PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: AB5812
Project Name
Region
Sector
Project ID
Borrower(s)
Implementing Agency
Environment Category
Date PID Prepared
Estimated Date of
Appraisal Authorization
Estimated Date of Board
Approval
Vietnam Industrial Pollution Control Project
EAST ASIA AND PACIFIC
Other industry (100%)
P113151
Socialist Republic of Vietnam
Ministry of Planning and Investment
[ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
June 8, 2010
March 1, 2011
December 15, 2011
Key Development Issues and Rationale for Bank Involvement
Industrial Development and Industrial Pollution in Vietnam. Since the 1980s,
Vietnam has experienced a remarkable industrial development.1 Geographically, the northern
region accounts for about 28% and the southeast region for about 47% of the national gross
industrial output. In terms of industrial ownership in 2008, contributions of foreign direct
investment (FDI), state-owned enterprises (SOEs), collective and household industries, and the
private sector to the national gross industrial output are 25.2%, 34.3%, 8.3%, and 34.3%,
respectively. In its industrialization process, Vietnam has promoted development of industrial
estates to attract investments, and to restructure the country’s economy at both the national and
local levels.2 In major cities, industrial estates have also been developed to reallocate polluting
industries away from populated urban centers. As of 2009, over 35% of all manufacturing
industries were located within industrial parks, zones or clusters in Vietnam. This percentage is
expected to continue to increase in the near term.
Even though the share of high-tech industries is gradually increasing over the years, twothirds of Vietnam’s small and medium-sized enterprises (SMEs) are still using less advanced
technology that are labor, material and energy-intensive. Industrial development has produced
much needed employment opportunities but has also lead to discharge of large amounts of waste
without proper treatment. The National Assembly has reported that industrial pollution is high on
its list of citizen complaints. Reports on rivers choked by industrial pollution are often seen in
domestic media outlets.
1
It is estimated that industrial output in Vietnam had an annual growth rate of 6% between 1986-1990, about 14%
during the 1990s, 16% from 2000 to 2005, and about 7% from 2006 to 2010. Key industries are food and beverages,
oil and gas, chemical, metal, rubber and plastics, textile and garment, and paper.
2
Dependent on size and approval procedures, industrial estates in Vietnam are classified as (a) large industrial
parks/zones approved by Ministry of Planning and Investment; (b) industrial clusters approved by Provincial
People’s Committees; and (c) small industrial points that are often approved by district governments.
The Ministry of Natural Resources and Environment (MONRE) has listed industrial
wastewater pollution as one of the key threats to public health and land productivity in Vietnam.
Specifically, to control pollution from industrial estates, the Ministry of Natural Resources and
Environment in its Circular 08/2009 (issued in July 2009) outlines roles and responsibilities of
developers, industrial zone management authorities, and local and central government agencies
in controlling pollution from industrial estates. Among others, the Circular requires that all
industrial estates have centralized effluent treatment plants (CETPs) designed, constructed and
operated as an integral part of the overall infrastructure services provided by the estates. This
strategy takes into account that (a) municipal wastewater treatment in Vietnam is still very
limited and most domestic wastewater is discharged without treatment; and (b) wastewater sewer
networks are practically non-existent in suburban areas where most industries are located.
Construction of CETPs in all industrial estates will require a significant amount of
investment. A recent study (the BKEP3 Study) on industrial wastewater pollution in the two most
polluted river basins found that 95 out of 140 industrial zones and 182 out of 188 industrial
clusters in three northern provinces (Hanoi, Nam Dinh and Ha Nam) in the Nhue Day river basin
and five southeast provinces (Ho Chi Minh, Dong Nai, Binh Duong, Binh Phuoc and Ba RiaVung Tau) in the Dong Nai river basin were operating without a CETP in 2009. The study
estimated that a total of $360 million will be needed for all these industrial estates in the eight
provinces to construct CETPs with appropriate treatment technologies. It was noted clearly
however that the lack of suitable treatment is primarily attributable to poor enforcement and a
weak regulatory environment and not only to a lack of financial capital.
Key Issues to be Addressed. To assist in managing its industrial wastewater pollution,
the Government of Vietnam has proposed an IDA-financed project. This IDA project aims to
support the country to address the following three key issues.
(a) Inadequate regulatory and institutional arrangements. Vietnam has issued a number of
regulations to regulate industrial pollution in general and pollution from industrial
parks/zones in particular. However, as noted in the BKEP Study, even though there is
quite a comprehensive array of laws and regulations governing the establishment and
operations of industrial estates, regulatory effectiveness is hampered by overlaps and
contradictions among the existing regulations, overlapping responsibilities for
different agencies, and lack of operational funds, qualified staff and equipment in
regulatory agencies. Among others, linkages between environmental impact
assessments (EIAs), discharge permitting, environmental monitoring, and
enforcement have yet to be established. Moreover, the current regulatory framework
does not require an information disclosure system that promotes corporate social
responsibility and public participation in pollution control compliance. Finally, to
address industrial pollution from its source, sound policies are needed to promote
cleaner production and technology upgrades at the industrial level.
3
LBCD Consultants Inc. and Experco International Ltd. (January 2010), Report on Industrial Wastewater
Management in Nhue-Day and Dong Nai River Basins. The study is commissioned by the Bank and Ministry of
Planning and Investment (MPI) under the Bank-Korean Environment Partnership.
(b) Lack of incentives for industrial compliance. The low percentage of CETPs in
industrial estates is a direct reflection of the lack of incentives for environmental
compliance by industries. Weak capacity and lax enforcement by environmental
authorities and relatively low penalties for non-compliance have provided limited
incentives for industrial zones (or industry in general) to properly treat their
wastewater.4 A key factor is the lack of capacity of the environmental authorities to
monitor and verify reported pollution loads in industrial effluents. Control of
pollution from industrial estates is further constrained by limited capacity of
industrial estate management agencies that are assigned by Circular 08/2009 with
prime responsibility to supervise and inspect implementation of environmental
protection measures of industrial estates. As a result, construction and operation of
CETPs are viewed purely as an additional cost and this cost is not integrated into the
overall cost structure of operations by industrial estate developers. As owners and
often operators of CETPs, developers often charge tenants wastewater treatment
tariffs that are too low to recover costs of CETP construction, operation, and
maintenance. Coupled with their inability to monitor quantity and quality of
wastewater discharges from tenants, developers face both financial and technical
challenges to operate CETPs properly.5
(c) Lack of finance for CETP construction and maintenance. Although in most cases,
lack of financing opportunities is not the major constraint to implementing adequate
management of industrial wastewater; this will change as industries have incentives
to do so. Attention is therefore also needed to ensure that appropriate financing
packages are available to industries and industrial estates. Recognizing significant
financial needs for control wastewater pollution from industrial estates, the
government of Vietnam has decided to use state budget to finance CETPs for
industrial parks in less developed areas.6 These financing opportunities are however
not sufficient.
Rationale for Bank Involvement. This proposed IDA operation has strong public goods
elements. Public complaints to the National Assembly are indicative of the negative impacts of
industrial pollution on public health and land productivity. Other donors have initiated or are
developing ODA programs to support Vietnam to address its industrial pollution problems.7
4
In fact, low capacity of environmental authorities also prevents Vietnam from fully collecting industrial
wastewater discharge fees. As reported by the Vietnam Environment Administration (VEA) in 2008 in its report on
the Implementation of Decree 67 on Wastewater Discharge Fee, collected industrial wastewater discharge fees
accounted for only 11% of what they should have been in 2004. The report was prepared under the Vietnam:
Improving Institutional Capacity for Water Pollution Control (P099405), a project financed by a grant under the
Institutional Development Fund.
5
Two reported technical difficulties are how to construct a CETP with most appropriate treatment technologies
before confirmation of which industries will operate in an industrial zone and how to treat industrial wastewater of
different characteristics.
6
State budget has also been used to construct CETPs in industrial zones developed by state-owned enterprises
(SOEs).
7
CIDA’s activities are working with VEA and DONREs on environmental governance in selected provinces. JICA
has provided a grant for capacity building to selected provincial DONREs and is planning to identify investment
opportunities for pollution control in industries. KFW is considering a CETP investment to an industrial park. AFD
is working with a mining company. ADB is planning a sector loan to support CETP construction in industrial zones.
