickening to a three-and-a-half-year high, S&P Global said in a report released last week.
Further marked increases were seen in both output and new orders at the end of the second quarter, as relative market stability due to a lack of pandemic disruption enabled demand to grow, adding that rates of expansion were particularly pronounced in the consumer goods category.
Rising new orders encouraged manufacturers to expand workforce numbers again during June, extending the current sequence of increasing staffing levels to three months.
“The Vietnamese manufacturing sector ends the first half of 2022 in good health, with firms feeling that they’ve seen the back of the pandemic and can generate new business at a solid rate,” Andrew Harker, Economics Director at S&P Global Market Intelligence, said.
The country’s Manufacturing Purchasing Managers’ Index (PMI) posted 54.0 in June, down slightly from 54.7 in May but still signalling a solid monthly improvement in the health of the sector, according to S&P Global.
Vietnam’s Blue Economy Potential and Opportunities for Investors
Vietnam’s blue economy is a relatively new concept that encompasses economic activities related to oceans and seas while improving livelihoods and preserving the health of the ocean ecosystem. The sea and coastal areas of Vietnam account for approximately 47-48 percent of the country’s GDP. Vietnam Briefing highlights some distinct characteristics of the blue economy as well as opportunities for investors.
The development of Vietnam’s blue economy is a relatively new concept but is necessary to address the environmental issues, its carbon footprint, and the exploitation of natural resources along its coastlines.
What is the blue economy?
The blue economy is a relatively new term. It means the assurance of economic growth and the development of marine ecosystems while ensuring the reasonable exploitation of natural resources with lesser environmental impact. It also means the construction and development of infrastructure adaptable to climate change and extreme weather.
The World Bank describes the blue economy as the sustainable use of ocean resources for economic growth while improving livelihoods and preserving the health of the ocean ecosystem.
As such, the blue economy is the central point to enable Vietnam achieve its Sustainable Development Goals (SDGs) by 2030 with vision to 2045, with the environment being one of the pillars of this development.
The blue economy would also help meet Vietnam’s climate change goals. Recent studies show that a 1-meter rise in sea level would impact 11 percent of Vietnam’s population and 7 percent of its agricultural land. Depending on the severity of sea-level rise, climate change may eventually expose 38‐46 percent of Vietnam’s population to flooding.
The development of the blue economy, however, must be based on a balanced growth of six industries: fisheries and aquaculture; oil and gas; marine renewable energy; coastal and marine tourism; the maritime sector; and environment and ecosystems.
Opportunities for the development of Vietnam’s blue economy
Vietnam’s long coastline is advantageous as it is situated near international and regional maritime routes. Vietnam’s coastal areas lie in areas with high economic growth rates and serve as a bridge between several regional trading partners and shipping routes.
These are favorable conditions for Vietnam to develop its maritime sector, shipbuilding, and logistics industries, given its 114 estuaries, and 52 deep-sea gulfs along the central coast (gulfs, bays, and lagoons stretching over 60 percent of the coastline), and over 100 positions for construction of big seaports.
Vietnam is home to several natural resources and contains about 35 minerals of various groups: fuel, metal, building materials, precious and semi-precious stones, and liquid minerals. Sand mines under sea beds in Quang Ninh province and Hai Phong city have a deposit of over 100 billion tonnes and nearly 9 billion tonnes respectively.
Besides, the potential of seawater resources is significant with diverse types of marine energy such as natural hydrate, tidal energy, wave energy, and heavy-water nuclear energy.
Vietnam is also rich in marine resources. Apart from fish, a major resource, there are many high economic resource value items such as shrimps, crabs, sea cucumbers, and seaweed. The fish deposit in Vietnam’s sea areas is approximately 5 million tons/year, with the annual fish catch at around 2.3 million tons.
As per the Ministry of Agriculture and Rural Development (MARD), annual marine aquaculture output is expected to reach 850,000 tonnes and export turnover is estimated to be between US$800 million and US$1 billion. Moreover, the 3,260 km-long coastline and thousands of islands constitute favorable conditions for Vietnam to develop sea tourism. Along its coast, there exist about 12 beaches, some ranked as the best in the world.
