Foreign direct investment-led development for better urban environmental management : the case of Hanoi, Vietnam | |
| Author | Nguyen Thi Binh Minh |
| Call Number | AIT Diss. no.UE-02-01 |
| Subject(s) | Investments, Foreign--Vietnam--Hanoi Environmental management--Vietnam--Hanoi |
| Note | A Dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy |
| Publisher | Asian Institute of Technology |
| Abstract | The study utilized the secondary data for (a) evaluating and analyzing FDI and UEM situation and (b) reviewing regulatory and institutional framework for FDI and UEM in the study area and experiences of other countries that used FDI for the UEI&S provisions. The primary data for this study was collected through a field survey, conducted during May 1999 to January 2000 in Hanoi City. The survey method involved an initial listing of 237 operating FDI enterprises from the government annual reports. This served as the ‘sample frame’ for this study. The sample size of 36 FDI enterprises emerged from application of a standard sampling formula. Five groups were identified as key stakeholders for studying FDI’s link with the urban environment. These groups are: (i) foreign managers who work for FDI enterprises, (ii) FDI employees, (iii) the self-employed dealing with FDI industrial products, (iv) the households in the neighborhoods of FDI industrial enterprise locations, and (v) government officials and experts at the national and local levels involved with FDI and UEM. The selection of individual reSpondent was made by using a random sampling technique. The detailed sampling procedure led to a total of 355 respondents for filling the questionnaire Or the interview form. The aim of the questionnaire survey was to collect first hand information on the environmental impacts of FDI as well on possibility of utilizing FDI for the UEI&S provisions. This information was collected from five groups ofpeople who are closely related with or affected by FDI. Different sets of questions were used for different groups in the survey. The survey results and analyses of the compiled data include the following. Mapping of location of FDI enterprises in Hanoi shows that they are not concentrated in the high-density urban-residential or mixed—land use areas. A combination of the Pollution Quotient (PQ), which indicates the relative pollution abatement cost of a particular industrial type, and the Industrial Quotient (IQ), which indicates the degree of relative concentration ofa particular industry, calculated to evaluate environmental impacts of FDI in the city, show that FDI is not concentrated in polluting industries. In the survey the issues oftechnology transfer and environmental protection, the quality of imported equipment and the treatment practices were discussed with the respondents. In the view of respondents, technology transfer through FDI is a major source of environmental management expertise and for finding technological solution for environmental pollution control for industries in Hanoi. Though in Hanoi the use of second—hand equipment is not widespread among FDI, it is still a source ofconcem for the environment. While most FDI enterprises seem to treat their wastes, some still discharge them without any treatment. In the survey, the respondents’ perception on environmental impacts of FDI was elicited. Majority of respondents do not think environment is seriously being affected by operating FDI enterprises located in their areas. However, some respondents do believe and complain that FDI joint venture enterprises are damaging the local environment by discharging the untreated or poorly treated wastewater into rice fields, canals 0r rivers. The issue of whether FDI enterprises decrease the aesthetic scene in Hanoi was intensely discussed by the respondents. Only four percent of respondents strongly felt that FDI projects are affecting the aesthetic scene of the city; most of these respondents were foreigners. It seems that the locals are longing for FDI, employment and modem buildings whereas the foreigners are interested in conservation. The analysis of the link between FDI and employment/income issues highlights the view that FDI strongly contributes to economic development and creation of jobs. Respondents working for FDI or dealing with FDI goods and services make significantly higher contributions to their household incomes and savings than non—FDI workers. Increased income is resulting increased consumption. The queries and information on current and potential use of FDI for UEI&S show that nearly all FDI flows in Hanoi has so far been going into commercial service, industrial or construction sector — the sectors from which investors get good profits. Not a single FDI project investment has yet been undertaken in UEI&S projects for Hanoi, which is seriously deficient in UEI&S. Both central and local governments look for financial sources to solve these problems. They have started to consider the private sector for financing UEI&S. However, at present, the private sector in Vietnam is still new and weak and does not have enough financial resources, technical capabilities and management expertise for improving and monitoring the complex UEI&S projects. Due to theserealities, the Hanoi government is eager to obtain private foreign investment in UEI&S for them to cope with the emerging complexities of managing the urban environment. This research also addresses why it is difficult to attract FDI in the UEI&S