This is a best prospect industry sector for this country. Includes a market overview and trade data.
Leading Sectors for US Exports & Investments
The following list of leading sectors for U.S exports and investments is not intended to be an exhaustive list, and the U.S. Commercial Service has successfully worked with U.S. firms from a broad array of industry sectors. If your firm’s industry is not listed below, it does not mean that there is no market potential for your product of service in Vietnam, and we encourage you to contact our offices in either Hanoi or Ho Chi Minh City for more information on this market.
Environmental and Pollution Control Equipment and Services
Vietnam is facing an increasing number of environmental pollution challenges including air, water, and solid waste. Major factors contributing to these problems include a high population growth rate, rapid urbanization, accelerating industrialization, weak enforcement of the laws on environmental protection, and a lack of education and cultural awareness.
A lack of clean water is one of Vietnam’s most pressing environmental concerns. Presently, it is estimated that only about 70 percent of the population has access to potable water. A high rate of water loss, averaging 27 percent (equivalent to 1.8 million cubic meters per day), further exacerbates the problem. To improve this situation, the Prime Minister issued Decision 1929/QD-TTg on the “Orientation for Development of Water Supply in Vietnam’s Urban Centers and Industrial Parks Leading to 2025, and Vision for 2050” and Decision 2147/QD-TTg on approval of the “National Unaccounted for Water and Nonrevenue Water Reduction Program to 2025”. These decisions set a target of supplying clean water to all urban cities and towns and limiting the rate of water loss in these cities to less than 15 percent by 2025. By 2050, all urban cities, towns, and industrial parks will be supplied in a stable manner with higher quality services.
Another pressing environmental concern, and a top government priority, is drainage and sewage. Due to rapid and ongoing urbanization and industrialization, improved municipal and industrial wastewater treatment is a critical need. The total investment required to meet sewage and drainage system needs throughout the country is estimated to be two to three times that of the total investment for water supply projects.
Per the “Orientation for Development of Water Sewage and Drainage Systems in Vietnam’s Urban Centers and Industrial Parks Leading to 2025, and Vision for 2050”, by 2025 most urban cities will have centralized municipal wastewater treatment and collection systems; 70-80 percent of municipal wastewater will be collected and treated properly. By 2050, all urban cities class IV and above will have storm water discharge systems as well as wastewater treatment systems. The government will give priority in using ODA funds for developing urban drainage systems, especially in major cities and in areas that are prone to natural calamities. The government also encourages funding from both domestic and foreign individuals and institutions in developing water drainage and wastewater treatment systems.
Municipal Waste Water
It is estimated that over 90 percent of households utilize on-site treatment, generally in the form of septic tanks, but only 4 percent of sewage is treated. Approximately, 60 percent of households dispose of wastewater to a public sewage system, primarily through combined systems where sewage and rainwater runoff are collected but less than 10 percent of the wastewater in the country is being treated today.
Currently, there are 17 centralized urban wastewater treatment plants in six cities in Vietnam with total capacity of 565,000 cubic meters per day. Thirty-one wastewater treatment plants, primarily comprising of combined systems, with total capacity of over 1.5 million cubic meters per day are under design or construction in urban areas. Both storm water and household wastewater are commonly discharged through combined and outdated drainage systems into canals, rivers and lakes without treatment.
The estimated total investment requirement for implementation, excluding resettlement cost, was estimated to be at $3.4 billion. It is mandatory for new urban residential areas and industrial parks to plan and construct separate drainage systems for storm water and wastewater. Municipal and industrial wastewaters are further required to be pre-treated to ensure compliance with environmental standards before being discharged into the city’s drainage systems. Thus, the government encourages cost-effective and environmental friendly wastewater treatment technologies and products into Vietnam.
Industrial Waste Water
The country’s industrial production has grown around 15 percent per year during for the last decade. Statistics show that as of June 2012, there were 334 industrial parks and export processing zones in the country. Industrial wastewater treatment is a critical need as 75 percent of wastewater is being discharged into lakes and rivers without treatment. Per a report from Ministry of Natural Resources and Environment (MONRE), 240,000 cubic meter of wastewater is being discharged directly to the environment every day.
Pollution violations by industrial manufacturers have drawn much attention recently. Public interest groups have begun to focus on the impact of industrial waste has on the environment and economy. Violating manufacturers are beginning to feel the impacts of boycotts by their associates and customers. These companies have also had some difficulty accessing bank funding, as more banks are adjusting their policies to avoid clients on the environment black list. Recent developments have triggered an intensification of monitoring and inspection of industrial pollution. Industrial parks represent an attractive market for wastewater treatment plants since the government is pushing industry harder on environmental compliance.
The Vietnam Environment Administration (VEA) states that solid waste continues to increase throughout the country, and is expected to reach a rate of 44 million tons annually. Accelerating industrialization and urbanization, along with a population increase, are the major causes for this surge.
It is estimated that 46 percent of this solid waste is being discharged from the urban areas, 17 percent from industrial production zones, and the remaining from rural areas, trade villages and the medical sector. About 80 percent of the waste is being buried; the rest is treated by burning or composting. Currently, the country has more than 450 landfills but only around 120 follow proper sanitary regulations.
