Embracing the Circular Economy: Vietnam’s Path to Sustainable Development
On November 11, 2023, a significant conference took place in Hanoi, focusing on the urgent implementation of a circular economy in Vietnam. Phi Vinh Tuong, the deputy director of the Institute of World Economics and Politics, highlighted that as global challenges like rising sea levels, climate change, and resource crises intensify, adopting a circular economy has become a global trend. For Vietnam, he asserted, this shift is not merely an option, but an inevitable pathway toward sustainable development, fulfilling the commitment of net-zero emissions by 2050.
The Urgency of Adoption
Tuong emphasized that transitioning to a circular economy is crucial for Vietnam to avoid exclusion from global value chains. Despite several economic development policies in place, they often lack cohesion, sector-specific guidance, and robust intersectoral coordination. Infrastructure for recycling and national material-flow databases remains inadequate, and many small and medium-sized enterprises (SMEs) struggle with limited capacities, posing serious challenges to progress.
Proposing Solutions for Governance and Coordination
To propel this transition, Tuong called for crucial improvements in governance frameworks regarding the circular economy. His recommendations included establishing intersectoral coordination mechanisms and prioritizing models within pivotal sectors such as agriculture, manufacturing, and urban development. This structured approach will also entail the design of green financial mechanisms and investment encouragement, with an emphasis on developing green credit systems and circular economy funds to support enterprises navigate their transformation.
Action Plans as Strategic Initiatives
At the conference, Le Van Loi, president of the Vietnam Academy of Social Sciences, acknowledged the government’s recent approval of an action plan aimed at fostering circular economy practices by 2035. This plan serves as a strategic initiative, integrating key directives from the Law on Environmental Protection 2020 and the national climate change strategy into actionable steps. Loi described the circular economy as the architectural foundation for Vietnam’s national development, particularly during the dual transitions of digitalization and green transformation, which collectively aim to reduce reliance on resource extraction and augment energy efficiency.
Addressing Limitations in Economic Growth Models
Bui Quang Tuan, vice president of the Vietnam Economic Scientific Association, presented a critical view of Vietnam’s current growth model, which heavily depends on inexpensive labor. He pointed out the limited technology transfer from foreign investment and the modest contributions of science and innovation to economic growth. As Vietnam positions itself within global value chains, its economy still exhibits characteristics of reliance on non-sustainable practices. The circular economy, while being an important focal point, is still at an embryonic stage in sectors such as agriculture and eco-industrial parks.
The Role of Domestic Enterprises in Transition
Nguyen Dinh Dap from the Vietnam Academy of Social Sciences elaborated on the challenge faced by domestic enterprises, most of which lack the resources necessary for a successful transition to a circular economy. This transition demands innovation, scientific applications, and access to advanced technologies. Dap emphasized the need for skilled experts capable of tackling challenges across the entire value chain, identifying financing as a major puzzle for businesses pursuing green production and sustainable business models.
Incentives to Facilitate the Transition
To ease this transition, Dap recommended that the government institute financial incentives, such as VAT reductions, tax exemptions, and subsidies aimed at promoting circular business models. Additionally, preliminary financing support to enterprises could pave the way for the adoption of sustainable practices, marking a significant step forward.
Advancements in Green Banking
Over the past decade, Vietnam has been creating a robust policy foundation for green banking, especially in light of the government’s 2021 net-zero commitments. The State Bank of Vietnam (SBV) has been instrumental since launching its green banking development scheme in 2018. The goal by 2025 is for at least 10 commercial banks to implement green banking models effectively and for green credit to constitute at least 5% of all outstanding loans in the economy.
As of the end of 2024, approximately $25.5 billion in total outstanding green credit has been achieved, representing 4.5% of total loans. State-owned commercial banks are leading this shift, accounting for around 60% of total green credit, indicating an evolving lending landscape favoring environmentally friendly sectors.
Challenges in Implementation
Despite these advancements, the path forward is fraught with difficulties. Inconsistencies across various agencies in guiding documents and the absence of uniform standards in appraising green projects remain significant hurdles. Furthermore, the lack of specific regulations surrounding environmental, social, and governance (ESG) disclosure complicates monitoring and transparency efforts within the sector.
The Roadmap Ahead
Vietnam’s action plan for the circular economy, aiming for 2035, envisions creating a sustainable production and consumption system that emphasizes efficient resource utilization. The roadmap focuses on the period from 2025 to 2030, emphasizing reduced resource extraction while enhancing overall efficiency to achieve standards comparable to leading ASEAN countries. The long-term vision for 2035 aspires to establish a comprehensive and competitive circular economy, positioning Vietnam as a regional innovation hub in this field.
The ongoing dialogue surrounding these initiatives and challenges illustrates Vietnam’s determination to not only adapt to global trends but also to lead in the sustainable development movement, ushering in a more resilient and prosperous future for all its citizens.