FACTBOX-Five political risks to watch in Vietnam

SINGAPORE, Oct 8 (Reuters) – Vietnam has weathered the global economic crisis relatively well, but the country is still seen as a risky and relatively opaque investment destination.

Following is a summary of key Vietnam risks to watch:

* CORRUPTION

Corruption is endemic in Vietnam at all levels of government, and acts as a major barrier to foreign investment. The authorities had announced aggressive plans to fight corruption, and encouraged the media to act as a watchdog, but these efforts lost steam after several journalists were detained for reporting on major corruption scandals. Progress on corruption will remain a key determinant of investment attractiveness.

Key issues to watch:

– Vietnam’s rank in corruption perceptions rankings. A strong improvement or decline would influence investors.

* GOVERNMENT EFFECTIVENESS

Corruption, lack of accountability and transparency, and burdensome bureaucracy all impact the effectiveness of the government in formulating and implementing policy. Economic reform and the restructuring of inefficient state enterprises are vulnerable to being undermined by entrenched interests and conservative elements in the government more focused on security.

Key issues to watch:

– While the government stimulus package has boosted the economy, there are questions over how the budget deficit can be financed, how inflationary pressure can be contained, and how the crowding out of private investment can be avoided. Hanoi has embarked on a plan to trim bureaucratic procedures in government, and how that scheme plays out will be something to watch.

– Investors frequently list poor infrastructure as one of the biggest barriers in Vietnam, and the government’s ability to coordinate swift, efficient development in this area is being keenly observed.

* EXCHANGE RATE POLICY

Vietnam’s fixed exchange rate policy frequently causes economic pressures to build. The authorities are widely expected to widen the dong’s trading band or devalue it again gradually in coming months, and this has prompted hoarding of dollars. For now, the risk of a sudden big devaluation is considered small.

Key issues to watch:

– Markets are closely watching for any clues to the likelihood and timing of changes to the exchange rate.

* SOCIAL UNREST

Vietnam has seen a rising number of strikes, protests and land disputes, often affecting foreign businesses. Disturbances have erupted in rural areas due to state expropriations of land and the corruption of local officials. But there remains no evidence for now that wider unrest is likely, or that there is any imminent risk of the regime being challenged from below.

Key issues to watch:

– Any sign that a broader national protest movement is emerging out of local disputes. So far, this seems unlikely.

– The role of the Catholic church. Catholics have been engaging in periodic protests over church land taken over by the government after 1954. The Catholic Church, while officially shunning involvement in politics, has 6-7 million followers in Vietnam and is quite well organised.

– Territorial disputes in the South China Sea. This issue is highly charged in Vietnam, where suspicion of China runs high. Any move by China to assert sovereignty over disputed islands in the South China Sea, or perceived weakness by Vietnam on this issue, could galvanise broad based support for demonstrations.

* THE ENVIRONMENT

Vietnam has great potential as a source of tradeable carbon credits under the Kyoto Protocol, but issues of expertise, transparency and financing have hindered progress. Environmental issues may also become a growing source of popular unrest, as in China. With its huge coastline, Vietnam is recognised as one of the countries that will be hardest hit by rising sea levels, particularly in the rice-growing Mekong Delta.

Key issues to watch:

– The extent to which the government manages to limit the environmental damage from Vietnam’s economic growth.

– Any evidence that extreme weather events affecting Vietnam are becoming more frequent as a result of climate change.

(Compiled by Andrew Marshall and John Ruwitch; Editing by Bill Tarrant)

http://www.reuters.com/article/latestCrisis/idUSSP476366

Vietnam environmental review of Chinese-run bauxite mines stalled

Hanoi – Vietnam’s environment minister completed a fact-finding visit to controversial bauxite mines, but officials said Monday no progress has been made on a promised environmental
review of the projects.

Minister of Natural Resources and Environment Pham Khoi Nguyen visited several active and proposed bauxite mines in Vietnam’s Central Highlands region last week. The mines, to be operated by the Chinese state-owned Aluminium Corporation of China Limited, have drawn public criticism for environmental and security reasons.

