SIP INDEX: For Sustainability of Vietnam's Industrial Parks

10:29:37 AM | 12/1/2022

Vietnam currently has over 500 licensed industrial park infrastructure construction projects, including nearly 400 being operational with a total area of 123,000 ha in 61 out of 63 provinces and cities, according to the Ministry of Planning and Investment. The number of industrial parks (IPs) has steadily increased over the years.

In addition to general regulations on planning, investment, environmental protection and labor, IP operation management is governed by Decree 82/2018/ND-CP dated May 22, 2018 on the management of industrial parks and economic zones, replaced by Decree 35/2022/ND-CP dated May 28, 2022 on the management of industrial parks and economic zones from July 15, 2022.

The Program for Promoting Sustainable Industrial Parks in Vietnam in 2021-2025 was launched by the Vietnam Business Council for Sustainable Development (VBCSD) under the direction of its administering Vietnam Chamber of Commerce and Industry (VCCI), the Ministry of Industry and Trade (MOIT), the Ministry of Natural Resources and Environment (MONRE), the Ministry of Labor, Invalids and Social Affairs (MOLISA), and the Vietnam General Confederation of Labor (VGCL). The program is currently being developed and is scheduled for operation in the coming years.

In 2022, VBCSD and the Sustainable Trade Initiative in Vietnam (IDH Vietnam) have been carrying out research and a survey on the status of IPs in accordance with the economic, environmental, social and governance framework (EESG) with 19 main target categories. The survey, conducted at the managerial level, was made in the form of questionnaires with 118 IPs and in-depth interviews with 45 IPs.

According to the research report on actual situations of some IPs in Vietnam, made with the EESG framework, the issued rate of EESG development policies is low (only 39% have a risk management policy to comply with environmental laws; and 21% have a risk management policy to ensure social compliance; 10% have the policy to promote the circular economy; and 13% have a policy on digital transformation).

Mr. Pham Hoang Hai, Head of Partnership Panel of the VBCSD Secretariat, said that one of the biggest difficulties in sustainable governance is changing mindsets, organizational models, and governance as IPs have operated for a long time (95% of surveyed IPs were established before 2018) and reached a sufficient occupancy rate for symbiotic improvements to be implemented.

Moreover, awareness of sustainable IPs remains weak. In-depth interviews showed that up to 50% of IPs have no idea of sustainable IPs; 30% have known and learned about the concept of eco-industrial parks; and 20% understand that sustainable industrial parks need to ensure balanced, simultaneous development of four EESG pillars.

Besides, policies and objectives currently focus on a few aspects instead of all aspects of sustainable development at the same time; IPs hesitate to share financial data; information on investment, generated economic value, including revenue and profit, is conventionally the most basic information which is shared by only a few surveyed IPs. Most IPs do not provide enough information on investment capital, revenue, and taxes. One of the reasons is transparency and availability of these data in the IP governance system.

“Many activities have not been maintained or executed periodically. For example, according to the law, all IPs must equip and maintain fire protection equipment and train personnel to use them, but compliance (with periodic inspection) in industrial zones is varied,” Mr. Hai said.

Furthermore, IPs care more about risk management policies (law compliance) than policies that bring sustainable development to them as well as their operators. According to the survey, only 22% of IPs have international management system certificates; 77% do not have company-level audit information on financial, social and environmental aspects.

Vietnam does not have a database on the operational status of IPs with the EESG framework and their tenants, he added. According to the research report, there is a lack of coordination among stakeholders in IP governance, such as operators, investors and tenants.

Therefore, after this study, VBCSD will work with experts of the Program Steering Committee and consultants to devise a Sustainable Industrial Park Index (SIP Index) based on the EESG framework, and test the compatibility and suitability of an SIP Index in some industrial zones in Vietnam, Hai noted.

The SIP Index, once completed, will support industrial parks and local authorities to regularly assess, monitor and provide solutions to enhance EESG sustainability of IPs and their operators. At the same time, the measure will promote incentive mechanisms of the government and international investors for businesses that actively invest in solutions for cleaner production, resource efficiency and livelihood and working improvement for workers.

The index will also help central authorities to have an overall picture of the current status of industrial park sustainability, make good policies and promote more sustainable industrial park models, strengthen connectivity of businesses and industries, meet market requirements and help Vietnam achieve relevant international commitments.

Last but not least, the gauge will support establishing central and local sustainable industrial park associations, one of the main objectives of the Program. This will help create a mechanism for sharing, learning, supporting and having a common voice on the path toward sustainable development.

By Anh Mai, Vietnam Business Forum