VZCZCXRO4791
OO RUEHDT RUEHPB
DE RUEHHM #0595/01 2571013
ZNR UUUUU ZZH
O P 141013Z SEP 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6015
INFO RUCPDOC/USDOC WASHDC PRIORITY 0146
RUEAEPA/EPA WASHINGTON DC
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHI/AMEMBASSY HANOI PRIORITY 3912
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 6251
RUEHIN/AIT TAIPEI PRIORITY 0044
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC

UNCLAS SECTION 01 OF 04 HO CHI MINH CITY 000595 
 
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, KBUCKLEY) 
 
E.O. 12958: N/A 
TAGS: SENV TBIO ECON SOCI VM
SUBJECT: DONG NAI POLLUTER VEDAN HIGHLIGHTS LIMITATIONS OF 
ENVIRONMENTAL LAW IN VIETNAM 
 
REF: 2008 HANOI 1261 
 
HO CHI MIN 00000595  001.2 OF 004 
 
 
¶1. (SBU) Summary:  Farmers seeking compensation from Taiwanese 
MSG producer Vedan recently rejected an offer of $1.5 million 
for environmental damages caused by the facility's untreated 
waste.  Although company officials admit to having flouted 
environmental regulations, they told ConGen officers that the 
GVN has made Vedan a scapegoat for violations which are common 
at both foreign and domestic industrial firms along the Thi Vai 
River in Dong Nai province.  While the fact that the GVN is 
pursuing the case is positive, the ways in which it has done so 
have not been transparent, and have highlighted governance 
issues:  differences between the letter of the law and its 
implementation, unclear authority between the provincial and 
central governments, and the lack of technical expertise for 
environmental issues in Vietnam.  The current high level of 
public interest in environmental protection has Vietnam's 
private sector looking to U.S. technology and services and is 
opening an opportunity to influence environmental policy in 
Vietnam.  End Summary. 
 
Polluter and Farmers Jostle over Environmental Impact 
--------------------------------------------- -------- 
 ¶2. (SBU) In August, a coalition of three Farmers' Associations 
(FA) in Dong Nai, Ho Chi Minh City, and Ba Ria Vung Tau 
provinces rejected Vedan's offer to provide $1.5 million in 
assistance for damages incurred by fisherman resulting from 14 
years of dumping untreated wastewater into the Thi Vai River. 
Negotiations between the FAs and Vedan had begun in March 3, 
2009 after the FAs collected thousands of letters from fisherman 
and farmers along the river claiming damages and, in many cases, 
a total loss of livelihood as a result of the heavy pollution. 
Vedan has admitted responsibility for dumping untreated waste in 
the river and says it wants to provide assistance to farmers, 
but fisherman first need to provide specific and reasonable 
evidence of their losses. 
 
¶3. (SBU) The Vedan case has made headlines since the story broke 
in September of last year after the Ministry of Natural 
Resources and Environment (MoNRE) sent a special team to inspect 
projects along the Thi Vai River, including Vedan (REFTEL).  Mr. 
Phan Van Het, Vice Director of the Department of Natural 
Resources and Environment (DoNRE) in Dong Nai province, told 
ConGen Off the team found that Vedan had surreptitiously added 
nine new projects to its complex without having applied for 
licenses or undergoing any of the required environmental 
assessments.  Inspectors also found that Vedan had run pipelines 
from factories directly into the river, completely bypassing the 
onsite waste management system. 
 
The Vedan Case Pits Development Against Environment 
--------------------------------------------- ------ 
4.(SBU) Vedan is a Taiwanese-invested company specializing in 
the production of Monosodium Glutamate (MSG).  According to 
Vedan General Manager H.K. Yang, Vedan obtained a license in 
1992 (one year before Vietnam's old environmental law was 
enacted) to construct its 129 hectare complex in Long Thanh 
district of Dong Nai province.  Before the scandal broke last 
year, Vedan was in some ways considered a model corporate 
citizen.  Vedan employs more than 2,600 people in the Long Thanh 
complex, many of them former fisherman who joined Vedan's ranks 
in 1995 under a company program to provide local general 
assistance.  Vedan also prides itself on helping 600,000 
farmers' livelihoods by buying local raw materials, such as 
cassava and molasses, for its MSG production. 
 
Investigators Clarify River Dumping Scheme, Eventually 
--------------------------------------------- --------- 
5.(SBU) Vedan's Yang told ConGen EconOff that the direct 
pipeline for river dumping had existed since 1994, shortly after 
Vedan began operations in the Long Thanh complex.  He said they 
had built the pipeline to transport waste onto ships for "ocean 
dumping," a practice that they had used in China and Japan.  The 
GVN rejected the "ocean dumping" technique, saying it flouted 
international conventions on environmental protection. Despite 
this refusal, Vedan's pipeline stayed intact.  According to 
media reports, Vedan kept a series of pipelines well-hidden 
under the ground to escape detection, discharging as much as 
105,600 cubic meters of untreated wastewater into the Thi Vai 
River every month over many years.  When EconOff asked Mr. Yang 
whether these allegations were true, Mr. Yang said that some of 
Vedan's staff might have dumped waste into the river "every now 
 
HO CHI MIN 00000595  002.2 OF 004 
 
 
and then," but he emphasized that it was "not every week." 
 