In late April Vietnam’s Politburo, the Communist Party’s governing body, ordered the projects frozen pending an environmental impact report.

But Deputy Minister of Trade and Industry Le Duong Quang told the German Press Agency dpa no progress had been made on the report.

‘We plan to produce this report, but we have not decided to assign it to any specific agencies,’ Quang said.

Quang said the bauxite projects had been approved before a new law requiring environmental impact reports. He said the agency had been unable to meet Vietnamese Prime Minister Nguyen Tan Dung’s 2007 request for an environmental report on the mines.

‘We could not produce this report because at that time, we did not have any money to carry it out,’ Quang said.

Doan Van Kien, chairman of the Vietnam National Coal-Mineral Industries Group (VINACOMIN), a partner in the mining projects, said his company was not responsible for researching the environmental impact of the Chinese-run projects.

National Assembly deputy Nguyen Lan Dung, a biologist who has criticized the proposed mines, praised the government’s response to the issue despite the lack of progress on a study.

During a visit to the port city of Haiphong Saturday, Dung was confronted by citizens concerned about the bauxite projects and promised a strict review for environmental impact and to ensure they created jobs for Vietnamese workers.

Scientists have criticized the bauxite projects on environmental grounds. Bauxite mining generates five tons of caustic red sludge for each ton of aluminum ore it produces.

Other critics, including revered 97-year-old General Vo Nguyen Giap, have focused on what they term the national security risk of allowing Chinese companies access to the strategically important Central Highlands.

Still others have complained that the Chinese companies are importing thousands of unskilled Chinese laborers rather than hiring local Vietnamese workers.

The Politburo’s directive in April mandated that imported labor be confined to highly skilled workers and that unskilled jobs go to Vietnamese locals.

Read more: http://www.monstersandcritics.com/news/asiapacific/news/article_1476388.php/Vietnam_environmental_review_of_Chinese-run_bauxite_mines_stalled_#ixzz0GYwBvNXJ&B

Vietnam’s China mining plans spark rare criticism

HANOI, April 19, 2009 (AFP) – A plan to let a Chinese company build a bauxite mine in Vietnam has triggered rare public outcry from critics who say the environmental and social damage will far outweigh any economic benefit.

Some even fear the plan, agreed to by leaders of the two communist countries without broader dialogue, could ultimately mean the de facto seizure by Beijing of a strategic region of Vietnam.

Vietnam’s government estimates the country’s bauxite reserves at 5.5 billion tonnes – a major draw for the world’s mining giants.
In 2007 it approved a plan for two major mining operations to be run by state-owned Vietnam National Coal and Mineral Industries Group (Vinacomin) in the Central Highlands.

A subsidiary of Chinese aluminium firm Chinalco has been granted a contract to build one mine, while the US aluminium company Alcoa has partnered with Vinacomin to explore the feasibility of a second.

But in a country that bitterly recalls 1,000 years of Chinese occupation – and more recently a brief 1979 border war – any presence of Vietnam’s big neighbour on its territory is perceived as a menace.

Writer Nguyen Ngoc, whose work focuses on the Central Highlands and its people, said there was a longer-term risk of seeing the region “Sinocised.”

“The Central Highlands constitute a strategic position for all of the south of Indochina,” said Ngoc, who alleges Chinese companies are already exploiting bauxite over the border in Laos.

“They say that who is master of the Central Highlands is master of southern Indochina.”

While the bauxite project presents “financial, ecological and social problems,” he said the most important question was that of security and independence.

In a one-party state where public protest is rare, scientists, intellectuals and former soldiers have combined with fierce critics of the regime to denounce the government’s plans.

“China has been notorious in the modern world as a country causing the biggest pollution as well as other problems,” 135 Vietnamese intellectuals said in a petition criticising the mining plan and delivered Friday to the National Assembly, or parliament.

Deputy Prime Minister Hoang Trung Hai has said the bauxite mining industry would help spur socio-economic development in the Central Highlands, the state Vietnam News Agency reported.

