CRS Asia, Vol.5 Week 23
by Michelle Brown mbrown@csr-asia.com
Enhancing the capacity of businesses, government offices and civil society to identify and build partnerships can help build more sustainable business practices in Vietnam. This was one of the recommendations that emerged from some recent research CSR Asia carried out on the enabling environment for sustainable business practices in Vietnam.*
Over the last 25 years, Vietnam has achieved remarkable growth. Between 1996 and 2006 the economy doubled in size while the general poverty rate fell from 58.1 percent in 1993 to 16 percent in 2006 according to World Bank calculations. Providing an environment for the private sector to grow has been fundamental to this change and this transformation. Unleashing entrepreneurialism has helped to create jobs as well as provide products and services. While there has been a steady increase in foreign investment over the last decade the current global financial crisis is no doubt have an impact. However, according to the Economist Intelligence Unit, prospects for long term growth remain strong.
While Vietnam has already achieved its target indicators for the Millennium Development Goals in terms of eradicating extreme poverty and eliminating gender inequality and is on target to achieve many of the other goals, challenges still remain. Pockets of severe poverty remain and nearly half of ethnic minority groups are believed to be living in poverty. The urban and rural income gap is thought to be rising with poverty concentrated in many remote mountainous areas. Rapid economic development has not come without its toll and the environment has suffered immensely. Vietnam is not likely to achieve its targets in relation to environmental sustainability.
In 2008, due to internal and external factors, inflation rose considerably in the middle of the year while there were also growing concerns over food shortages, and the potential for large numbers of people to slip back into poverty. The number of labour strikes or labour ‘stoppages’ rose in 2008 with more than 680 strikes reported in that year representing an increase of more than 30 percent. While there was an increase in the monthly minimum wage it did not curb unrest and workers protested that this was still not sufficient.
Much of the country has continued to be vulnerable to natural disasters and typhoons often wreak havoc on communities particularly given the vast coast line which is likely to intensify with climate change. In addition to typhoons other impacts of severe weather include salt water intrusion, unpredictable weather, droughts or floods although these will vary in different areas. Natural disasters, which are intensifying with climate change, continue to affect livelihoods– and particularly for some of the most poor and vulnerable communities. Various studies have concluded that Vietnam is one of the countries to be most affected by climate change. In 2008, research by Oxfam documented how communities in Quang Tri province and Ben Tre province were already experiencing the consequences of the climate changing. Nearly three quarters of the population in Vietnam lives in areas vulnerable to water related natural disasters.
Vietnam’s environment and unique ecological assets have suffered immensely due to the industrial and agricultural transformation. In mid 2008 there were reports emerging on the ‘death’ of a 12 km stretch of the Dong Nai River, due to persistent effluent dumping activities by Vedan, a manufacturer of MSG. The business laws in Vietnam have been through a process of ongoing revision to provide a more conducive environment for business. There appears to be a fairly comprehensive regulatory framework for environmental and social protection. However, the challenge is that what exists in policy is not always translated into practice and duplications and contradictions between rules and regulations complicate matters even more.
Vietnam passed its first Environmental Protection Law in 1993. In 2006 it amended it to include provisions for the adoption of “polluter pays” measures; for instance for waste discharge into water bodies and the disposal of hazardous wastes. In principle, with the new law, authorities are required to report to communities the names of polluting establishments, and people can demand either businesses or government agencies to provide information on polluting incidents. Each year ‘State of the Environment’ reports are supposed to be provided by authorities at various levels. Despite these changes, particularly with regard to industrial pollutants, there are concerns that matters appear to be getting worse and that this in turn is having serious consequences for farmers’ livelihoods. Amongst those companies that participate in the Manufacturing and Distribution working group of the Vietnam Business Forum, there is a strong perception that there is currently no likelihood of a manufacturing facility suffering any serious legal consequences if they ignore the pollution laws.
