Impact of Trade Policies on
Industrial Pollution in Vietnam
Purpose of paper
• Study linkages between trade and industrial
pollution in Vietnam
• SAM for Vietnam and World Bank IPPS =>
estimates of industrial pollution in Vietnam
• Simulation exercise: examine how
exogenous trade shocks affect resource
allocation, and hence pollution
Outline of paper
1. Introduction
2. Trade and environment linkages: some
theoretical and empirical backgrounds
3. Vietnam’s trade policies and industrial
pollution
4. Trade and pollution linkages in Vietnam: a
SAM multiplier analysis
5. Conclusion
Trade Policies in Vietnam
• Major trade reforms since doi moi => much
more open now compared to 15 years ago.
• However, still a very protective trade regime
• Tariff structure: low for capital goods and
raw materials; high for finished goods
• NTBs: cement, fertilizer, sugar, paper,
alcohol, steel & iron, construction glass,
motor vehicles, etc.
• Protected industries also tend to be more
pollutive industries
Table 2: Vietnam's tariff structure, 2000
Nominal tarif f rate (%)
Industries
Paddy rice
Wheat
Cereal grains
Vegetables
Oil seeds
Sugar cane, sugar beet
Plant-based f ibers
Crops, n.e.c
Cattle, sheep, goats, horses
Animal products n.e.c
w ool, sil-w orm cocoons
Forestry
Fishing
Coal
Oil seeds
Gas
Minerals n.e.c
Bovine cattle, sheetp, goat meat
Meat products n.e.c
Vegetable oils and f ats
Dairy products
Processed rice
Sugar cane, sugar beet
Food products n.e.c.
Beverage & tobacco
Textiles
Wearing apparel
leather products
Wood products
Paper products, publishing
Petroleum, coal products
Chemical, rubber, plastic, products
Mineral products n.e.c.
Ferrous metals
Metals n.e.c.
Metal products
Motor vehicles and parts
Transport equipment n.e.c.
Electronic equipment
Machinery & equipment n.e.c.
Manuf actures n.e.c.
Total
Simple average
5
3
5.9
24.3
8.6
10
3.9
13.2
4.5
5
3
4
16.9
3.8
4.5
14.1
2.3
12.2
18.1
13.1
16.7
7.5
30
28.6
52.1
29.4
49.2
18.8
18.7
20
9.6
8.8
20.7
5.3
5.8
18.5
22.6
13.2
9.7
7.4
24.7
15.6
Ef f ective rate of protection (%)
Weighted
average
5
3
2.6
27.2
6.5
10
4.2
6.2
4.8
3.7
1.3
1.2
18.9
3.4
1
15.5
1.1
10.3
27.3
12.3
14.5
7.5
30
20.1
50.2
30
49.4
13.5
11.9
19.4
44
6.4
23.8
6
10.4
16.6
18.6
28.3
10.7
8.1
22.7
19
ERP f or import
ERP f or export
substitution
production
4.2
-3.8
3
0
-4.6
-10
41.6
-8.1
4.4
-7.1
9.7
-3.8
1.3
-6
4.5
-5.8
0.9
-7.1
-1.5
-7.4
-2.2
-4.2
-20.5
-22.9
66.6
-45.7
-14.4
-22.2
-13.9
-15.9
24.5
-13.3
-21.4
-27
12.2
-3.5
13.3
-5.4
1.4
-98.5
16.3
-5.7
8
-22.5
na na
59.6
-48.3
na na
115
-138
229.8
-231.9
-15.1
-67.1
15.2
-19.3
88.1
-88.5
na na
-0.1
-40.3
69.6
-52.3
3.7
-25.3
21.9
-103.8
34.5
-33.9
186.4
-200.7
56.6
-32.9
13.8
-18.4
-0.6
-29.3
64.3
-45.1
• FDI flows tend to follow trade policies:
– Over half of FDI into Vietnam enters the
services sector
– Of the FDI in the traded-goods sector, a
significant proportion is going into highly
protected industries
– FDI in clearly import-substituting industries