The government estimates the projects will require total investment of more than 10 billion dollars and will, by 2025, annually produce between 13 and 18 million tonnes of alumina, a partially-processed product of bauxite.

But critics say the mines would bring only limited financial benefit to Vietnam, which plans to export most of the alumina.

The scheme’s most prominent opponent is General Vo Nguyen Giap, 97, who led Vietnam’s defeat of French colonial forces.

In open letters to the government, he warned of the danger to the environment, to the lives of ethnic minorities, and to Vietnam’s “security and defence.”

The Ho Chi Minh City War Veterans’ Association has expressed similar views, and economics professor Nguyen Quang Thai said in a recent report to the government that Giap’s warning should be respected.

“We SHOULD NOT allow foreign labourers into the area,” Thai wrote, without naming China.

Exploitation of natural resources – notably for coffee production – has already provoked violent clashes in the Central Highlands, home to the ethnic minority Christian Montagnards who have battled land confiscation and religious persecution.

Dissident monk Thich Quang Do, head of the banned Unified Buddhist Church of Vietnam, has called on people to denounce the “destructive effects” of the planned mine on indigenous people.

A permanent Chinese presence in the Central Highlands would pose “an alarming threat” to national security, he said.

If the bauxite projects are carried out, scientists fear massive destruction of the fertile soil where forests, coffee and tea grow.

They also worry about water pollution and say the local population, some of whom received or will receive compensation, risk loss of land and are not qualified to work in the factories.

Writer Ngoc said there could be “new revolts” by the region’s ethnic minorities.

Experts estimate thousands of Chinese will arrive for the bauxite projects and say several hundred are already in Lam Dong province, where the ground is being cleared.

“For countries like Vietnam… exploiting natural resources for development is necessary,” said geologist Dang Trung Thuan. “Exploitation is obvious, but to what extent ?”

http://news.asiaone.com/News/Latest%2BNews/Asia/Story/A1Story20090420-136270.html

Vietnam: Norway helps build Green One UN House in Vietnam

The Norwegian government has pledged 1.8 million USD toward the building of the Green One UN House in Vietnam.

The grant agreement was signed in Hanoi on Apr. 15 between the visiting Norwegian State Secretary for International Development, Hakon Gulbrandsen, and Setsuko Yamazaki, Country Director of the UN Development Programme in Vietnam.

“This grant aims to support the UN reform and the aid effectiveness agenda in Vietnam and at the same time to support a demonstration model for green buildings in Vietnam,” said State Secretary Hakon.

As a tripartite undertaking between the UN, the Government of Vietnam and donors, the office building is expected to enable the UN in Vietnam to use energy and water more efficiently, thus minimizing the ecological footprint of the UN in Vietnam.

According to the Norwegian Embassy in Hanoi, the building will allow co-location of UN staff who are currently scattered in 10 different locations throughout Hanoi.

Norway is among the first donors strongly supporting the “Green One UN House” idea, along with the UK, Ireland, Finland, Australia and New Zealand. From the beginning, the country granted 200,000 USD towards the eco-design of the building.

Its latest grant increased the total pledges by donors to more than 50 percent of the total retrofit cost which is estimated at 8.5 million USD.

The Vietnamese Government is contributing a high value land site and is likely to offer the premises on a rent-free basis for a minimum of ten years.

The Norwegian State Secretary is on a working visit to Vietnam from Apr. 15-16, during which he will meet with Minister of Natural Resources and Environment Pham Khoi Nguyen, Vice Minister of Planning and Investment Cao Viet Sinh and other officials.

He will also visit the Mekong Delta to learn more about the challenges of climate change in this vulnerable region.

http://www.isria.info/en/16_April_2009_85.htm

Vietnam PM halts controversial hotel in park: govt

A plot of land which was to be the site of a hotel project in one of Hanoi's biggest parks

HANOI (AFP) — Vietnam’s prime minister has stopped a 40-million-dollar hotel development at a city park amid fears over possible damage to the capital’s “green lung”, the government said Wednesday.