6.(SBU) Despite Vedan's economic contributions to the province, 
once the media caught wind of the violations discovered by 
MoNRE's special inspection team, there were vocal calls from 
many different sectors, including the Prime Minister, to shut 
Vedan down completely.  Thanh Nhien newspaper reported local 
DoNRE officials as saying they had no idea that Vedan was hiding 
pipelines to dispose waste.  However, DoNRE's Mr. Het told 
EconOff that DoNRE knew all along that Vedan's waste management 
system did not meet national standards.  He said that Vedan had 
applied for licenses and environmental reports through the 
Ministry of Natural Resources and Environment (MoNRE) in Hanoi 
and yearly inspections were conducted either independently by 
DoNRE or in conjunction with MoNRE.  Mr. Het wouldn't address 
directly why DoNRE did not crack down on Vedan sooner if it knew 
the company was not in compliance with environmental 
regulations, but indicated that it was MoNRE's responsibility 
since it had issued the licenses. 
 
7.(SBU) In spite of the public outcry, the GVN did not try to 
force Vedan out, instead imposing administrative fees of $15,000 
for operating without a license and $7.7 million in retroactive 
environmental protection fees.  In addition, Mr. Het said Vedan 
was forced to destroy its pipeline system and to cut back the 
40% of its operations for which it never received permission. 
Vedan will not be allowed to operate at full capacity until it 
completes all outstanding environmental procedures, which it is 
now close to achieving.  According to Mr. Yang, Vedan has spent 
almost $30 million to upgrade and install new waste treatment 
facilities, including a $9 million waste solidifier from Germany 
and a $10 million concentration facility, both of which will be 
operational by the end of October 2009. 
 
Farmers Still Have Fish to Fry 
------------------------------ 
8.(SBU) Mr. Het said that DoNRE and provincial authorities are 
awaiting results of an independent assessment by the Institute 
of Environment and Natural Resources at HCMC National University 
that will determine the scope, area, duration and level of 
damage inflicted by Vedan.  DoNRE will use the results of the 
assessment, in addition to fishermen's claims, to determine how 
much to seek from Vedan in compensation.  However, the Farmers' 
Associations in the three provinces along the Thi Vai River did 
not wait for the assessment to be completed before they began 
seeking compensation from Vedan.  According to Mr. Quang, the 
Vice Director of the Dong Nai Farmer's Association, the FA has 
received 4,647 letters from groups in Dong Nai alone, including 
fish farm owners, invested fish catchers and small-scale 
fishermen. 
 
9.(SBU) Vedan initially agreed to an MOU with the Farmers' 
Associations to discuss the "principal, scope of recipients, and 
the level of compensation."  However, that's about the only 
thing they've been able to agree on up to this point.  Mr. Quang 
said that Vedan had offered the farmers a miniscule $1.4 million 
"assistance fund" to encourage job transformation and 
agricultural promotion.  In addition, they offered a "direct 
assistance package" of $1.1 million, always making clear the 
separation between assistance and compensation.  Mr. Quang said 
that Vedan set strict stipulations on potential fund recipients: 
 they must have a formal title, legal evidence for their 
investment, proof that the damage is both real and caused by 
Vedan, and they cannot be among those that received assistance 
from Vedan in 1995. 
 
Muddy, Muddy Waters 
------------------- 
¶10. (SBU) Mr. Quang said that with all those criteria, the 
fishermen wouldn't need an Association to back them up since 
they would be better off suing Vedan directly through the 
courts.  He explained that most fishermen do not have formal 
titles or proof of investment, but nonetheless have been 
seriously impacted by Vedan's environmental violations.  In 
fact, based on the fishermen's claims and assessments, Vedan has 
inflicted at least $70 million worth of damage.  DoNRE noted 
that although many of the fishermen have legitimate claims, 
there are probably a good number of profiteers that have simply 
jumped on the bandwagon hoping to cash in on the deal.  He 
referenced a seafood processor upstream from Vedan and several 
rice and cashew farmers making claims that have never even used 
 
HO CHI MIN 00000595  003.2 OF 004 
 
 
water from the Thi Vai River due to its 50% salt content. 
 
¶11. (SBU) Mr. Quang also acknowledged that some of the claims 
may be unjustified, which is the reason that the FAs agreed to 
seek only 45% of the desired compensation from Vedan.  Vedan's 
Mr. Yang said he has no idea how the Farmers' Associations came 
up with the figure of 45%, but even cut by that much, it still 
amounts to $35 million, which is far more than Vedan is able to 
pay out.  While Vedan wants to take responsibility and right its 
wrongs, it will not do so without a single piece of evidence of 
the damage or proof that Vedan is the culprit. 
 
