VZCZCXRO6403
RR RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
DE RUEHHI #0981/01 2350947
ZNR UUUUU ZZH
R 220947Z AUG 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 8344
INFO RUEHHM/AMCONSUL HO CHI MINH 5048
RUEHBK/AMEMBASSY BANGKOK 6436
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RHMFIUU/HQ EPA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC

UNCLAS SECTION 01 OF 04 HANOI 000981 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MLS, OES AND INL 
DEPT PASS USAID TO LAC/RSD, LAC/SAM, G/ENV, PPC/ENV 
JUSTICE FOR ENVIRONMENT AND NATURAL RESOURCES (JWEBB) 
EPA FOR INTERNATIONAL (MKASMAN) 
COMMERCE FOR ITA/MAC/HONG-PHONG PHO 
 
E.O. 12958: N/A 
TAGS: SENV TBIO ECON SOCI VM
SUBJECT: VIETNAM'S EXPORT PROCESSING ZONES AND INDUSTRIAL PARKS: 
ECONOMIC BOON, ENVIRONMENTAL BUST 
 
HANOI 00000981  001.2 OF 004 
 
 
¶1. (SBU) Summary. Industrial Parks (IPs) and Export Processing Zones 
(EPZs) are key components of Vietnam's growing economy.  However, 
IPs and EPZs emit large amounts of air and water pollutants, while 
producing growing quantities of solid wastes.  While the Government 
of Vietnam (GVN) has several environmental management tools at its 
disposal and EPZ/IP managers are tasked with ensuring the 
environmental compliance of their tenants, in practice, the system 
has done little to manage pollution.  Therefore, many businesses are 
faced with trying to comply with unclear standards.  Some 
multinationals rely on internal company codes of conduct.  The GVN 
fears that many others simply discharge wastes directly into the 
environment.  End Summary. 
 
EPZs and IPs Play a Key Role 
in Vietnamese Economic Growth 
----------------------------- 
 
¶2. (U) IPs and EPZs play a major and growing role in GVN development 
plans, particularly in attempts to attract Foreign Direct Investment 
(FDI) and to integrate Vietnam into the global economy.  EPZs and 
IPs also assist in poverty alleviation and in the distribution of 
economic benefits.  As of 2007, Vietnam contained 154 IPs and EPZs 
and 9 Economic Zones (EZs) covering 32,000 hectares in 48 cities and 
provinces nationwide.  By 2010, Vietnam plans to add an additional 
15,000-17,000 hectares with another 27,000-30,000 hectares 
(including 115 new IPs and EPZs) by 2015.  Initially, IPs and EPZs 
were concentrated in southern Vietnam, particularly near Ho Chi Minh 
City.  While the majority of IPs and EPZs remain in the south, the 
GVN actively promotes expansion into the north and central regions. 
Dong Nai Province, just north of Ho Chi Minh City, contains 39 
percent of all IP and EPZ investment capital, closely followed by 
its western neighbors, Binh Duong Province and Ho Chi Minh City, 
each with 15 percent.   Hanoi with 10 percent of total investment 
capital, ranks fourth. 
 
¶3. (U) In 2006, EPZs and IPs accounted for 29 percent of gross 
national industrial output (USD 17 billion).  EPZs and IPs produced 
export revenue of USD 8.3 billion and contributed USD 880 million to 
the Vietnamese budget, while employing 918,000 people. They 
currently constitute 45 percent of industrial production, which the 
GVN expects to jump to 50 percent by 2010 and 60 percent by 2015. 
According to the Hanoi Authority for Industrial and Export 
Processing Zones (HIPZA), EPZ and IP production constitutes 30-35 
percent of industrial production and 35-40 percent of exports from 
the Hanoi region, while provincial authorities in Haiphong note that 
EPZs produce one third of total exports from Haiphong.  Foreign 
investment makes up the large majority of total projects, with 
investment capital of USD 21.8 billion, accounting for 35.7 percent 
of all FDI projects and 36 percent of FDI capital nation-wide. 
Local investment totals USD 6-7 billion.  Taiwan, Japan, and Korea 
are the primary investors in EPZs and IPs with total projects valued 
at over USD 12.3 billion.  U.S. investment in 103 projects in EPZs 
and IPs equals USD 720 million or 3 percent of the total. 
Additionally, a small number of U.S. businesses, including AIG, have 
entered into the IP/EPZ development and management sector. 
 
