Eco-Industrial Parks: Vietnam’s Legal Ambiguity Puts Businesses Face Risk

Ecological industrial parks (EIP) are a growing trend in Vietnam, but legal ambiguities pose significant risks for businesses. Mr. Ngo Nghi Cuong, a foreign investment consulting expert and the managing director of C+ Consulting and Investment Corporation, highlights the challenges and the urgent need for a clearer legal framework to support sustainable development in the sector.

Vietnam and the Demand for Ecological Industrial Parks

According to Mr. Ngo Nghi Cuong, the development of green and ecological industrial parks is both a trend and a necessity in a sustainable economy.

Over the past decade, China has experienced a rapid increase in costs, eroding its advantage of cheap labor, which previously attracted investment and positioned it as the world’s manufacturing hub. A recent report by VPBankS Research indicates that Southeast Asian countries are emerging as potential destinations to capitalize on the “China +1” trend. This trend involves diversifying production value chains, expanding manufacturing capacity to multiple markets and new industrial centers, and addressing concerns about escalating tensions in the US-China trade conflict, all of which are driving the search for a “New Factory” by major corporations.

VPBankS Research suggests that among Southeast Asian nations, Vietnam holds a significant competitive advantage in operating costs. Notably, Vietnam offers various industrial park (IP.) land lease prices, catering to diverse tenant needs. However, in the global shift towards sustainable development, industrial parks today must meet more than traditional criteria. A new set of requirements is emerging, demanding that industrial parks be “greener,” more sustainable, and focused on overall quality. In addition to expanding in scale, industrial parks need to undergo significant transformation, focusing on high-tech applications, innovative operating models, minimizing environmental impact, and optimizing resources. Development must also be closely linked to regional development networks, fostering connections between neighboring areas to enhance value and competitiveness.

Mr. Ngo Nghi Cuong, a FDI consulting expert and the managing director of C+ Consult.

In an interview with VietnamFinance, Mr. Ngo Nghi Cuong, a foreign investment consulting expert and the managing director of C+ Consulting and Investment Corporation, stated: “Vietnam’s investment environment has its appeal in Southeast Asia. However, we must recognize that in the long run, advantages such as tax incentives and competitive costs will not remain the determining factors in attracting foreign direct investment (FDI).

“In the current climate, the development of green and eco-industrial parks is both a trend and a requirement for a sustainable economy. Green IP development is no longer merely a response to policy or legal trends but a long-term development strategy for investment enterprises in the global economy moving towards sustainable development, a circular economy, and the pursuit of net-zero carbon emissions by 2050,” Mr. Cuong said.

Moreover, the development of eco-industrial parks brings numerous significant benefits, including environmental protection, contribution to sustainable development, promotion of long-term growth, energy savings, efficient resource utilization, protection of workers’ health, and meeting market demands. Mr. Cuong also noted that for foreign enterprises, the “greening” factor plays a decisive role in their investment decisions in Vietnam, depending on their industry and target export markets.

For instance, in the dairy and dairy product processing industry, new investment projects seek green industrial parks with clean energy supply, low carbon emissions, and sustainability certifications. Additionally, certain wood and steel products exported to the European Union (EU) are subject to the Carbon Border Adjustment Mechanism (CBAM). Exporting enterprises in these industries are greening their production processes and implementing Environmental, Social, and Governance (ESG) codes of conduct. When expanding production scale, “green and sustainable” factors will be a top priority.

Many industrial parks in Vietnam have attracted major corporations by developing in the direction of eco-industrial parks. For example, the DEEP C Industrial Park, built with sustainable elements from the outset, such as renewable energy projects, green building standard factories, and industrial symbiosis models, has become a top choice for FDI enterprises investing in Vietnam. DEEP C has also attracted green projects from major investors, including an environmentally friendly materials production plant by the SK Group (South Korea) and a green factory by Pegatron (Taiwan, China).

Bac Tien Phong Industrial Park, Deep C Quang Ninh.