is more than double that in clearly exportoriented industries
=> FDI tends to intensifies the effects of trade
policies on environment
Table 3: Structure of FDI by Sector and Year of License Issuance
1988
Agriculture, forestry, fisheries
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
21
Total
120
107
51
34
20
43
72
32
51
46
597
Food & food processing
2
10
106
571
199
191
494
580
590
532
100 3,375
Textiles and garments
3
18
35
46
111
543
189
446
204
280
53 1,928
Leather products
6
0
6
7
31
20
251
21
183
18
28
571
Wood products
0
4
12
15
9
21
10
23
0
15
22
131
11
32
159
639
350
775
944 1,070
977
845
203 6,005
Cement, glass, non-metal
2
2
4
5
338
127
136
603
952
604
40 2,813
Chemicals
3
29
5
8
69
64
145
526
230
358
330 1,767
Electric, electronic products
2
6
10
26
17
207
156
451
195
315
20 1,405
Machinery
1
17
2
114
140
48
113
614
523
85
101 1,758
Metal products
0
0
2
0
6
131
211
293
134
81
74
932
Other industry
1
1
9
6
23
54
62
127
49
144
103
579
9
55
32
159
593
631
823 2,614 2,083 1,587
668 9,254
149
99
181
178
699
163
150
79
145
140
143 2,126
0
0
15
0
140
50
45
80
96
17
Construction & real estate
18
230
115
421
Transport, post, telecom.
39
33
294
37
40
42
77
365
719
749
695 3,090
6
37
4
100
15
347
44
89
268
450
731 2,091
352
593
Industry
Sub-total: light industries
Sub-total: heavy indutries
Mining
Services
Banking & finance
Other services
Total
639 1,818 2,073 2,792 4,528
15
458
814 1,083 14,531
851 1,568 2,496 3,869 4,228 7,121 8,867 4,648 3,559 38,152
Industrial pollution in Vietnam
• Scale effect: rapid expansion of industry
sectors => rapid growth in industrial
pollution
• Technique effect ?
• Composition effect: two major
trade/industrialization policy impact:
export-oriented growth and ISI
Table 2: Production statistics of selected industries in Vietnam
Unit
Cement
Thousand
tons
Bricks
Million
pieces
Glass
Thousand
tons
Leather tanning/processing Trillion
VND
Paper
Thousand
tons
Processed w ood
Thousand
metric
Detergent
Thousand
tons
Chemicals
Trillions
VND
H2SO4
Tons
NAOH
Rubber & plastics
Ceramic
Refined sugar
Alcohol and beer
Tons
Trillions
VND
Million
pieces
Thousand
tons
Million litre
1995
5,828
7,453
77
4
216
1,606
129
5
9,768
7,307
2
187
93
516
1996
1997
1998
1999
2000
2001
6,585
13.0
7,597
1.9
93
20.5
4.5
25.0
220
1.9
1,398
-13.0
167
29.6
6.3
23.5
17,943
83.7
9,099
24.5
2.8
21.7
233
24.3
111
18.9
601
16.3
8,019
21.8
7,744
1.9
66
-29.3
6.6
46.7
263
19.5
1,184
-15.3
213
27.6
7.2
14.3
15,173
-15.4
7,676
-15.6
3.5
25.0
172
-26.2
122
10.3
675
12.3
9,738
21.4
8,131
5.0
105
60.1
7.1
7.6
311
18.3
2,705
128.5
229
7.4
8.1
12.5
22,864
50.7
10,444
36.1
4.4
25.7
182
6.1
143
17.2
766
13.6
10,489
7.7
8,217
1.1
106
0.9
7.7
8.5
349
12.2
1,466
-45.8
214
-6.7
9.7
19.8
27,348
19.6
54,401
420.9
5.4
22.7
220
20.7
208
45.7
803
4.8
13,298
26.8
9,454
15.0
113
6.8
8.9
15.6
408
16.9
1,744
19.0
247
15.8
11.9
22.7
35,652
30.4
59,097
8.6
6.8
25.9
247
12.5
161
-22.9
903
12.6
15,374
15.6
9,985
5.6
116
2.6
avg.