Vietnam’s coastal areas lie in a tropical climatic zone with many parts enjoying long sunshine hours throughout the year, which is ideal for tourists, especially those coming from countries with cold winters.
Regulations that foster the development of the blue economy
Vietnam has launched many strategies and policies to help in transitioning its economy from a “brown” to a “green” one, including the National Strategy on Green Growth 2021-2030 with a vision to 2050; the strategy on sustainable exploitation and use of marine resources, and the protection of marine environment up to 2020, with a vision toward 2030, among others; and made many international commitments on environment and development, such as the net-zero carbon commitment at COP26.
Vietnam has approved several laws, and master plans for the deployment of green growth tasks, such as the National Action Plan on Green Growth, the 2012 Law of the Sea of Vietnam, and the 2015 Law on Marine and Island Resources and Environment.
Additionally, the government also issued Resolution 36-NQ/TW on October 22, 2018, on the Strategy for sustainable development of Vietnam’s marine economy to 2030, with a vision toward 2045.
The strategy states that by 2030, the marine economic sectors will be developed in the following priority order: sea tourism and services; maritime economy; exploitation of petroleum and other marine minerals; marine resource farming and exploitation; coastal industries; renewable energy and new marine economic sectors.
It can be observed that resource-intensive economic sectors have been given lower priority and replaced by natural resource-saving ones such as tourism and the maritime industry.
The highlight of the strategy is the inclusion of marine resource farming besides exploitation. In addition, it lists the renewable energy industry and new marine economic sectors, such as wind power, on-sea solar power, sea-tide power, and exploitation of marine biodiversity resources (marine pharmaceuticals, seaweed growth, and processing).
This is the first time that Vietnam has developed robust plans related to the blue economy to sustainably develop the marine economy in line with international standards, which shows the country’s objective toward a more sustainable marine industry.
Opportunities for investors
The maritime industry
Investors currently have many opportunities to participate in maritime projects after Vietnam’s master plan for seaport system development was approved.
The master plan for 2021 – 2030 is among the five national plans developed by the Ministry of Transport and approved by the Prime Minister. The highlight of the master plan is the list of seven infrastructure development projects using non-budget capital sources.
The total capital needed for these projects in the 2021-2025 period is about VND 150,357 billion (US$6.5 million) and VND 146,643 billion (US$6.3 million) in the 2026-2030 period. Among them are projects that are attracting special attention from domestic and foreign investors such as Lach Huyen port, Tran De – Soc Trang port, Nghi Son – Thanh Hoa port, Cai Mep Ha port, and the shallow port system.
The shipping industry itself is also a potential industry in the marine economy for investment with attractive tax incentives and policies, which Vietnam Briefing has discussed in the previous article.
Offshore wind power industry
Another marine industry that can offer significant potential for foreign investors is wind power. It is forecast that total wind capacity will increase from around 3GW in 2021 to just under 13GW by 2030, with the government also looking to develop 21GW of offshore wind by 2045.
Additionally, Vietnam is an energy transition leader in ASEAN as the country plans to develop its wind power capacity outpacing its neighbors such as Thailand and the Philippines.
Vietnam has a geographical advantage, particularly it’s over 3,000-kilometer coastline with high wind speeds, favorable for offshore wind development.
Regarding the policies, unlike in other countries, like the Philippines, there are no restrictions on foreign direct investment. Investors can therefore have 100 percent foreign ownership.
Vietnam has also had a generous tariff of US$0.085/kWh for wind projects, which helped spur a flurry of development ahead of that tariff’s expiration on 1 November 2021.
As another resource-saving marine industry, tourism also boasts attractive investment opportunities for investors. This proves feasible now as Vietnam has reopened after the pandemic, with international flights resuming, and rapid COVID-19 test requirements on international entry no longer required.
According to data from the General Statistics Office (GSO), in the first two months of 2022, international visitors to Vietnam were estimated at 49,200 arrivals, up 71.7 percent over the same period last year.
Many resort real estate projects have announced investment policies or officially opened for sale on the market from the beginning of 2022.
Particularly, the central provinces such as Binh Thuan, Khanh Hoa, and Thua Thien-Hue, known as the center of coastal tourism, have also introduced many large-scale real estate projects, catering to the tourism industry.