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Challenges in Developing Ecological Industrial Parks

To date, the government has integrated the development of eco-industrial parks into national strategies for sustainable development and green growth. There are also numerous policy proposals to encourage industrial parks to transition to the ecological IP model. The Ministry of Planning and Investment has also set a target that by 2030, approximately 40–50% of localities will convert existing industrial parks into eco-friendly models, and 8–10% of localities have plans to develop new eco-industrial parks from the urban planning stage and the orientation of industries and sectors for investment attraction.

Despite the growing urgency of developing green and eco-industrial parks, Vietnam faces considerable challenges in its construction. The managing director of C+ Consulting and Investment Company stated: “From a business perspective, this is a matter of changing business models and business plans for industrial parks. Thus, challenges will arise from the legal environment, investment resources for transformation, human resources, and development strategies in the new phase.”

The first challenge, according to Mr. Cuong, is the legal environment for the development of the EIP model. “Although Decree No. 35/2022/ND-CP contains provisions on incentives and procedures for establishing ecological IP investment enterprises, it is not enough. For example, how traditional industrial parks implement the conversion has not been addressed. Without a clear legal framework for this development model, businesses will face difficulties in the conversion, having to both do it themselves and bear the risks. Therefore, we need additional common standards or criteria for the conversion to the ecological IP. model,” he cited.

In addition, the financial, technological, and human resources of industrial parks are also significant obstacles in the transformation process. Some industrial parks have been selected to participate in the ecological IP. construction support program of the Ministry of Planning and Investment, with funding from the United Nations Industrial Development Organization (UNIDO) and the Swiss State Secretariat for Economic Affairs (SECO). Some industrial parks have independently organized staff training on ecological IP. development models in Japan and South Korea. However, these numbers are very modest compared to the total number of industrial parks operating in Vietnam.

Many Challenges in Developing Ecological Industrial Parks in Vietnam.

Changing the investment attraction strategy for industrial parks and persuading businesses in the industrial parks to participate in the circular economy is another challenge because cooperation and symbiosis among businesses in the industrial parks are currently difficult and problematic. Mr. Cuong shared that a representative of a pioneering industrial park in ecological IP development once raised the issue of not being able to reuse wastewater within the industrial park, even though the treated wastewater quality was better than the raw water quality, due to legal issues.

“Eco-industrial parks and the circular economy go hand in hand. Wastewater and waste in an eco-industrial park must be treated and reused as much as possible. Waste from one factory can be the input material for another. This industrial symbiosis also requires many industrial parks in a region to connect. When planning to attract new investment, ecological IP investors must have an overall strategy with a circular economic vision,” he said.

To develop eco-industrial parks in Vietnam, Mr. Cuong believes that the first step is to continue to improve the necessary legal framework for the development of eco-industrial parks and provide specific implementation guidelines. In parallel, there should be incentive policies to encourage the conversion of traditional industrial parks into eco-industrial parks, including tax incentives and credit support.

The second step is to quickly address the legal bottlenecks in the application of the circular economy or industrial symbiosis between industrial parks in a region.

The third step is that the development of ecological industrial parks must be linked to the application of technology and innovation from the 4.0 industrial revolution. In the planning, industrial parks need to allocate land to attract start-ups in high-tech fields, automation, research and development projects, high-tech services, etc. Multi-billion dollar capital flows do not come with just a single project but bring their entire ecosystem, and IP investors need to be well prepared to capture this capital flow, Mr. Cuong concluded.

From attracting foreign investment to promoting a circular economy, the benefits of ecological industrial parks are clear. However, Vietnam must address the legal ambiguities, resource constraints, and collaborative challenges that currently hinder progress. By prioritizing legal clarity, incentivizing green investment, and fostering technological innovation, Vietnam can pave the way for a sustainable and prosperous future.

Source of the full article in Vietnamese: https://vietnamfinance.vn/phat-trien-kcn-sinh-thai-phap-ly-chua-ro-dn-tu-lam-tu-chiu-rui-ro-d121886.html

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