In relation to labour issues, in the past year and a half various new laws and decrees were enacted, including the “tripartite partnership” between MOLISA (Ministry of Labour, Invalids and Social Affairs, representing the government), VGCL (representing employees) and VCCI (Vietnam Chamber of Commerce & Industry, representing employers) to mediate labour disputes. Decision 1129 was passed in August by the Prime Minister, on “enhancing leadership, providing direction for the development of harmonious labour relations, improved investment environment, and social order”. In addition to raising minimum wages, the government issued Decree 11 in January 2008 which states that if a strike is deemed ‘unlawful’ by the courts, those workers involved are required to pay compensation to their employers. This later decree has been a cause of concern for many groups working on issues in a country where it is nearly impossible to have a ‘legal strike’ and labour activists face imprisonment or just ‘go missing’.
Furthermore, like elsewhere, the need for improved managerial capacity, human resource practices and upgraded production facilities all pose challenges for embedding sustainable business practices. According to 2006 ILO research in Vietnam, the challenges and lack of skills is more apparent in smaller enterprises and others that do not have exclusive relationships with multinational buyers. Factories with exclusive relationships receive more support for upgrading production and improving labour standards. Research by the Vietnam Business Links Initiative in 2007 noted that to change business practices, “mentality and culture at the base of organizations” is the greatest challenge. Changes in management systems require changes in how managers think but that “most of the enterprises think that it is a very challenging task and costly with very modest evidence of success and gains”. This is compounded by the low profit margins for garment and textile factories whereby employers look for any means possible to keep costs down.
Buyer orders are likely to be a major incentive for domestic manufacturers to operate more sustainably. Thus it appears that those companies – whether local or foreign-owned, private or state-owned – producing for image-conscious (foreign) brands tend to be more concerned with (or see a clearer business case for) acting responsibly. In particular, since 1997, many producers for large American and European customers have started to adopt SA 8000.
There are some multi-stakeholder initiatives in country. With regard to addressing issues in the supply chain, the IFC and ILO together with the government of Vietnam and some major brands is launching the ‘Better Work Programme’. Essentially, this appears to build on the ‘Better Factories Cambodia Programme’ and aims to reduce overlap and duplication in buyers’ efforts and improve the conditions for workers in Vietnamese factories.
In addition, in 2007, the Global Compact launched a Vietnam network but it is not clear what take-up there has been (if any) from local enterprises. Going forward, it is anticipated that there will be more activities and, although it must still address issues of impact, it helps to raise public awareness.
There are stories of other inspiring partnerships to address other social challenges with business that are beginning to take root. For example, companies producing fish sauce such as SEAPRODEX have developed a partnership with the National Institute of Nutrition and the Global Alliance for Nutrition to combat malnutrition through fortifying fish sauce – a key household ingredient in the country. Iron deficiency anaemia affects nearly half of the population with significant impacts on pregnant women and young children.
Another great example of a business approach to addressing an important issue came from the helmet manufacturer Protec. Protec is Vietnam’s largest manufacturer of safety helmets, making over 5,000 per day, with all profits going towards awareness raising campaigns and traffic safety education programmes. This company has helped to address road safety and filled a large gap in the country where motorcycle accidents where a major cause of death and disability. A recent law has been passed to now require helmets in both rural and urban areas. By providing a high quality, lightweight affordable product in tandem with a public awareness campaign Protec has had a very positive impact.
While there are some emerging stories of innovative approaches to bring both business and community benefits in the country, there is an opportunity to do more. While the government has tried to create incentives for business to invest in rural and remote areas through tax exemptions, it is largely unknown whether this generates any addition benefits. There is currently no tax exemption for business innovations towards poverty reduction. Like elsewhere, there is also a general (mis)perception that CSR is equal to philanthropy. As Vietnam seeks to achieve middle income status, there is an opportunity for the country to look to find ways to better engage business in achieving sustainable development.
*Please note that this research refers to consultant reports that CSR Asia prepared for the Asian Development Bank in 2009. Other reports referenced in this article include:
ILO (2006). Market Assessment: Factory-Level Management and Labour Service in Vietnam
(VBLI), V. B. L. I. (2007). The current status of Corporate Social Responsibility (CSR) in Vietnam
The notes and documentation from the 2008 mid-term Vietnam Consultative Group Meeting ■
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