As Vietnam aims to reach net zero-carbon status by 2050, sustainable development will be the main theme that covers all economic sectors in Vietnam, including the marine economy. Therefore, with the country’s supportive government policy-making and advantageous natural resources, the blue economy now emerges as another potential investment opportunity for investors.
Vietnam’s Circular Economy: Decision 687 Development Plan Ratified
Vietnam is shifting from a linear economy toward a circular economy, targeting sustainable economic development for a more competitive economy. To realize that goal, the government recently issued Decision 687 on circular economy development which was followed earlier by the revised Law on Environmental Protection (LEP). Vietnam Briefing highlights key updates while looking at what these changes would mean for businesses and investors.
Vietnam’s economic activities have been mainly based on a linear economy which means taking a traditional approach to the “take-make-dispose” model. In this model, the use of collected raw materials is maximized during the production process, eventually resulting in the disposal of unusable materials.
This tends to produce a significant amount of unwanted, and sometimes dangerous landfill waste while contributing to the scarcity of raw materials given their irrational usage.
Currently, about 85 percent of the waste generated in Vietnam is buried without treatment in landfill sites, posing tremendous detrimental effects to the environment.
However, Vietnam has been gradually transforming into a circular economy. The circular economy is based on a three-pillar system involving the “make-use-recycle” model, which promotes waste reduction and lowers resource extraction through recycling, reducing, and reusing.
The concept of a circular economy treats used plastics as valuable material resources to be recycled rather than as waste to be discarded. This is highly favorable to promote sustainable development as it introduces an opportunity for Vietnam to scale up recycling and other plastic circularity efforts.
Plastic and waste management situation in Vietnam
As an emerging industrial hub with accelerating economic growth, Vietnam has severe environmental issues, particularly in waste management and plastic pollution. The total volume of waste each year in the country is approximately about 25.5 million tons, of which 75 percent goes into landfills.
According to the World Bank, Vietnam is among the top four generators of plastic waste, at 280,000 tons per year. The pandemic has exacerbated this situation following the increased usage and disposal of facemasks, sanitizer bottles, and e-commerce packaging.
With growing urbanization and a rising middle class, the consumption and demand for plastics have also grown rapidly in consumer packaging, construction, household goods, and automotive industries.
In 2019, the plastic industry contributed about US$17.5 billion to Vietnam’s economy, equivalent to 6.7 percent of the country’s GDP. On average, a Vietnamese now consumes 41.3 kilograms of plastics a year, equivalent to 7,600 plastic grocery bags.
To tackle the situation and towards a sustainable economy, the government has been deploying long-term action plans and setting ambitious recycling targets.
National action plans and strategies
Conscious of growing marine pollution, Vietnam has launched a national action plan for the management of marine plastic litter, aiming to reduce 75 percent of Vietnam’s marine plastic debris by 2030. By then, the country strives to eliminate the use of single-use plastics and non-biodegradable plastic bags from all coastal tourism areas. Meanwhile, all protected marine areas should be free of plastic litter.
The government has also demonstrated a strong dedication to tackle sustainable development and climate change at the Conference of the Parties (COP26) with its commitment to achieving net-zero carbon emissions by 2050.
More recently, Vietnam’s Deputy Prime Minister Le Minh Khai signed Decision 687 approving the national development plan on a circular economy in June.
Accordingly, the plan aims to decrease greenhouse gas emissions per GDP by at least 15 percent compared to 2014. In addition, the plan sets goals to reuse, recycle and treat 85 percent of plastic waste and reduce 50 percent of plastic waste in the sea and ocean.
By 2030, circular economy models will help raise the rate of urban solid waste collection and treatment to 50 percent, recycling 100 percent of organic waste in the urban areas and 70 percent of organic waste in the rural areas.
By 2025, circular economy projects are expected to contribute to recovering renewable resources, reducing energy consumption, and increasing the rate of renewable energy, rate of forest coverage, and waste recycling.
Particularly, the plan highlights the importance of increasing the awareness and investment of domestic and foreign enterprises and investors in the circular economy as an approach to successfully adopting a circular economy model.