12.(SBU) Mr. Yang welcomes an independent assessment of the 
damage, but is concerned that Vietnam lacks the technical 
expertise to carry out a meaningful, valid study of such 
complexity.  He said that the institute MoNRE has charged with 
conducting the study is using a "Mac 21 method," but does not 
have any prior experience with that method.  Vedan has tried 
unsuccessfully to get the GVN to allow the institute to partner 
with a Taiwanese research entity familiar with the method. 
Meanwhile, MoNRE is pushing to meet its end of September 
research deadline rather than waiting the six months the method 
would require.  Thus, Mr. Yang said, even once "independent" 
results are determined, their validity may still be 
questionable. 
 
A Hairy Scapegoat? 
------------------ 
¶13. (SBU) There is a Vietnamese saying that "the guy with hair 
is easier to catch than the bald one," and Mr. Yang surmises 
that it is precisely because Vedan has been so successful in 
Vietnam that the media has focused attention on this case and 
made his company a scapegoat.  Mr. Yang lamented that despite 
being interviewed many times, Vedan's version of events never 
appears in the media.  He finds this unfair when Vedan is far 
from alone among companies - both foreign and domestic - that 
have violated Vietnam's environmental regulations.  There are 
close to 300 other companies operating along the Thi Vai River 
and Mr. Yang said there's no way that Vedan is the only one 
responsible for the environmental damage.  As obvious proof that 
not all pollution in the Thi Vai is from Vedan, he points to the 
fact that heavy metals have been detected in the river water but 
that Vedan does not use any in its processes. 
 
¶14. (SBU) Mr. Yang further noted that part of the reason Vedan 
set up operations along the Thi Vai River in the first place is 
because GVN had told Vedan in 1994 that the Thi Vai River's salt 
content made it unsuitable for agricultural irrigation. 
According to Mr. Yang, GVN had claimed that it would be used 
exclusively as an industrial river, emphasizing its close access 
to Cai Med deep-water port (which is itself a heavy source of 
river pollution). 
 
Contradictory Messages and Limits of the Law 
-------------------------------------------- 
¶15. (SBU) Contradictory messages from different government 
entities and the media, Mr. Yang said, make doing business in 
Vietnam frustrating.  Changing regulations are also a source of 
confusion and cost for companies.  For example, Mr. Yang said 
that since Vedan first began operations in Vietnam, the 
environmental laws have changed twice, each time with much 
stricter standards.  Instead of having a timeline for gradual 
compliance, such as phasing in new requirements over a five to 
10 year period, GVN simply changed the law in 2005 and expected 
companies to comply immediately, without considering the huge 
costs that come with such adjustments.  He emphasized the fact 
that if environmental standards are too strict or there is not 
sufficient time or means for compliance, companies are inclined 
to find ways around them.  Mr. Yang also noted that authorities 
seem to implement regulations on an ad hoc basis, depending on 
the province. 
 
¶15. (SBU) Sometimes implementation of the law is not possible 
simply because the implementing decrees do not exist.  Although 
the 2005 Environmental Law allows for criminal penalties of big 
polluters and media reports had made reference to GVN applying 
these penalties, Mr. Het of DoNRE said that none of the 
implementing decrees or articles have yet been established. 
Since administrative penalties are too low, one strategy the 
agency has been using as an alternative to "punish" polluting 
companies is to categorize them according to their violations 
 
HO CHI MIN 00000595  004.2 OF 004 
 
 
(heavy, medium, and light) and then publicize them to the media. 
 For example, of the 218 projects that were inspected in 2008, 
80 were publicized in the media as medium or heavy polluters. 
Mr. Het said such a public strategy has a strong disincentive 
affect on companies who are shamed into compliance. 
 
Comment 
------- 
¶17. (SBU) Comment: The case of Vedan is both a classic example 
of the difficulty in finding the balance between promoting 
economic development while also preserving the environment and a 
an example of the even greater difficulty posed by trying to 
improve older regulations after industrial plants have already 
been built.  Particularly because Vedan representatives are 
certainly correct when they assert that they are not the only 
source of pollution in the Thi Vai river and thus should not be 
expected to fully compensate every farmer and fisherman who has 
suffered losses due to pollution, the case also raises questions 
of how to adjudicate tort claims when rule of law is weak. 
While the GVN's activism on this case certainly reflects growing 
sensitivity to environmental issues, it could also reflect a 
desire to avert public attention from long-term, systemic 
failures by GVN agencies charged with protecting the 
environment.  Although government agencies ultimately went after 
Vedan, questions remain as to why it took the GVN 14 years to do 
so, particularly if local authorities, as DoNRE claimed, knew 
all along that Vedan's operations did not meet standards.  In 
addition to what appears to have been a lack of political will 
to go after polluters such as Vedan, a lack of technical 
expertise also impeded quick resolution as there is not yet an 
accepted methodology for measuring toxic waste.  While there is 
no easy resolution to this thorny problem, there is a silver 
lining for U.S. producers and exporters of environmental 
protection and waste management equipment.  An increasing number 
of Vietnamese companies are seeking Mission's assistance  to 
identify U.S. environmental product and service providers, to 
find partners to teach waste management in vocational schools, 
and to help them influence the development environmental 
standards in Vietnam.  End Comment. 
 
¶18. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX