Special edition  » Green development

Since Vietnam started to develop its market economy, foreign direct investment (FDI) and sustainable development have been very important to the country’s socio-economic development.

Sustainable development, with economic growth, social social progress and environment protection, will better people’s lives, especially poor people and also pay attention to the environment. In this context, we must question whether an FDI project is necessary to the country if it has negative inpacts on the environment.

FDI and global economic growth

Professor Nguyen Mai

For forestry or mining sector investment, it could take 10 years to make a profit. It could take many years to construct the North-South rail expressway and also take the same time to make profit on this project. It also takes many years to develop an industry in a country. Therefore, each nation needs a long-term investment policy for sustainable development.

Investment could change the economic development orientation to ensure sustainable development. In industrialising countries like Vietnam, FDI contributes an important part because the total domestic capital cannot meet the investment demand. Both domestic and FDI investment have been considered as decisive factors for Vietnam’s socio-economic achievements over the past two decades.

During 2001-2005, FDI accounted 16 per cent of total social investment capital in Vietnam. The number was 25, 30 and 25.9 per cent in 2007, 2008 and 2009 respectively. Meanwhile, FDI’s contributions to the nation’s gross domestic product (GDP) during 2001-2005 was 14.5 per cent. By the 2009, FDI companies contributed 18.33 per cent to GDP.

Besides contributing to the GDP, FDI also creates more than a million jobs and brings new technology, business sectors, high quality services and management skills to Vietnam.

In 1972, the Club of Rome, a non-governmental organisation in Italy, published an edition called “Limits of Growth” warning of the earth and globe’s economic growth limits. The edition gave a long-term forecast about the global population, economy, environment and solutions.

At that time, Club of Rome forecasted the worth would not grow any longer since 2015 if there were no solutions to save the earth from rising temperatures. What people have been suffering recently from recent natural disasters reminded me of the Club of Rome’s alarming report 38 years ago.

Humans are facing a fearful situation caused by the rising temperatures on our planet. Though the temperature increases remain slow, their consequences are terrible.

In 2003, thousands of people dead in Europe due to the worst heat wave since early in the 20^th Century. In 2005, the Katrina storm hit the southeast United States killing 1,300 people and costing $125 billion in damage. In recent years, huge blizzards also hit Northeast of the US seriously impacting socio-economic prospects in this region. In Asia, severe droughts also damaged harvests in China and South East Asian countries.

Meanwhile, ice and snow on the world’s highest mountains including the Himalayas, Alps, Pyrenes is thawing and the number of strong storms is increasing every year. About 13 million hectares of natural forests are lost each year all over the world.

The El Nino phenomenon, which occurs under frequency from two to seven years, creates a climate change in trans-continents. While countries on the eastern hemisphere like Vietnam, Philippines and Indonesia suffer severe droughts, Latin American countries suffer heavy rains.

In contradictory to El Nino, the La Nina phenomenon brings strong storms and heavy rains accompanied with whirlwinds, especially in the Atlantic Ocean.

The earth’s rising temperatures have been impacting on water resources. Ninety-six per cent of total water on our planet is seawater, only 3 per cent is fresh water. However, 70 per cent of fresh water exists under ice in north and south poles and in the world’s highest mountain peaks. The fresh water density is unequal between countries, from 100 to 10,000 m³ per year per person. The density is also different in the dry and rainy seasons. For countries, where the fresh water density is below 1,000 m³ per year per person, have been facing strained situation and the lack of water has occurred in countries having water density below 500 m³ per year per person.

The population has tripled in the 20th Century and increased the demand of water by six times. In which, 75 per cent of water is used for agriculture. At the same time, the water intensive industries and hydroelectricity sector has been developing rapidly. While the demand for water is increasing, waste water remains a serious problem. In big cities, 40-50 per cent of water is lost from pipeline leakages. All of the above reasons cause the exhaustion of water and environment pollution in the world.

Agriculture and food security are the most affected area by climate change. During 2007-2008, the world experienced a food crisis, forcing United Nations to call for urgent action to deal with crisis. Since March 2007 to the first quarter of 2008, food prices tripled and threatened lives of million people.

Following is power sector and energy security, which are also suffering the negative impact from climate change. The energy demand increased sharply due to the industrialization of hundreds of countries, the increase of autos and other vehicles and also severe heat waves in summer and freezes in winter.

The global warming has forced many people to be displaced by natural disasters, and they are called climate refugees. According to the World Bank, there have been 25 million climate refugees so far. They had to displace because of tsunami in South Asia in 2004 and earthquakes. The construction of huge hydroelectricity plants and desertification also forced many people to leave their hometowns for new places. United Kingdom NGO Christian Aid predicts about one billion people will be displaced by 2050, most of them climate refugees.