sectors, especially in the water supply and sanitation sector (WSSS). At present, the UEI&S provisions are entirely owned and provided by the public sector. These are considered as public goods with complex economic and technical characteristics. Huge investment requirement beyond the capability of private businesses and externalities related to public health and environmental effects are key characteristics that have traditionally kept UEI&S in the hands of the government or public corporations. Difficulties associated with foreign private participation in these provisions include the ownership issue and the risks for both the private investors and the government. Other problems in attracting FDI into UEI&S in Vietnam are its underdeveloped capital markets, lack of adequate legislation, and unfavorable public opinion for private sector participation (PSP) in such key services as water supply. The findings from the two major themes of investigation of this research were used to reflect on the policy options apprOpriate of Hanoi/Vietnam in engaging FDI in improvement of the urban environment. The Vietnamese government has to guide, even force FDI industries to locate into the industrial zones and make them apply effective waste treatment technologies and practices. It is recommended that the government exercise more control over allowing the import of secondhand equipment, as it may be source of increase in pollution. Both the local and national governments could facilitate organizations of short courses, workshOps and seminars on environmental protection for FDI and domestic firms. Such programs could provide the opportunity for domestic firms to learn environmental protection skills from FDI companies and make FDI enterprises more conscious of their environmental protection practices Overall, the findings of this research suggest that attracting FDI requires national government to create the macro economic conditions conducive to PSP in infrastructure development. The FDI provision of water supply and wastewater treatment facilities for the Hanoi City will be feasible only if an acceptable and clear BOT law, supportive policies (e.g., providing guarantees and rewards for high risks), institutional frameworks and adequate incentives are in place. Based on the socio—political realities of Vietnam, this study proposes limited private participation or following the Chinese model where local governments create utility companies that function like the private sector. Imaginative forms of PPP, with city government’s role incorporated, will be of mutual benefit to the investors, the city residents and the local government. In recent years, flows of foreign direct investment (FDI) to developing countries have rapidly been increasing. FDI is now an important contributor to national economy as well as to urban growth in Asian developing countries. Rapid urbanization and economic growth in these countries are causing many problems in cities, simultaneous of course to many benefits. Waste discharges from fast-growing industrial, commercial and service sectOrs and increasing consumerism are leading to environmental degradation. Deterioration of envirOnmental problems are compounded by a severe shortage of basic urban environmental infrastructure and services (UEI&S) such as water supply and sanitation; drainage and sewerage; and waste collection, treatment and disposal. The pace of UEI&S growth is unable to cope with the needs of the growing population in urban areas. The growing professional practice of urban environmental management (UEM) focuses on improving the urban environment by reducing the environmental impact of economic activities, better management of human and financial resources and the provision of environmental infrastructure and services. But deficiencies in institutional, human capabilities and limited financial resources are serious constraints in these respects. Although FDI has been well-researched from various angles, that is not yet the case for UEM; more so in terms of the nature of the link between the two. In the cities of developing countries with fast growing economies and rapid inflow of FDI, understanding ofthis link is of paramount importance. In this regard some key questions are: How is FDI linked with the urban environment? What are impacts of FDI on the urban environment? And in what direction FDI should be guided to enhance the urban environmental management? This dissertation attempts at answering these questions through a case study on the current level of utilization of FDI and its further potential for improving UEM in Hanoi, Vietnam. It provides an integrated and holistic conceptual framework for research linking FDI with the urban environment. This framework involves identification of the issues of research and appropriate methods of analysis. The two main themes of investigation have been: ( l) FDI’s impacts on the urban environment (both positive and negative) and (2) F Dl’s current and potential role in the UEI&S provisions. |
| Year | 2002 |
| Type | Dissertation |
| School | School of Environment, Resources, and Development (SERD) |
| Department | Department of Development and Sustainability (DDS) |
| Academic Program/FoS | Urban Environmental and Management (UE) |
| Chairperson(s) | Amin, Nurul; |
| Examination Committee(s) | Sajor, Edsel;Thapa, Gopal B.;Romanos, Michael C; |
| Scholarship Donor(s) | Government of Japan; |
| Degree | Thesis (Ph.D.) - Asian Institute of Technology, 2002 |