Another concern is waste collection and separation. Most of the solid waste produced in urban areas is not classified at its source. Organic and inorganic wastes are often mixed together. Waste collection in urban areas is only at 80-82 percent and 40-55 percent in rural areas. Additionally, there is very little recyclable material left once the waste reaches the treatment plants, as scavengers and garbage collectors have already collected the recyclable material including cans, PET bottles, scrap metal, wiring, plastic bags, and paper to sell.
The government strongly encourages private sector participation in solid waste collection, separation, transportation, and treatment. There are regulations in effect, but again, the enforcement level is very low. Entities generating solid waste are responsible for their waste collection, transportation and treatment fees. It is also required that waste be separated at the sources of generation. To minimize burying waste, the government encourages new technologies to treat less degradable waste. Over the past decade, efforts have been made to develop a policy and legal framework for environmental protection, particularly for the management and disposal of waste streams.
Vietnam’s Ministry of Natural Resources and the Environment (MONRE) found that the deterioration in air quality in recent years is severe in many urban areas, especially in Hanoi and Ho Chi Minh City. A 2013 National Environment Report showed that air pollution in Hanoi was graded from unhealthy to hazardous for over 265 days of the year. The primary sources of urban air pollution are traffic and industrial activities, per the Vietnam Environment Administration.
The Vietnamese government has plans to address industrial air pollution. The Ministry of Natural Resources and Environment (MONRE) has drafted a National Action Plan on Air Quality Management (2020 to 2025). The plan includes a 20 percent reduction target for NOx, SOx and particulate matter emitted by cement, chemicals, fertilizer and petroleum production facilities. Separately, a draft National Technical Regulation on Emissions for the Steel Industry is also in progress. Vietnam’s draft Environmental Law (55/2014/QH13) also contains air quality management requirements, including point source registration, emissions inventory and installation of continuous emission monitoring systems for the biggest stationary source emitters. Improving air pollution control also will require industrial parks to install emissions treatment systems. This increasing regulatory stringency is likely to drive growth in the air quality management market and provide opportunities for U.S solution providers.
Vietnam’s Law on Environmental Protection was enacted in 1994 and updated and strengthened in 2005 and 2014. Central-level attention on protecting the environment also includes setting environmental sustainability goals in its 2015-2020 long term plan, issued in 2016.
In February 2017, Decree No. 155/2016/ND-CP on Sanctioning Administrative Violations in Environment Protection went into effect. The decree puts in place fines up to VND 1 billion (USD 44,400) for individuals violating environmental laws, and up to VND 2 billion (USD 88,800) for organizations, the highest administrative fines ever to be put into effect.
Funding for water supply and wastewater projects comes mainly from Official Development Assistance (ODA) sources with the major donors being the World Bank (WB) and the Asian Development Bank (ADB), committing billions of dollars to Vietnam’s water projects. However, given the public finance constraints and the phasing out of ODA assistance of several bilateral development partners, the Government hopes to source a significant portion of the capital through Public Private Partnership (PPP), including foreign investors. The issuance of the PPP Decree in February of 2015, as a single regulation governing PPP transactions and the issuance of a Decree on Investor Selection provides a strong political will and credibility to give investor and financier confidence. The water and sanitation sector has been identified as a potential for PPP projects. Many development partners are providing support to promote the government’s PPP program, including the ADB, which in partnership with Agence Francaise de Development (AFD) is providing on-going financing support of $30 million to the Project Development Facility (PDF) for building a pipeline of bankable PPP projects. As it aims to reach industrialized nation status by 2020, Vietnam faces substantial challenges. It is estimated that from now until 2020, Vietnam would need around $170 billion to develop its infrastructure, including transport, bridges, power plants, water supply network, waste water treatment plants and ports.
Local production of environmental equipment does not currently meet market demand, especially the requirements of ODA-funded projects. Technical conditions/requirements governing many ODA projects dictate that many materials must be imported (water meters, valves, pumps, motors, water treatment chemicals, water filtration systems, water control and monitoring equipment, etc.) WB or ADB-funded projects are typically procured through an international competitive bidding that offers a transparent and fair selection for U.S. companies.
In addition to municipal and donor-funded projects, market demand is also being driven by certain industrial users. Industrial parks represent an attractive market for wastewater treatment systems, because Vietnam must import nearly all the key components of these systems.
The market for water and wastewater treatment services centers on consultant contracts for ODA funded projects. More than 2,000 projects in Vietnam are required to make environment impact assessment (EIA) reports each year. Domestic engineering and consulting firms can perform EIAs for developers, but foreign developers prefer to work with foreign engineering and consulting firms because domestic firms often don’t have the expertise to perform EIAs to global standards. Foreign environmental impact assessment capabilities will continue to be in demand in Vietnam.
Asian Development Bank
Ministry of Natural Resources and Environment (MONRE)
Vietnam Environment Administration
Vietnam Water Supply and Sewerage Association (VWSA)
Vietwater 2017, Hochiminh city, (November 8-10, 2017)
For more information about this sector please contact:
Ms. Ngo Anh, Commercial Specialist
U.S. Commercial Service, U.S. Embassy in Hanoi
Mr. Triet Huynh, Senior Commercial Specialist
U.S. Commercial Service, U.S. Consulate General