On October 25, 2007, the United Nations Environment Programme introduced “Global Environment Outlook” which is considered as the most overall report on climate change, water resource and biodiversity. The report warned: “

Many research organisations predict a dark outlook for the planet if environment pollution continues at its current rate. Thus, the United Nations is calling on countries to reduce by half their CO2 emissions by 2050 in comparison with 1990 to keep the temperature increases lower than two degrees.

A carbon tax has been imposed to countries discarding CO2 higher than standard levels, each tonne of C02 is imposed $100. Countries discarding CO2 lower than standard level cansell emission creditsto other countries.

Chanllenges for Vietnam

A United Nations Development Programme’s report on “Fighting Climate Change” introduced in 2007 said that Vietnam had gained great progress in human development, but added that climate change was threatening that achievement and the most affected region in the country was the Mekong Delta.

Vietnamis one of the most vulnerable countries in the world to the rising temperatures. The Intergovernmental Panel on Climate Change forecasted temperatures will increase one degrees Celsius from 2010 to 2039 and three to four degrees Celsius during 2070-2099 in Indochina. Meanwhile, the rainfall will reduce by 20 millimetres during 2010-2039 and increase to 60mm during 2070-2099. Sea levels will rise six centimetres each year.

Over the past 50 years, the average temperature in Vietnam has increased by 0.7 degrees Celsius and sea levels have risen by 2cm. It is forecasted that the temperature will increase three degrees Celsius and sea level rise by one metre by 2010. By that time, about 40,000 square kilometres, accounting 12.3 per cent of country’s total area, will be sink under the sea, impacting on 10 per cent of Vietnam’s population and cost 10 per cent of GDP.

The recent environment pollution detected at enterprises in Dong Nai, Nha Trang, Ho Chi Minh City and Hanoi and other provinces have serious consequences for the country.

Research from the Swiss-Vietnamese Clean Air Programme, in cooperation with the Hanoi Department of Natural Resource and Environment in 2007, showed worrying results for air pollution in Hanoi.

The ecological environment has been a burning question in the progress of Vietnam’s economic development.

Humanshavecaused environment pollution and climate change so humanshave responsibility to save the earth with scientificsolutions, cooperation between countries and sustainable development.

New approach is required

Vietnam’s economy is showing new progress, from a slowdown to recovery, so that a new approach to FDI is needed to suitable to sustainable development. Though Vietnam continues encouraging FDI with commitments on protecting legal rights of investors, it is

The high time to efficiently implement the state management and protect the national interest over FDI projects across country

The most important thing is that the government have a strategy to attract FDI in line with the sustainable development. The government should both appreciate both FDI quantity and quality, ensuring FDI is suitable to country’s development orientation in each period.

The government can take initiative to select investors and deny licencing FDI projects that are not suitable to the community’s interest. The government can also stop licencing FDI mining sector projects which exploit natural resources for exports, but not for processing.

At this time, the government should orient FDI attraction in each sector for sustainable development. Environmentally friendly projects like renewable energy, green architectural buildings and hi-tech ones should be given the highest incentives.

The adjustment and amendment are required to current legal frameworks on labour and environment to prevent dispute about industrial relation and environment pollution, especially sanctions for severe and long environment pollution.

State authorities should focus on making regulation on working standard, salary, environment and guiding FDI enterprises the regulation implementation. In fact, the efficient state management is decided by “post monitoring operation” but not documents sent by investors to authorities.

For example, most FDI in Vietnam must have environment impact assessment reports, which are conducted by an organization under Ministry of Natural Resources and Environment or Department of Natural Resource and Environment. After appraisal councils approve the reports, the investors can implement their investment and no one care about the report.

That is the reason for the rising environment pollution in Vietnam. The operation of manufacturing enterprises polluted rivers like Thi Vai, Cau and Nhue though all of those enterprises had had their EIA

reported. The pollution occurs when state authorities do not implement regular supervision of FDI projects. Meanwhile, the local government also does not have strict punishment to fine polluters.

It is also important to amend regulations relating the relationship between FDI and sustainable development in bilateral investment and trade agreements. The regulations will define the rights and duties of investors and countries receiving investment and the investor’s country.

FDI attraction certainly must be in line with international rules, but a foreign investor must also respect development orientation and development priority of each country.

In conclusion, investment and FDI will make for better and sustainable development for the people. The government should not implement investment or allow FDI projects which do not create happiness and sustainable development for people.