The plan itself has also been discussed in the recent kick-off conference organized by the Ministry of Natural Resources and Environment, where government leaders, development partners, ambassadors, and experts announce their strengthened cooperation while sharing successful models, concepts, and approaches to a circular economy.
Building on the launch of the National Plastic Action Partnership, the revised LEP, and other plastic pollution reduction actions, this plan continues to be one of the efforts made by the country to incorporate a circular economy across its industries.
Provisions to the Law on Environmental Protection
In January 2022, the revised Law on Environmental Protection (LEP) 2020 came into effect. In general, the law highlights the responsibilities of ministries and localities to integrate circular economy in planning strategies, development plans, waste management, and waste recycling.
The 2020 LEP introduces the concept of circular economy through fostering extended producer responsibility (EPR) policy, highlighting the responsibility of producers and importers to recycle products and packaging. Following this, the government issued Article 54 and Article 55 which details requirements on collection, disposal, and recycling of waste products, plastic waste, and others.
EPR is an environmental policy approach in which a producer’s responsibility for a product is extended to the waste management stage. It was first introduced in the 2005 Law on Environmental Protection, however, to which no mandatory recycling quota for companies was implemented.
This resulted in their reluctance to facilitate EPR given the lack of specifications from the authorities. Therefore, the provisions of EPR in the revised LEP create a legal framework for EPR to be enforced.
Specifically, the law requires that domestic solid wastes must be sorted into reusable or recyclable solid wastes, food wastes, and other solid domestic wastes. Additionally, Article 54 provides that producers and importers of products and/or packages with recycling value are responsible for collecting them for post-use recycling at the obligatory recycling rates.
This applies to both recyclable products and packaging, and waste treatment. There are two options to which manufacturers can comply with the law:
- organize the recycling themselves according to the given rates and specifications; or
- contribute financially to the Vietnam Environment Protection Fund (VEPF) to support the recycling of their waste.
For example, laptops are products of recycling value. As such, they must be collected for recycling at the recycling rate of 20 percent and according to stated (X) specifications. For example, if Producer A sells 3 million kgs worth of laptops on the Vietnamese market in one year under brand A, producer A must collect and recycle 600,000 kg of after-use (abandoned) laptops.
Article 55 states that “Organizations and individuals producing and/or importing packages, containing toxic substances, which are hardly recyclable or impede the collection and treatment, shall pay financial contributions to support daily-life solid waste treatment activities.”
For example, as per the regulations, cigarette producers and importers are required to pay VND 100 (US$0.0044) to the fund for every 20 cigarettes produced. This is because cigarette tubes are difficult to be collected and treated, requiring producers and importers to contribute to the VEPF as stated earlier.
What does it mean for businesses?
Encouraging plastic recycling in businesses is expected to mobilize increased private sector investment to help address plastic pollution while supporting key industries such as tourism, shipping, and fisheries.
The circular economy also presents four benefits for businesses’ sustainable development which are resource efficiency, environment protection, economic development, and social benefits.
Further action from the government to develop the circular economy can also mean an opportunity for businesses. According to a new study by the World Bank (WB), about 75 percent of the material value of recyclable plastics in Vietnam is lost – the equivalent of US$2.2 to 2.9 billion a year – because used plastics are not sorted, collected, or recovered. This is however likely to change with the government’s new Decree 45/2022/ND/CP which mandates separate of trash. The Decree is expected to take effect on August 25.
Plus, recyclers in Vietnam are still small and scattered with a minimal recycling rate compared to the inputs of the economy. Therefore, with increased support from the government with new national plans and strategies, investors can capture the additional material value and generate revenue through the circular economy. Still, market and structural changes as well as first-time investments are prerequisites for the sector.
To comply with the law, Vietnam’s manufacturers and producers will now have to register recycling plans and report recycling results annually to the Ministry of Natural Resources and Environment. Local and foreign-invested companies are also advised to prepare recycling plans and budgets for EPR accordingly to address new requirements imposed by the new law.
However, transforming into a circular economy requires a rigorous regulatory framework that allows all economic sectors to apply the model in their production from manufacturing to consumption and waste management.
With increasing government policies and raising awareness of businesses and the community, Vietnam is set to become a competitive leader in pursuing sustainable economic development.