The project, known as SAS Hanoi Royal, is a joint venture between Hanoi Tourism Company and SIH Investment Limited of Singapore, the government said on its website.

French-based Accor would manage the completed hotel under its Novotel brand, an Accor spokesman said.

Prime Minister Nguyen Tan Dung ordered a “suspension” of construction while an alternate site is sought, the government said.

Dung asked relevant authorities “to choose a different location and recommend that to the investor”, the government said, adding that public opinion, including that of architects and planning experts, said building the hotel in Thong Nhat park would seriously affect the city’s environment.

Sealed off behind a high green fence in one corner of park, the site has been churned up and metal rods inserted into the ground but there was no evidence of active construction when AFP visited.

Plans called for a five-storey, four-star hotel with 376 rooms, the government said.

Evan Lewis, Accor’s regional vice-president of communications, said he received media reports of the prime minister’s decision but had not been officially informed, and so declined to comment.

Thong Nhat, once known as Lenin Park, contains neatly-laid flower beds, tree-lined pathways, children’s rides and a lake. The park is a popular spot for exercising in the heart of an increasingly congested capital.

http://www.google.com/hostednews/afp/article/ALeqM5iXqiQ3MWToYyNzzKxfyp6Y5mXCTg

Vietnam to go ahead with bauxite mines despite opposition

Vietnam's Prime Minister Nguyen Tan Dung (centre) who has vowed to to open a controversial bauxite mining project

HANOI (AFP) — Vietnamese Prime Minister Nguyen Tan Dung is determined to go ahead with a bauxite mining project in the Central Highlands region despite public protests, the government said Thursday.

Earlier media reports said Dung had approved a directive allowing the mining, processing and use of bauxite ore in the mountainous coffee-growing region.

The project has met with protests from scientists and local residents, who fear the open-cut mining will destroy vast forest and crop areas and create mountains of toxic sludge.

On Wednesday Dung told domestic reporters in Hanoi the plan was “a major policy of the party and the state”, according to the government’s website.

It also quoted the premier as saying there would soon be a conference on how to exploit the bauxite resources in a sustainable and efficient way.

Last month Vietnam’s famed war hero General Vo Nguyen Giap, 97, sent an open letter to Dung asking for plans for bauxite mining to be put on hold until international experts had studied the ecological impact.

http://www.google.com/hostednews/afp/article/ALeqM5iumhbQFHamniM6E8NmK2yYn41ccA

U.S. – Vietnam Partnership

07 December 2008

U.S. Assistant Secretary of State for Oceans, Environment, and Science Claudia McMurray visited Ho Chi Minh City, Can Tho City, Lam Dong Province, and Dong Nai Province November 18 to 22 to promote environmental and scientific cooperation between the United States and Vietnam. Two specific goals of her trip were to highlight the importance of cooperation on climate change research and mitigation, and to encourage efforts to preserve wildlife, as well as combat illegal wildlife trafficking.

On November 20, Assistant Secretary McMurray participated in the inauguration of the U.S. government-funded Delta Research and Global Observation Network, or “DRAGON” Institute, in Can Tho. She told the audience the center will provide “the opportunity for scientists from the U.S. and Vietnam to work together to find solutions to the challenges climate change presents to management of each nation’s river deltas,” as the Mississippi and Mekong deltas have common vulnerabilities.

A day before Assistant Secretary McMurray arrived in Vietnam, the United States and Vietnam announced the establishment of a joint working group to study the effects of climate change. The group will operate under the U.S.-Vietnam Science and Technology Agreement signed in 2000.

Assistant Secretary McMurray also met with officials of the Ho Chi Minh City Forest Protection Department and Customs Bureau, with whom she stressed the U.S. commitment to stopping illegal wildlife trafficking, a black market trade that nets traffickers between ten and twenty billion [U.S.] dollars a year. “Some may not know this,” said Ms. McMurray, “the largest market for [illegal wildlife and wildlife products] is China but the second largest market is the U.S.”

Ms. McMurray visited the Cat Tien National Park in Dong Nai province to view rehabilitation centers for the Asian black bear and golden-cheeked gibbon. Both species are endangered because of relentless pressure from poaching for traditional Chinese medicine and the pet trade. She said the U.S.-Vietnam partnership aims to curb both the demand and supply of trafficked wildlife through steps such as wholesale advertising in the United States to raise awareness, and training Vietnamese forest protection forces and customs officials to improve crackdowns on traffickers.

During her visit, Assistant Secretary McMurray also stressed the need to balance economic growth with environmental protection. “The U.S. underwent a period of strong economic development and had conflicts between economic development and environmental development,” she said. “Vietnam should not forget the environmental issue because of economic interests.”

http://www.voanews.com/uspolicy/2008-12-07-voa4.cfm

SLP Environmental Consultants expand their environmental consultancy services into Vietnam

Rapid industrialization, an evolving environmental regulatory system and a growing awareness of the importance of protecting the natural environment has resulted in SLP Environmental Consultants extending their environmental consultancy services into the Vietnamese market.

Over the last decade, industrial activities in Vietnam have made a significant contribution to the stable development of the country’s socio-economic and national economic development targets. However, in the development process, these industrial manufacturing activities and associated infrastructure expansion works have taken their toll on Vietnam’s natural environment and environmental law enforcement has historically been patchy and often lax.

It is not uncommon to read reports in the Vietnam press of rivers and groundwaters polluted by large volumes of untreated industrial effluent and municipal wastewater, or how the uncontrolled burial of hazardous wastes has contaminated groundwaters making them unusable for drinking water supply. Atmospheric pollution has also risen as a result of rapid industrialization and smoke, dust and odour pollution from facilities such as cement manufacturing and seafood processing plants is widespread.

One environmental pollution incident extensively publicised in the Vietnam press over the last few months is the Taiwanese-financed monosodium glutamate producer Vedan Vietnam who were caught red-handed polluting the Thi Vai River in Ba Ria Vung Tau Province, 67km south of Ho Chi Minh City. They have been discharging thousands of cubic metres of untreated wastewater into the river every day for the last 14 years and as a result a 15km stretch of the river is now grossly polluted. The Vietnamese Government have suspended the factories operations and fined the company a US$7.5 million retrospective environmental protection fine, and additionally some 1,000 local residents whose health and livelihoods have suffered are preparing a class action against the company. According to the Vietnam Environmental Protection Agency (VEPA), the Thi Vai River receives daily some 34,000 cubic metres of untreated wastewater discharged from nearly 200 companies operating in the river basin and as a result ships can no longer anchor at Go Dau Port in Dong Nai Province because of pollution damage.
There is also a requirement for the public infrastructure within Vietnam to be improved. The World Bank estimates that only 14% of wastewater in Vietnam’s main cities such as Hanoi, Ho Chi Minh and Hai Phong is treated and only 50% of rural families have access to sanitation. Ho Chi Minh City is currently improving its sewerage system and wastewater treatment facilities, but there is extensive scope for new projects and the expansion of such utilities across the country.

(…)

Vietnam was recently described in a UK Trade and Invest Report as one of the most attractive emerging markets globally. Foreign Direct investment (FDI) is at record rates with Vietnam currently ranking fifth in the world with a FDI estimate for 2008 of US$60 billion, with additional billions being loaned for new infrastructure projects by International Financial Institutions such as the Asian Development Bank. These projects include hydroelectric power plants, wastewater treatment and waste disposal facilities, urban mass transit schemes, new expressways and the upgrading of existing roads and canals. Industrial growth for the period January to September 2008 was reported by the General Statistics Office as 15.2% and this rapid growth is demonstrated by the fact that by 2015 six new steel smelting plants with associated deep water ports will have been constructed in Vietnam. Currently Vietnam has a heavy reliance on imported steel and they wish to increase their domestic production of cast iron and steel of different kinds to meet increasing domestic demand and develop a new export market.