EPZs and IPs also Play a Key Role in Pollution Problem 
--------------------------------------------- --------- 
 
¶4. (U) The growth of EPZs and IPs has led to increasing 
environmental impacts.  While the entities that oversee EPZs and IPs 
argue that these facilities have relatively minimal impacts on the 
environment, most acknowledge that discharges from these entities do 
not meet Vietnamese environmental standards.  For example, in May 
2008, in Tan Binh Industrial Zone, in HCMC's north, coliform in 
waste water at the treatment station was found to be 84.6 times 
higher than acceptable limits. Earlier this month, the Dong Nai 
Department of Natural Resources and Environment announced that the 
Bien Hoa 1 Industrial Zone dumped nearly 15,000 cubic meters of 
untreated water directly into the Cai River, which feeds the Dong 
Nai river.  Dong Nai officials stated that the liquid effluent 
contained unacceptably high levels of several metals and coliform. 
Dong Nai officials also stated that tenants at the facility 
stockpiled dangerous and untreated industrial wastes and could not 
control dust emissions.  A media report from last week noted that 
several Japanese vessels refused to call at a river port in Dong Nai 
province after five days in the polluted port removed paint and 
decreased hull thickness by eight millimeters (about a third of an 
inch) from company ships. The national Ministry of Natural Resources 
 
HANOI 00000981  002.2 OF 004 
 
 
and Environment (MONRE) recently declared that river "virtually 
dead" due to industrial pollution. MONRE also recently found 
pollution of underground water resources in Hanoi by toxic 
substances, particularly in areas surrounding IZs. 
 
Environmental Considerations 
in General EPZ/IP Planning 
---------------------------- 
 
¶5. (SBU) The Ministry of Planning and Industry must approve all EPZ 
and IP development, though it coordinates planning and development 
with other ministries, as well as provincial and local authorities. 
According to Dr. Tran Ngoc Hung, Deputy Director of the Department 
for Industrial and Export Processing zones, MPI considers 
environmental issues when making policies and strategizing about 
EPZs and IPs, which face stricter environmental requirements than 
facilities operating under more general environmental laws.  The GVN 
is now completing regulations for environmental protection in IPs 
and EPZs to balance investment with environmental protection and to 
include some means to limit importation of polluting/out-of-date 
technologies.  MPI claims that it ensures that all projects have 
adequate infrastructure inside and outside the facilities (roads, 
waste treatment, power etc.) and requires heavily polluting 
industries to locate in special areas, away from urban centers.  A 
recent Prime Ministerial instruction requires all existing EPZs and 
IPs to build central wastewater treatment plants by 2010, for which 
the GVN will provide financial incentives. By 2010, the GVN plans to 
build independent monitoring stations in EPZs and IPs to measure 
pollution levels, though it has not yet identified funding for these 
stations, which MPI estimates to cost up to USD 1 million apiece. 
 
Environmental Impact Assessments 
-------------------------------- 
 
¶6. (SBU) Vietnamese environmental officials rely upon Environmental 
Impact Assessments (EIA) as their primary means to protect the 
environment at EPZs and IPs.  GVN regulations require an EIA prior 
to construction of an IP or EPZ and IP/EPZ managers must file a new 
EIA if new facilities in the IP/EPZ cumulatively change the 
environmental impact of the IP/EPZ.  For example, the Dinh Vu EPZ in 
Haiphong had to produce a separate EIA when it constructed a liquid 
jetty to allow its tenants to offload petroleum from ships on the 
river.  Officials determine the need for EIAs for individual 
factories within IP/EPZs on a case-by-case basis.  Investors that 
anticipate that their projects will have a serious environmental 
impact must file an Environmental Impact Statement (EIS) with the 
provincial DONRE, and the EPZ or IP must file a separate, 
comprehensive EIA.  The EIS is used as a basis for granting (or not) 
an investment license.  Projects that do not require EIAs need to 
sign environmental commitments with the management boards of the 
EPZ/IP to ensure compliance with environmental requirements. 
Normally, committees of provincial authorities and local 
environmental experts review and approve EIAs. 
 
