DECENTRALIZING INCENTIVES AND
COMPLIANCE PROMOTION IN VIETNAM
Bali, Indonesia,
25 November, 2008
Introduction 1-4 (a)
GENENRAL INFORMATION
AT A GLANCE: VIET NAM
• Capital: Hanoi
• Total Area: 337,114 km2
• Population: 83 million (urban: 25%, rural:
75%).
• Density: 240 habitant/km2
• Humid tropical climate area
• Coastal strip with Red river delta (North)
and Mekong delta (South)
• Almost its entire area is a patchwork of rice
paddies.
HO CHI MINH CITY PROFILE
.Geographical location: it is
situated in the South of VN, at
downstream section of the Dong
Nai-Sai Gon river system..
Main economic activities:
industry, commerce, services.
24 districts (4 outer districts, 5
suburban districts (with very
much rural characteristics of a
farming & fishing land) occupy
78.97% of the total area . 1.7
million people living in these
districts ,accounting to 32% of
the City population
Total length of canals and rivers:
795.5 km.
HO CHI MINH CITY PROFILE
Area: 2.093,7 km2
Population: 6.239.938 (2005)
70% under 35 year old
VỊ THẾ CHIẾN LƯỢC
Cửa ngỏ quốc tế lớn nhất của
Việt Nam
Đầu mối giao thông cho toàn
khu vực phía Nam
Tp Ho Chi Minh
Coastal zone length 11.3km, with over 33,000ha mangrove forest
in Can Gio district, which was certified as Biosphere areas by
UNESCO in 2000.
MAJOR
POLLUTION
SOURCES
IN HO CHI
MINH CITY
Residential areas without
adequate environmental
infrastructure
28,753 medium/small scale
industries within residential
zones
14 IPs and EPZs
Construction activities
Transportation of
2,200,000 motocycles and
230,000 4-wheel vehicles
(2.300 buses only)
Key steps in development of environmental
institutions in Vietnam
1970s State Committee for Science and Technology with Department of baseline survey
and studies.
1983 Ministry of Science and Technology (MOSTE) with Dept. of environmental baseline
& studies.
1984 MOST Dept. of Natural and Environment (in English) – 12 staff
1985 DNRE Five year national research program for environmental studies (20 projects).
1990 National Sustainable Development Conference – Proposal to establish MONRE
(Ministry of Natural Resources and Environment)
1993 Proposal to establish a Ministry of Environment and national environment council
submitted to government
1994 MOSTE and National Environment Protection Agency (NEPA) established.
1995-8 DOSTEs established at provincial level
2002 MONRE established at (NEPA divided into three organization with MONRE)
2003-5 64 DONREs established – 90% with environment divisions.
2003-5 333 District NRE divisions established, and 10,000 communal NRE staff.
(NRE: Natural Resources and Environment)
Legal instruments of Vietnam
•“Laws” and “Codes” are passed by the National
Assembly;
•“Resolutions” and “Ordinances” are passed by the
Standing Committee of the National Assembly;
•“Government Decrees” are passed by the Prime Minister
or the Vice Prime Minister;
•“Resolutions”, “Circulars”, “Directives” and
“Ordinances” are passed by the relevant Minister; and
•“Regulations” are passed by local/provincial
governments.
Institutional framework of environmental
management of Vietnam
Institutional arrangement
• In August 2002, the Government established a new Ministry in
charge of environmental issues - Ministry of Natural Resources
and Environment (MONRE);
• People’s Committees (at city/provincial levels) implementing
environmental management activities under the direction of
MONRE and other relating ministries, with the support of
Department of Natural Resources and Environment (DONRE);
• Ho Chi Minh city DONRE has Environmental Management
Division, Solid Waste Management Division are in charged for
environmental protection activities; Environmental Protection
Agency (HEPA- WW Fee collection Division (8 staffs) is in
charge for wastewater fee collection duty.
Institutional framework of environmental
management of Vietnam
Institutional framework of environmental management
of Vietnam – DONRE of Ho Chi Minh city
Roles of DONRE
• Are agencies of the provincial PCs; Work with the MONRE.
•Support the provincial PCs in state management for issues
related to land, water resources, minerals, environment,
hydrometeorology, and mapping in the province, and reporting
administrative to the national government;
•The establishment of functional divisions within DONRE is
decided by the provincial PCs in consultation with MONRE.
•Submit to PCs any grants, extensions, and revocations of
environmental certificates.
Roles of DONRE
• Evaluate environmental impact assessment submitted by regulated
establishment.
•Collect fees for environmental protection including those for
wastewater.
•Conduct environmental compliance inspections, setting
environmental related disputes, compliance and violations within its
provincial jurisdiction.
•DONRE Environmental Inspectorate may conduct both announced
and unannounced inspections by itself or in cooperation with the
MONRE Environmental Inspectorate.
•Chief Environmental Inspectorate of DONRE is empowered to revoke
the environmental certificate in case of detected violation.
•The DONREs have no direct authority for pollution regulation with
industrial parks.
Legal and Institutional framework of
environmental policy in Vietnam
•Law on Environmental Protection 2005.
