Foreign firms pay more heed to environment protection

Dr Edmund Malesky, an economic researcher at the US’ Duke University, said at a recent release of Vietnam’s provincial competitiveness index (PCI) 2016 that most surveyed firms believe environmental health is important and are willing to pay reasonable costs in terms of their own operations and to accept additional regulation to avoid damaging pollution.

‘About 97.3% of nearly 11,000 foreign direct investment (FDI) investors joining the PCI survey said that it is the responsibility of businesses to protect the environment, even if it increases businesses cost”, he added.

The PCI, annually carried out by the Vietnam Chamber of Commerce and Industry and the US Agency for International Development, is designed to assess the ease of doing business, economic governance, and administrative reform efforts by Vietnam provincial and city governments in order to promote private sector development.

FDI firms in manufacturing, service/retail, construction, and finance/insurance are particularly robust in these beliefs.

Especially, in the three-point scale of awareness, firms in the manufacturing and mining sectors report the highest level of knowledge about the regulations that govern them. This makes sense as these sectors tend to be the most polluting and most regulations target their operations, said Malesky.

A full 31% of FDI investors could recall an environmental incident in their home province in the past year.

Similar patterns are evident in the four-point scale of self-reported compliance. Again, manufacturing and mining have the highest score of 3.58, with FDI investors noticeably more concerned about compliance than domestic firms. They are followed by finance/insurance (3.38), service/retail (3.33), and construction (3.33).

Half of FDI firms and 45% of domestic firms report some negative effects. A sizable number-about one quarter-of domestic and foreign respondents believe that pollution has had negative or very negative effects on their business prospects.

There are statistically significant differences between manufacturing firms and those in construction, services, or finance. Only 11% of foreign and 14% of domestic manufacturers who reported severe pollution in their province believe that it is harmful to their operations. By sharp contrast, between 20% to 30% of business operators in other sectors expressed concerns.

The distinction between answers appears to be related to market orientation. Most foreign manufacturers are export-oriented, and pollution in Vietnam has very little effect on overseas consumption. The retail and service, construction, and finance sectors are domestically-oriented-their success depends on happy and healthy Vietnamese consumers as well as foreign visitors.

In the wake of such a disaster, foreign investors have tried to combat pollution in their own businesses through self-regulation and training of employees.

“Around 52% of workers at FDI firms attend training courses on the environment. Manufacturing topped the list with 58.08% of employees trained, followed by service/retail with 40.07%, agriculture at 36.88%, and construction at 30.08%”, Malesky said.

Foreign groups reported high levels of compliance with provincial regulations, but also a willingness to pursue environmental protection beyond those strictures.

Up to 95.1% of FDI firms agreed that local authorities have responsibilities for enforcement of the regulations on environmental protection, though this would create a burden on the business community.