IP/EPZ Environmental Requirements and Provisions 
--------------------------------------------- --- 
 
¶7. (SBU) IP and EPZ managers, working with provincial and central 
environmental authorities, generally set environmental standards 
which the tenants must follow.  However, concern about environmental 
issues varies among the EPZs and IPs scattered around the country. 
Some, like Dinh Vu in Haiphong, have a centralized environmental 
plan and require tenants to meet basic environmental standards prior 
to opening and during operations. Some EPZs and IPs monitor 
environmental practices of tenants.  When they detect problems, they 
may warn the company or notify local environmental authorities. 
Some IZs will refuse to permit polluting industries to operate 
within their boundaries or try to ensure that tenants only use 
up-to-date production technologies.  The Chan May Lang Co Industrial 
Park management board recently rejected a proposal from Vinashin, 
Vietnam's major state-owned shipbuilder, for a ship assembly in the 
zone because of deleterious environmental effects (Note: Provincial 
authorities in central Khanh Hoa province recently fined Vinashin 
for a series of environmental violations over the past several 
years, including the improper discharge of toxic waste). 
 
Enforcement Difficulties 
------------------------ 
 
 
HANOI 00000981  003.2 OF 004 
 
 
¶8. (SBU) Though central and provincial authorities, together with 
IP/EPZ management, all claim to focus on environmental 
considerations, actual implementation of environmental requirements 
remains haphazard and communications between these entities and the 
regulated facilities can be unclear.  According to HIPZA and other 
local Hanoi authorities, many polluting tenants in IPs/EPZs do not 
comply with environmental standards.  Despite GVN policy/regulations 
now requiring them, as of early 2008, only 56 of the 154 EPZs and 
IPs have central wastewater treatment systems.  Only six of Ho Chi 
Minh City's 15 industrial and export processing zones have waste 
water treatment plants.  Many facility developers consider the 3 
million and USD 7 million cost of  developing such centralized 
facilities - prohibitive. In Ho Chi Minh City, earlier this year, 98 
out of 106 companies inspected by the provincial Department of 
Natural Resources and Environment (DONRE) were fined for flouting 
waste water treatment regulations. 
 
¶9. (SBU) Even where officials attempt to enforce pollution 
standards, their efforts often are thwarted by the limited amount 
authorized to fine violators.  Provincial DONREs can and do inspect 
IZs for environmental compliance, though these inspections can be 
inconsistent.  Additionally, DONREs normally must announce upcoming 
inspections, providing violating facilities the opportunity to 
conceal violations.  According to Deputy Director General Bui Cach 
Tuyen of the General Department of Environment under MONRE, the 
maximum fine for environment violations is VND80 million (USD 
5,000), an insignificant amount compared to the cost savings a 
business can make by not properly treating its waste water.  While 
central authorities have the power to shut down factories that 
repeatedly flout environmental laws, they rarely do so due to the 
need to coordinate with district, city and ward officials and to 
economic and labor concerns.  (Note: the Haiphong DONRE stated that 
two years ago it closed Haiphong Cement Manufacturing, which had 
operated for 100 years, due to continued environmental problems). 
 
Waste Management Difficulties 
----------------------------- 
 
¶10. (SBU) At many EZs and IPs, industrial wastes management remains 
ad hoc, with many provincial authorities unaware of treatment 
arrangements.  Tenants are responsible for sorting and classifying 
solid and/or hazardous wastes, which (theoretically) are removed 
from the EPZ or IP by a licensed waste handler, either a private 
company or a government service, hired by the park management, 
though our contacts provided little information about their 
qualifications or disposal practices.  Even where disposal services 
exist, it can be difficult to transport those wastes to disposal 
facilities.  According to Vice Manager  Le Van Huong of the Tra Vinh 
Industrial Zone Management Board, environmental waste disposal 
companies pick up solid and liquid waste by truck and deliver it to 
Ho Chi Minh City for disposal. (Note:  Tra Vinh is 200 km from HCMC, 
accessible only by poor roads.)  Representatives of Chevron, which 
operates two facilities near Haiphong, stated that the Haiphong area 
contains no licensed hazardous waste collectors, requiring residents 
in local EPZs and IPs to hire companies from Hanoi, three hours 
away.  With little capacity in Vietnam to properly treat certain 
industrial and hazardous wastes, facility owners face three choices; 
store the waste indefinitely, pay high fees for a distant, licensed 
disposal company to handle the wastes, or hire a local firm to make 
the wastes "go away."  The owner of an Australian steel wiring 
facility noted that local authorities recently offered to arrange 
the removal of industrial wastes from his facility but could not 
explain how or where the wastes would be treated.  The owner instead 
decided to store the wastes on site until he could be certain of 
proper disposal. 
 