(1993: first general Law on Environmental Protection)
•National Strategy for environmental protection until 2010 with
vision toward 2020 – signed by Prime Minister on 02/12/2003.
•Directive 41/CT-TW of the Politburo of Vietnam Communist
Party 2005.
•Decree 67/2003/ND-CP on wastewater charge.
• Law of Water Resources 1999.
• Enforcement policies.
Legal and Institutional framework of
environmental policy in Vietnam
National Strategy on Environmental Protection (NSEP) to 2010 with
vision toward 2020
 The strategy has emphasized the significance of development of
an appropriate legislation on water resources management and
management of river basins.
 Other technical measures such as rehabilitation and embankment
of rivers have also been indicated by the Strategy to improve water
environment.
NSEP promotes the use of economic instruments (EI) to
environmental management as an explicit mean to implement the
various objectives stated in the Strategy: EI are solutions to macro
level-environmental management in a market economy, typically
used along with administrative and educational and propaganda
measures for the same purpose of improving legislative
enforcement in the environment sector
Legal and Institutional framework of
environmental policy in Vietnam
Directive 41/CT-TW of the Politburo of Vietnam Communist
Party 2005.
From 2006 to allocate at least 1% of the state budget
expenditure (~3,500 billion VND) for environmental protection.
This directive has been applied with the Decision No.
34/2005/QD-TTg by the Prime Minister.
Decentralization to provincial and city level
Provincial People’s Committees (PPCs)
The government commitment to decentralization:
•Changes in central government to focus on macro economic
management and broad policy.
•Delegated management responsibilities to agencies,
provincial department and SOEs.
•More discretion over local budgets and planning by the local
Peoples Committees.
•Clearer distinction between government and enterprise
responsibilities.
Decentralization to provincial and city level
Provincial People’s Committees (PPCs)’s roles and responsibilities:
•Issuing document within their legal powers on environmental protection in their
locality.
•Directing and inspecting the implementation of the environmental effects of
protection regulations of the State and their locality;
•Checking evaluation reports on the environmental effects of projects and
establishments;
•Granting certificates of environmental standards to production establishments and
businesses, or withdrawing them;
•Cooperating with institutions as the central level in supervising, inspecting and
handling violations of the Law of Environmental Protection (LEP) in the locality;
•Urging all organizations and individuals to observe the LEP;
•Receiving and setting disputes, complaints, denunciations on environmental
protection within their powers, or submitting them to the authorized institutions for
settlement.
Legal and Institutional framework of
environmental policy in Vietnam
Policy enforcement
Decree 81/2006/ND-CP on fines on administrative
violations
 Maximum fine imposed on breaches of environmental
regulations could reach to 70 million VND (4,500 USD)
 With regards to WW and pollutants discharge into water
resources are fixed from 100 to 70 million VND ( ~ 7 –
4,500 USD) depending on the pollution level or whether
containing hazardous and radioactive substances.
(Decree 81 is under revised at this present to increase the
fine up to 500 mill.)
Environmental protection charges for wastewater
Decree No. 67/2003/ND-CP
 With the adoption of Decree No. 67/2003/ND-CP on
environmental Protection charges for wastewater
(henceforth Decree 67) on June 13, 2003.
 And the accompanying Inter-Ministerial Joint
Circular No. 125/2003/TTLT-BTC-BTNMT (hence
Circular 125) providing guidelines for the
implementation of Decree 67, the Government went
for legislated principles to action: as of Jan 2004,
both domestic and industrial sectors must pay a fee
for discharging wastewater in the environment;
Environmental protection charges for wastewater
Decree No. 67/2003/ND-CP
 Domestic WW fee is collected by the clean water supply
company
For industrial WW, enterprises will do self-declaration to
DONRE; DONRE will appraise and announce the fee
amount, then the enterprises to pay fee to the provincial
State Treasury.
The decree also assigns the Ministry of Finance (MOF) in
cooperation with MONRE to stipulate the fees rates in
order to be suitable for each kind of receiving
environment.
MONRE and MOF are responsible to specify objects that
pay this charge.
Environmental protection charges for industrial WW
Decree No. 67/2003/ND-CP
Industrial WW charge
This fee applies directly to the discharge (load) of 7
pollutants: BOD, COD, TSS, Mercury, Lead, Arsenic, and
Cadmium.
The pollution level, from its side depends on the quantity
and toxicity of pollutants contained in the WW.
 Replaced Decree 67 later on by Decree 04 from Jan 8th,
2007 with 3 minor changes: (1) remove BOD parameter, (2)
change the use of fee collected, and (3) establish
emission coefficients for different industrial sectors.
Environmental protection charges for wastewater
Decree No. 67/2003/ND-CP

The main goal
(1) To limit the environmental pollution cause by wastewater
(2) To use economically clean water
(3) To create fund for environmental activities

The calculation
Total fee paid (VND) = Volume of discharged wastewater
(m3) x amount of pollutants in wastewater (mg/L) x
charge rate for industrial wastewater discharged into
respective receiving environment (VND/kg)/1000
Environmental protection charges for wastewater
The circular No. 125/2003/TTLT-BTC-BTNMT
In order to timely guide implementation of the Decree 67, the
MONRE in cooperation with MOF have drafted and issued the
joint circular. The guiding circular makes clear the objects:
•Who bear the fees or pay fees;
•The specific rate for industrial WW applied to each type
of receiving environment;
•Give specific introductions about the way to calculate
and declare fee, process of appraisement, announcement
of paying fees and perform of paying fees to State
Treasury.
