05:30 21.11.2018

Will Vietnam follow China down the pollution path?

Will Vietnam follow China down the pollution path?

But while the world’s attention is focused on China’s losing battle to clean up its air pollution, Vietnam’s own turmoil is also coming into view. Amid the country’s heavy industry output surge, Hanoi should learn a lesson from China’s predicament and tackle the underlying issues contributing to pollution before they get locked into a narrow industrial strategy with environmental and social costs that can’t easily be reversed.

 

China: overcapacities are driving pollution        

In China, coal is also the main pollution source, especially because of its use in heavy industry. However, while Vietnam’s economy has only fairly recently begun to take off in earnest, China’s has been in overdrive for years. Massive overcapacities in steel and aluminium have subsequently been built that account for much of the pollution.

Confronted by public pressure, Beijing prioritised drastic overcapacity cuts in 2016. The policy envisioned closing plants that don’t meet environmental standards and encouraged companies to upgrade factories with pollution controls. Targets include decreasing steel capacity by 100 million tonnes over five years, and coal capacity by 500 million tonnes in the same period.

However, progress appears to have stalled. The efforts so far to force production cuts have had rather underwhelming success, thanks to local governments circumventing the directive by cutting so-called “zombie capacity” – capacity that is already idle. In this way, they have been able to easily meet reduction targets without actually lowering output. It’s estimated that 72 percent of reductions were due to this fudging of capacity numbers.

It doesn’t help that China suddenly scrapped blanket production cuts for its heavy industry in 28 Northern cities, and now provides for the exemption of primary aluminium and alumina producers able to fulfil “ultra-low emission standards”. Yet considering that enforcement of such standards has been a notorious weakness – 80 percent of China’s aluminium capacity have repeatedly failed to comply with emissions standards – the efficacy of that clause is everything but reassuring.

Vietnam: Economic development is scuppering environmental targets

As a communist country, Vietnam’s growth strategy and industrial policies to achieve GDP enlargement have been modelled on China’s, placing a focus on spiralling industrial expansion and manufacturing. And if the economic policies are the same, so are pollution patterns. As in China, they are largely due to unchecked proliferation of traffic and boosted steel, aluminium and cement production – all fuelled by coal.

When complete, the long-awaited Ha Tinh steel plant will become one of the largest in the world, with a potential production capacity of 20 million tonnes per year. Since 2015, Vietnam has also significantly forced ahead with developing an indigenous aluminium industry for the sake of decreasing reliance on Chinese aluminium, roughly half a million tonnes per year at that time.

Not surprising then that Hanoi only had 38 days with good air quality in 2017, according to a GreenID survey based on air monitoring data compiled at the US Embassy in the city. It revealed that the number of pollutants was on average four times higher than World Health Organization (WHO) guidelines.

Although air pollution levels in Vietnam’s cities are causing severe health problems for the population, no comprehensive strategy has yet been proposed at a large scale to counter its effects. Quite the contrary: Prime Minister Nguyen Xuan Phuc is pushing to build more coal power plants in line with rising steel and aluminium production, set to jump by 20 percent or more this year alone. And with only 50 or 60 percent of total metals capacity utilised, the glut is far from over.

 

It’s not too late

China is in the midst of a full-blown environmental and public health crisis following from a failure to effectively address pollution levels, but for Vietnam this future is not yet set in stone. Vietnam ought to take a proactive approach sooner rather than later and avoid having to retrospectively tackle the same grave issues a few years down the line.

Doing so is as much a social and economic imperative as an environmental one. Researchers from the Chinese University of Hong Kong have suggested that air pollution may be responsible for more than 1 million early deaths per year, shaving around 267 billion yuan off the Chinese economy. Vietnam is heading in the same direction and is now among the top ten countries with the worst air pollution in the world.

Still, certain political developments indicate that Hanoi has recognised the problem and is beginning to tackle it, even with help from other countries. For example, the German Development Agency (GIZ) is currently consulting with the city of Hanoi on a plan for a greener urban environment, all the while people are encouraged to use more public transport.

This clearly is a step in the right direction, although to effectively mitigate the underlying causes of the problem structural policy changes have to be implemented. For this, a new industrial policy is required that de-emphasises industrial production in favour of a more diversified economy. As early as 2012, McKinsey recommended Vietnam increase labour productivity and seize the opportunity for establishing itself as a leader in IT, business process outsourcing and data management. With a relatively young and large population, the country indeed could easily capitalise on such service sectors.

Vietnam for the longest time chose to grow GDP on the back of heavy industry and agriculture, but its unlikely they will maintain their momentum into the future. Through implementing better pollution controlling policies, Vietnam may just be able to dodge the health and environmental challenges that are endemic in China.

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