Fears of Importing Pollution 
---------------------------- 
 
¶11. (SBU) Though Vietnamese officials actively promote IPs and EPZs 
as destinations for foreign investment, they voice concerns that 
some foreign investors, notably China, Taiwan and Korea, see Vietnam 
as a destination for less-efficient and higher-polluting production 
technologies or environmentally unfriendly practices.  These 
investors "export pollution" to Vietnam.  HIPZA officials in Hanoi 
singled out United Motor Vietnam, a wholly-Chinese owned company, 
manufacturing motorbikes at the Noi Bai industrial zone near Hanoi's 
international airport, as a particular problem.  According to 
Haiphong officials, a Chinese investor wants to import used plastic 
 
HANOI 00000981  004.2 OF 004 
 
 
bottles to Vietnam for cleaning.  The plastic bottles would then be 
sent to China for recycling, while Vietnam would have to manage the 
cleaning waste. The Haiphong DONRE recently refused to issue a USD 
128 million license for a Chinese urea fertilizer project which 
would have used 1960s technology.   The Dinh Vu IZ has refused three 
Taiwanese chemical projects due to environmental concerns. 
 
¶12. (SBU) While the GVN understands the potential environmental 
consequences, environmental officials lament that Vietnam lacks 
environmental standards or other "barriers" to prevent the 
importation of such technology and does not have the capacity to 
define modern versus out-of-date or inefficient.  While the Ministry 
of Science and Technology (MOST) and MONRE control the importation 
of technology for large projects and attempt to ensure that only 
modern, efficient technologies come to Vietnam, the central 
government cannot control technologies involved in smaller projects, 
which only need approval from local People's Committees.   According 
to Professor Pham Ngoc Dang, the chair of the Vietnam Clean Air 
Partnership, many such agreements exist between China and Vietnamese 
localities.  Officials in less prosperous provinces rarely focus on 
environmental concerns, instead only looking at the short-term 
economic bottom line.  The Haiphong DONRE reported that when it 
refused to accept waste materials for reprocessing, other Vietnamese 
localities jumped in to sign the deal.  Recently, another foreign 
investor sought to invest in ship breaking.  Haiphong refused the 
investment, which tried to move to an IP in Ninh Binh.  While the 
Dinh Vu IP notified provincial authorities of its concerns regarding 
the proposed Taiwanese chemical investment, it had no means to 
communicate with management of other IPs that might be contacted in 
the future. 
 
Comment 
------- 
 
¶13. (SBU) EPZs and IPs have been an economic blessing, but an 
environmental curse.  Unfortunately, we expect the situation will 
get worse before it gets better.  GVN and provincial officials, 
though cognizant of environmental concerns, do not have the capacity 
to implement and enforce environmental standards.  As the economy 
grows and more EPZs and IPs spring up, waste discharges will also 
increase.  Nonetheless, this presents us with an opportunity, as our 
interlocutors at all levels have requested our assistance. 
Responding to industrial pollution will be difficult, and we 
understand the significant financial constraints upon U.S. 
assistance in this area.  Nevertheless, given the scope of this 
issue and its likely impact on the economy, environment, and public 
health, we have identified three meaningful venues for possible U.S. 
support.  First, we can build upon earlier U.S. efforts to assist 
Vietnam to develop monitoring and analysis capability to better 
identify the nature and sources of pollutants.  Second, we can help 
improve the capacity of civil society and the press to recognize, 
understand and publicize these issues.  Finally, we can expand 
ongoing wildlife trafficking enforcement training to include 
pollution-related offenses.  Additionally, we will continue to look 
for opportunities for U.S. companies with products, services and 
technologies that provide solutions to these growing environmental 
problems. 
 
¶14. (U) This cable was coordinated with Consulate General Ho Chi 
Minh City. 
 
MICHALAK