Vietnam is also capitalizing on its prime location as a tourist destination with the construction of new urban centres such as Thu Thiem Peninsula, located directly across the Saigon River from the historic core area of District 1 in Ho Chi Minh City. Leisure resorts in the design phase include Da Nang New City and Phu Quoc Island which are being touted as ‘clean tourist destinations’ incorporating sustainable development principals and special environmental protection initiatives. Such projects are viewed favorably by the Vietnamese Government. Furthermore Vietnam as a developing country finds itself in the advantageous position of being able to learn from the experiences of other more developed countries and design and build green sustainable buildings and infrastructure which will have a huge benefit for the local, regional and global environment.

(…)

As Vietnam’s economy grows at a breakneck pace, many Vietnamese are quite rightly worried about the potential trade-off between economic development and the environment. There is a rising consensus that economic development should not come at too high a price and more consideration needs to be given to sustainable development and protecting the natural environment for future generations. Environmental pollution in particular is threatening to undercut recent economic gains as it has a detrimental effect on human health and the ecosystems that Vietnam relies on for sustenance. Environmental pollution also has economic consequences as agricultural and aquacultural production is increasingly affected.

To put the problem in perspective, the number of polluting companies is now so high and the effects of pollution so visible that some banks are exercising corporate social responsibility and refusing to lend to polluting companies without concrete evidence that they are taking real steps to tackle their irresponsible environmental behavior.

Read full story

US, Vietnam to cooperate on climate change

The Associated Press
Monday, November 17, 2008

HANOI, Vietnam: The United States and Vietnam announced Monday they will work together to study climate change and seek ways to protect vulnerable river deltas.

The two nations will open an institute in Can Tho, the largest city in Vietnam’s Mekong Delta, a densely populated, low-lying region with an extensive network of canals and rivers.

The center at Can Tho University will be used by scientists to share information and data that will help them understand the threats to the world’s largest river deltas, said Gregory Smith, a scientist with the U.S. Department of the Interior.

With millions of people living along its long coast and across the Mekong Delta, Vietnam is considered one of the five countries most vulnerable to the potential effects of climate change, said Tran Thuc, director of the country’s Institute of Meteorology, Hydrology and Environment.

“If the sea level rises one meter (three feet), the whole Mekong Delta will be submerged,” Thuc said.

Smith told a joint news conference that the U.S. hopes to learn lessons that it could apply in the Mississippi River delta, where terrible floods were unleashed in the aftermath of Hurricane Katrina.

“Our interest first and foremost is to build a resilient Mississippi Delta,” he said.

To achieve such goals, he said, scientists around the world need to gain a better understanding of how to manage a wide range of human activities in delta areas, including housing, fishing, levees, dams and energy resources.

Smith said the new center in the Mekong, to be called the Dragon Institute, will be the first of several around the world.

The 15,500-square mile (40,000-square kilometer) Mekong Delta region is home to 17.3 million people living in 13 provinces and cities. It produces 90 percent of Vietnam’s rice exports and accounts for 60 percent of its fish and seafood exports, according to the United Nations Development Program.

http://www.iht.com/articles/ap/2008/11/17/asia/AS-Vietnam-US-Climate-Change.php

Vietnam to grow genetically modified crops: reports

Cao Duc Phat

HANOI (AFP) — Vietnam plans to test genetically modified (GM) agricultural crops from now until 2010 and then grow them on a large scale, media reports in the communist country said on Thursday.

Agriculture Minister Cao Duc Phat announced the plan in a National Assembly session this week, said the state-run Vietnam News Agency.

Under the government plan, Vietnam would from 2011 plant GM species of maize, cotton and soybean, said the news site Vietnamnet quoting experts attending a recent biotechnology workshop.

The Ho Chi Minh City Biotechnology Centre plans to grow a GM maize variety from the Philippines on a trial basis, the report said.

GM technology has been highly controversial, praised by some for increasing yields and improving varieties, and condemned by others for creating “frankenfoods” that pose dangers to the environment and people’s health.

Environmental group Greenpeace has called for a worldwide recall of GM foods, with a spokesman saying this week that distributing them was “like playing Russian roulette with consumers and public health.”

AFP: Vietnam to grow genetically modified crops: reports