However, with the exception of the small CIDA project, none are systematically addressing
incentives and the institutional and regulatory environment. The Bank is working closely with all
these donors to ensure the proposed IDA operation is well coordinated with other ODA
programs.
This IDA operation has been listed under Pillar 3 “Strengthening Environmental
Management” of the Bank’s Country Partnership Strategy (CPS) for Vietnam (2007-2011).
Related to preparation of the CPS and this project, a series of AAA activities have been carried
out to help Vietnam study its industrial pollution issues and develop strategies for industrial
pollution control.8 In addition to this proposed IDA operation, the Bank’s Ho Chi Minh City
(HCMC) Investment Fund for Urban Development Project (P104848) has financed construction
of CETPs in two HCMC industrial zones.
Proposed Objective(s)
The proposed PDO is to improve environmental compliance of industrial zones
on a pilot basis. This will be achieved through strengthening of the institutional and regulatory
environment, improved monitoring and enforcement, improved CETP construction and operation
for proper wastewater treatment, and information disclosure and public participation in two or
three provinces. Key performance indicators are (a) percentage of industrial zones with adequate
and good monitoring data on pollution discharges; (b) extent of pollution information disclosed;
(c) percentage of public complaints responded and resolved; (d) collection ratio and collected
amount of non-compliance fines; and (e) rate of wastewater treatment compliance in industrial
zones.
It is expected that two to three provinces will be selected, covering only a few river
basins. Willingness of the provincial authorities to participate in the project to control wastewater
pollution from their industrial zones will be a key criterion for provincial selection.
Preliminary Description
The proposed project cost, not including counterpart funding, is $50 million to be
financed through an IDA credit. Terms and conditions of the IDA credit will be determined
during project preparation. The proposed project components are:
Component 1: Institutional Strengthening and Enforcement. This component will focus
on environmental enforcement and support environmental authorities to: (a) review and update
environmental regulations and promote wastewater treatment compliance of industrial estates
through effective inspection and enforcement; (b) establish water quality monitoring systems in
8
These AAA activities include the BKEP study and IDF project mentioned above, the Review and Analysis of the
Pollution Impacts from Vietnamese Manufacturing Sectors (2008), and an ongoing Industrial Development and
Environmental Management Study.
the participating provinces;9 (c) develop and employ an effective information disclosure platform
and public participation mechanisms; and (d) perform effective inspection and enforcement.
Component 2: Pilot Financing for Wastewater Treatment. This component will provide
financing assistance for industrial parks in the participating provinces to properly construct and
operate CETPs and ultimately to comply with environmental requirements. Detailed financing
terms and conditions will be decided during project preparation as well as possible participation
of IFC in financing arrangements.
Component 3: Technical Assistance for Industrial Estates and Project Implementation.
This component will provide an array of technical assistance to support (a) industrial zone
management authorities to effective perform their environmental management responsibilities;
(b) proper design and operation of CETPs; and (c) accurate and timely self monitoring and
reporting by the industries. In addition, this component will support (d) project management
activities (including monitoring and evaluation); (e) studies related to project implementation;
and (f) knowledge management activities.
Implementation Arrangements. The Government of Vietnam has indicated that MPI will be
the project owner and its Department of Economic Zones Management will lead project
preparation. MPI has agreed to engage fully MONRE, the Ministry of Industry and Trade and
the participating provinces in project preparation. Detailed implementation arrangements will be
confirmed during project preparation.
Safeguard policies that might apply
Safeguard Policies Triggered
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waterways (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
9
Yes
x
No
TBD
X
X
X
X
X
X
X
X
X
Construction of the monitoring system will follow the master plan for national environmental monitoring,
approved by the Prime Minister in 2008.
Tentative Financing
Source:
BORROWER/RECIPIENT
International Development Association (IDA)
Total
Contact: Jiang Ru
Title: Operations Officer
Tel: (202) 473-8677
Fax: (202) 477-2733
Email: jru@worldbank.org
($m.)
10
50
60