How Vietnam’s Eco-Industrial Parks (EIPs) can Entice Foreign Investors

Eco-industrial parks are growing in Vietnam with the help of international organizations. Here are the benefits, challenges & successes in the space.

According to VietnamPlus, between 2010 and 2020, the industrial sector accounted for 30% of Vietnam’s GDP, higher than any other national economic sector. In addition to constituting the largest portion of exports, the industry sector has helped Vietnam move from 50th place in 2010 to 22nd place among the world’s largest exporters in 2019. By 2030, the country’s industrial sector is expected to contribute over 40% of the GDP.

In spite of the declining contribution of the mining sector to the GDP, the structure of the industrial sector is changing in a positive way. One of the key reasons for the changing industrial landscape is Vietnam’s Eco-Industrial Parks (EIPs).

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Eco-industrial parks and their benefits

As per United Nations Industrial Development Organization (UNIDO), Eco-industrial parks are communities of manufacturing and service businesses on common property with sustainable development goals in mind. By collaborating on environmental issues, member businesses can maximize economic, social, and environmental performance.

Achieving eco-industrial parks’ objectives requires businesses to go beyond following local and national laws. Together with the World Bank Group, UNIDO, and Germany’s GIZ, requirements are being developed to establish an international-standard framework for eco-industrial parks in Vietnam.

Many organizations in different countries refer to sustainable industrial parks as low carbon zones, green manufacturing zones, or green manufacturing areas. 

Read more: ESG and Corporate Sustainability Governance Reporting in Vietnam

Eco-industrial parks enable companies to benefit from greater collaboration and exchanges within companies (between management, technical and environmental staff, finance, etc.), as well as between companies, the government, and service providers.

Economic benefits

Direct and indirect employment creation, cost savings from reduced waste disposal, judicious resource utilization, energy consumption, and increased competitiveness are all major benefits of EIPs.

The indirect benefits of the park and the companies are generally more difficult to quantify, but they play an important role in long-term economic sustainability. Through skill upgrading and training, technology transfer, and demonstration effect resulting from the application of best practices, indirect employment can be created. This means that employees can continue to enrich and advance the workforce even outside of the park’s environment.

Environmental benefits

Eco-industrial parks offer a multitude of environmental benefits, such as reducing pollution levels, efficiently utilizing natural resources, and reducing, reusing, and recycling waste. An eco-industrial park can also be beneficial to the environment by improving the management of chemical and hazardous substances. 

According to an industrial competitiveness perspective, eco-industrial parks are largely driven by:

  • A reduction in operating costs and an increase in productivity
  • Supply chain and value chain greening
  • Taking measures to mitigate global warming
  • Increasing resource security, management, and efficiency (for example, materials, water, and energy)
  • Taking economic risks into account, by recognizing how environmental and social risks affect businesses
  • Providing relevant information on environmental and social issues
  • Ensure long-term licenses for industrial parks from the local community and government

Social Benefits

Among the social benefits of EIP development are the creation of local jobs, improved working conditions, community outreach, racial and gender equity, crime prevention, and better security.

Social infrastructure is often created along with eco-industrial parks, which is particularly important for workforce development. For instance, skills development training, vocational training, etc.

Challenges faced by eco-industrial parks

Policy challenges in Vietnam include a lack of incentive to reuse wastewater and industrial by-products among companies. In the absence of detailed guidelines, obtaining government approval for their reuse is a lengthy process with random outcomes.

In May 2018, the Decree 82/2018/ND-CP ‘Management of Industrial Parks and Economic Zones’ was approved by Vietnam’s Prime Minister, which prescribes the establishment, operation, policies, and state management of industrial parks and economic zones.

Ongoing EIP Projects in Vietnam

In 2014, the PM adopted a National Green Growth Strategy with 66 tasks to be completed by ministries, sectors, and localities. A revised industrial zone development model is also being studied by the Ministry of Planning and Investment along with the Green Growth Strategy.

The UNIDO project is aimed at transforming existing industrial zones into eco-industrial parks suitable for Vietnam by assisting enterprises to transform technology and apply resource-efficient and cleaner production methods.

The Project also identifies great potential for cooperation among enterprises in three industrial zones, namely Tra Noc 1&2 (Can Tho), Hoa Khanh (Da Nang), and Khanh Phu (Ninh Binh). 

The UNIDO Project in Vietnam: Success Stories

Les Vergers du Mekong is an enterprise with 100% foreign capital, was established in Vietnam in 2000. Since its establishment, the company envisions long-term sustainable development seeking solutions for increased resource and energy efficiency with the help of UNIDO. Its factory is currently situated in Can Tho’s Tra Noc Industrial Zone.

To save water, in the cleaning of fruits, the Project advised the production plant to adjust the position of the water valves right next to the faucets instead of its previous position of 3-4m away from the faucets. The Project also proposed to use washing machines instead of manual washing, which will help to save 80% of the water consumption. To save electricity, the Project recommended the use of an insulated roof, making a number of glass roof holes on the ceiling to take advantage of the natural lights and reduce the use of electric lights. For the lighting system in the factory it was recommended to replace bulbs from 40w to 36w, ensuring additional savings. 

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The Project also provides the company with financing schemes in addition to its technical assistance. A reform of technology and business production/management process was recommended by the Project’s experts to improve energy efficiency.

At present, they are coordinating with domestic and international consultants on developing guidelines for converting conventional industrial zones into eco-industrial parks. Additionally, they will organize workshops and conferences in order to consult on how to establish the legal grounds and appropriate model for Vietnam.

Similar to Les Vergers du Mekong, the Cosevco Ceramic Tiles JSC is another success story when it comes to the implementation of solutions proposed by the Project. With all solutions implemented, the company can achieve the following results:

  • Would reduce the percentage of broken plain products by 1.5-2%, saving an equivalent of USD 65,000 annually
  • Reduce expenses for molds and grids by approximately USD 12,000
  • Reduce expenses for color inks, electricity, water and compressed air for the color printing process by approximately USD 153,885 a year
  • Reduce expenses for human resources and prevent a significant amount of wastewater and solid wastes from being emitted into the environment

The bottom line on EIPs

The EIPs role in developing Vietnam into an economic powerhouse looks very promising. It is these eco-industrial parks that pave the way for sustainable development in the future. Apart from reducing environmental pollution, EIPs will also help in improving resource efficiency and creating more business opportunities.

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