Environmental protection charges for wastewater
Decree No. 67/2003/ND-CP

The target groups
Environmental protection charges for wastewater
Decree No. 67/2003/ND-CP
The rates of wastewater fee:
HEPA, HEPZA
DISTRICT PC’S
HTP
Enterprises
Inventory
Enterprises
Fee SelfDeclaration
(quarter/year)
Inspection, Analysis,
Fee Appraisal
HEPA
District
PC’s
HEPZA
HEPA
Enterprises
State Treasury/
HEPZA
District
PC’s,
HEPZA
State Treasury/
HEPA/
DoF/Tax Bureau
Fee Notice
Fee Payment
(quarter)
Fee
Colleciton
Final
Balance-sheet
(year)
Industrial
Wastewater
Fee Collection
Process in
HCMC
Environmental protection charges for wastewater
Decree No. 67/2003/ND-CP
Results:
+ The whole country
2004: 80 billion VND
+ Ho Chi Minh city:
- Fee collected in 2007: 6 billion (VND); 1,116 registered enterprises.
-From Jan up to Oct 2008: 5.8 billion (plan: 5 billion)
- Expected fee collected in 2008: >7 billion (sending fee notices to
1,780 enterprises with the fee calculated is 8.3 billion).
Advantages and disadvantages of WW charge
collection
ADVANTAGES
•Create a greater awareness in individuals, households,
enterprises and other institution as to their responsibilities
for environmental protection.
•Reduce wastewater generation.
•Provide a straightforward incentive to process industrial
effluent and reduce its pollutant charge.
•Yield considerable additional funds for local budgets
earmarked for environmental protection activities, new
investments, drainage,…
Advantages and disadvantages WW charge
collection
 Partly funded with the revenue from the WW charge, the
Vietnamese Environmental Protection Fund (VEPF) has
provided loans at concessional interest rates and sponsored
investment projects in environmental protection.
Up to now: > 200 billion VND has been collected, transferred
to VEF and allocate for DONREs for WW improvement
projects in provinces.
 2004-2006: VEPF provided concessional loans to 13
projects with an approved capital in excess of 35 million VND
disbursed to a variety of activities
Advantages and disadvantages of WW charge collection
DISADVANTAGES
Government implementation
• Delay the application of the WW charge of some localities.
• Capacity challenges in WW collection: limited technical and
administrative capacities; weak cooperation among the
stakeholders.
•The amount of fees collected lower than estimated.
Enterprises perception
• Low awareness of enterprises
• Not sufficiently clear and detailed.
• Not fair among the business (why some should pay but others
not?)
• WW charge calculation is not accurate.
Strategies to meet obligations and objectives for
incentives and compliance promotion
•Take into consideration the total amount of pollutants, or else we may
create a perverse incentive to dilute emissions and thus waste
resources (the WW charge for industrial effluents avoids this perverse
incentive);
•Where environmental pricing instruments are to be imposed on the
discharge of pollutants, the instrument should not only apply to emission
in excess of certain threshold values or environmental standards, as this
counteracts the economic incentive and partly renders the instrument a
measure of command-and-control regulation (the current WW charge for
industrial effluents avoids this shortcoming);
•In a situation of high inflation, the environmental incentives arising from
price-based instruments can be significantly compromised. While this
may be counteracted to a limited extent only, indexing the instrument to
inflation rates can help reduce the said effect.
Benefits and challenges of decentralization in
environmental compliance and enforcement
BENEFITS
•The basic framework for compliance, enforcement, pollution control,
national monitoring and reporting are set in place.
• Raise a sense of initiative of the local authorities (it depends on the
qualifications, experiences, capacity, technical instruments of district
Natural resources and environment division); ( differentiate between
inner districts & rural districts…);
•Better in pollution control at local level.
• Save time in setting environmental disputes, complaints.
Benefits and challenges of decentralization in
environmental compliance and enforcement
CHALLENGES
• Lack of clear distinction in responsibilities and difficulties in
coordination (no cooperative mechanism among state agencies working
at all levels has been created --> create overlap, limit the outcomes);
• The policy, legislative and institutional expansion and innovation
moved well beyond the capacities of staff, budgets and structures to
manage effectively (fixed rate of budget for state administrative
agencies!).
• The environmental background and capacity of staff is limited;
Natural Resources and Environment divisions in districts are set up; but
overall districts have found the task difficult given the low level of
existing capacity and budgets.
(Ex: HCMC DONRE send letter to Dept. of Finance => DoF submit letter to HCMC’s
PC to get instruction to district PCs allocate budget for district NRE division 2009!
Strategies to decentralized use of incentives
•Adjust fees rate to be suitable. Industrial WW charge now is
too low, not enough for expenses of solving environmental
standard.
•Continue the awareness raising activities.
Thank you for your attention !