grow th
17.7
5.1
10.2
17.2
428
4.8
1,801
3.3
330
33.5
12.3
12.8
17.9
15.5
37,000
3.8
59,840
1.3
28.8
79.3
20.2
230
-7.1
160
-0.4
944
4.5
5.0
11.5
10.7
Graph 1: Sources of Air Pollution 1
60%
52%
50%
SO2
NO2
CO
47%
40%
30%
27%
23%
20%
15%
14%
13%
12%
10%
10%
9%
8% 9%
8%
4%
2% 3%
2%
1%
1%
0%
1%
0%
CEMENT
CONCRETE
NFERMETAL
PAPER
PRWOOD
OTHCHEM
BRICKS
Graph 2: Sources of Air Pollution 2
80%
71.8%
70%
VOC
PM-10
TSP
60%
53.3%
50%
40%
29.3%
30%
24.7%
20.9%
20%
15.6%
8.7%
10%
0.9%
0.3%
2.4% 1.9%
0.2%
3.5%
0.8%
7.2%
2.3%
0.1%0.2%
0%
CEMENT
CONCRETE
NFERMETAL
PAPER
PRWOOD
ALCOHOL
Graph 3: Sources of Water Pollution
60%
BOD
50.2%
50%
TSS
40%
32.9%
30%
28.3%
21.0%
20%
17.1%
8.7%
10%
8.5%
5.1%
5.0%
0.2%
1.2%
0.0%
0%
PAPER
ALCOHOL
NFERMETAL
DAIRY
REFSUGAR
FERMETAL
Graph 4: Sources of Toxic Pollution
Toxic
71.4%
Toxic metal
70%
60%
50%
40%
30%
20%
19.2%
14.0%
13.7%
9.7%
10%
0.3%
1.9%
8.2%
0.0%
7.1%
1.4%
4.2%
4.2%
1.2%
3.7%
1.0%
FERT ILIZER
LEAT HT AN
0%
NFERM ET AL
PAPER
ORGCHEM
PRWOOD
INORGCHEM
FERM ET AL
Development strategies and goals 2000-2010
• By 2010: double GDP; more than double
exports; agriculture: 16-17%; industry: 4041%; services: 42-43%
• “The production development should be
corresponding to the market demand,
strongly oriented to export, and at the same
time oriented to an effective import
substitution …”
• “ … rapidly develop industries capable of
promoting their competitive advantages, taking
hold of domestic markets and pushing ahead
exports, such as agricultural, forest and aquatic
product processing, garment, leatherwear and
footwear, electronics and informatics, certain
mechanical products and consumer goods, etc …”
• “… selectively build a number of heavy industry
establishments: petroleum, metallurgy, mechanical
engineering, basic chemicals, fertilizers, and
building materials, etc. in rational sequences
conformable with the capital, technology and
market conditions, and capable of promoting
efficiency …”
In summary: general industrial development
strategy is to follow an export-oriented
industrialization, but ISI continues to be an
influential view => important implications to trade
policies and environment in the next few decades
0
Moto r vehic les
Other mach inery
Engines
Chemicals
Grain mill
Moto rbikes /cycles
Nonferrous metals
Cement
Meta l/wood machines
Furniture, nonmetal
Made -up textiles
Bakery
Paints
Carpets
Furniture, metal
Cordage
Pre. Fruits /vegie
Other manuf.
Drugs
Aircraft
Leath er
Pounds/$million
Ranking of industries by BOD emissions
16000
14000
12000
10000
8000
6000
4000
2000
0
Engines
Cutlery
Photophrap/optical
Elec. Apparatus
Musical instr.
Furniture,
Other wood
Cordage
Other rubber
Fabricated metal
Petroleum
Paints
Other textiles
Steel
Nonferrous metals
Chemicals
Pounds/$1000 output value
Ranking of industries by toxic pollution
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Meat
Furniture, metal
Other food
Engines
Ind. Machineries
Photophrap/optical
Petroleum refineries
Drugs
Musical instr.
Sugar
Other manuf.
Animal foods
Leather
Other plastics
Pounds/$million
Ranking of industries by S02 em issions
140000
120000
100000
80000
60000
40000
20000