57863 v3 INDUSTRIAL WASTEWATER MANAGEMENT IN NHUE-DAY AND DONG NAI RIVER BASINS OF VIETNAM

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized INDUSTRIAL WASTEWATER MANAGEMENT IN NHUE-DAY AND DONG NAI RIVER BASINS OF VIETNAM The World Bank Environment Unit Sustainable Development Department East Asia and Pacific Region August v3 Based on a report submitted in January 2010 to the World Bank and the Government of Vietnam s Ministry of Planning and Investment (MPI) by LBCD Consultants Inc. and Experco International Ltd.

2 TABLE OF CONTENTS LIST OF ACRONYMS...vii ACKNOWLEDGEMENT...x EXECUTIVE SUMMARY... xi 1. INTRODUCTION Brief introduction to the industrial wastewater problem Overall design of the study...2 PART A: THE INDUSTRIAL INVENTORIES AREAS INVENTORIED INVENTORY RESULTS... 6 PART B: ASSESSMENT OF THE REGULATORY AND INSTITUTIONAL FRAMEWORK FOR INDUSTRIAL ESTATES AND CRAFT VILLAGES THE GENERAL REGULATORY FRAMEWORK REGULATORY AND INSTITUTIONAL FRAMEWORK PERTAINING SPECIFICALLY TO INDUSTRIAL ESTATES Industrial parks Regulatory framework Management of industrial parks Industrial clusters REGULATORY AND INSTITUTIONAL FRAMEWORK PERTAINING TO CRAFT VILLAGES The problem of craft villages Legal and institutional framework REQUIREMENTS FOR ENVIRONMENTAL STUDIES AND PERMITS Environmental impact assessment Environmental protection commitment Environmental protection scheme...21

3 7.4 Waste Water Discharge Permits WASTE WATER FEES AND SANCTIONS FOR NON-COMPLIANCE Waste water fees Sanctions for infractions PROGRAM FOR RELOCATION OF MOST-POLLUTING INDUSTRIES PUBLIC AWARENESS WORK RIVER BASIN MANAGEMENT FINDINGS AND RECOMMENDATIONS Main Findings General comments on regulatory framework Permit issuance Collection of fees Industrial parks Craft villages Monitoring Recommendations Regulatory framework for industrial estates Institutional framework for industrial estates and stand-alone industries Craft villages Discharge permits Sanctions Fees for environmental protection Monitoring...34 PART C: INTERVENTIONS AT INDUSTRIAL ESTATES AND CRAFT VILLAGES: RECOMMENDATIONS FOR AN INVESTMENT PROGRAM RECOMMENDATIONS FOR PLANNING AN INTERVENTION PROGRAM FOR POLLUTION CONTROL Step 1: Institutional Structure National steering committee River basin committees COSTS EVALUATION FOR INFRASTRUCTURE REQUIREMENTS Cleaner production at industry level Cleaner production interventions and costs Recommendations and costs evaluation...38 iv

4 14.2 Infrastructure requirements and cost for industrial estates Common treatment facilities at industrial estate level Budgetary cost estimates for industrial estates in the most polluting provinces of Nhue-Day River Basin Pre-treatment at industry level Summary of costs estimations FINANCING OPTIONS: IS THERE A POTENTIAL MODEL FOR ODA INVESTMENT IN VIETNAM? Conceptual Approach Proposal: an hybrid approach Financial mechanisms for infrastructure capital costs Recommendations of financial mechanisms Financial mechanisms for small and medium enterprises (SMEs) Financial mechanism for craft villages CONCLUSION REFERENCES...49 v

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6 LIST OF ACRONYMS BASTAF:... Baffled Septic Tank BOD:... Biological Oxygen Demand CETP:... Common Effluent Treatment Plant COD: Chemical Oxygen Demand CP:... Cleaner Production DAF:... Dissolved Air Flotation System DARD:... Department of Agriculture and Rural Development DOC:... Department of Construction DONRE:... Department of Natural Resources and Environment DOIT:... Department of Industry and Trade DPI:... Department of Planning and Investment EIA:... Environmental Impact Assessment EPA:... Environmental Protection Agency... EPC:... Environmental Protection Commitment EPS:... Environmental Protection Scheme EPZ:... Export Processing Zone ETM:... Center for Environmental Technology and Management GIOV:... Gross Industrial Output Value GOV:... Government of Vietnam HCMC:... Ho Chi Minh City HH:... Household IDC:... Infrastructure Development Company ICEM:... International Centre for Environmental Management

7 INEST:... Institute of Environmental Science and Technology IP:... Industrial Park IC:... Industrial Cluster ISO:... International Organization for Standardization IZ:... Industrial Zone IZA:... Industrial Zone Authority LEP:... Law on Environmental Protection LWR:... Law on Water Resources MARD:... Ministry of Agriculture and Rural Development MOC:... Ministry of Construction MOF:... Ministry of Finance MOIT:... Ministry of Industry and Trade MONRE:... Ministry of Natural Resources and Environment MPI:... Ministry of Planning and Investment ODA:... Official Development Assistance PC:... People s Committee PPC:... Provincial Peoples Committee SADCO:...Sewerage and Drainage Company SBR:... Sequential Batch Reactor SEMLA:... Strengthening Environmental Management and Land Administration SOE:... State-owned Enterprise SOIP:... State-owned Industrial Parks TSS:... Total Suspended Solids UNIDO:...United Nations Industrial Development Organization UNEP:... United Nations Environment Programme viii

8 US$:... United States Dollar UASB:... Upflow Anaerobic Sludge Blanket VEA:... Vietnam Environment Agency VND:... Vietnamese Dong VEPF:... Vietnam Environmental Protection Fund VNCPC:... Vietnam Cleaner Production Center WWDP:...Waste Water Discharge Permit WWTP:...Waste Water Treatment Plant ix

9 ACKNOWLEDGEMENTS This report was led by the World Bank s Environment Unit of the World Bank s Country Office in Vietnam, part of the Sustainable Development Department of the East Asia and Pacific Region. It is largely based on a lengthy and detailed report prepared by LBCD Consultants Inc. and Experco International Ltd. of Drummondville, Quebec. That full report is available on the Bank s Vietnam-Environment web site ( Key members of the consultant team were the following: Pierre Beauchamp (Project director), Nguyen Van Kiet (Project manager), Julie Beausejour, Pierre Arnoux, Tran Thi Minh Thao, Jim Delaney, Huynh Ngoc Phuong Mai, Le Anh Binh (Local coordinator). The report was undertaken in collaboration with the Department of Industrial Estate Management of the Ministry of Planning and Investment s (MPI). Key MPI staff that contributed to the report were: Tran Hong Ky (Deputy Director of Department), Phan Tuan Giang, and Le Binh Phuong. The team members within the World Bank were Tran Thi Thanh Phuong (Task Team Leader), Rob Crooks (consultant), Douglas J. Graham (Environment Country Sector Coordinator), Jostein Nygard, Bekir Onursal, and Jiang Ru. Le Thanh Huong Giang supported the team. Consultants who assisted with this summary report include Rob Crooks and Hans-Roland Lindgren. Helpful comments and advice were received from Anjali Acharya, Jan Bojo, and Patrick Mullen (IFC). Overall guidance was provided by Hoonae Kim, the then Sector Manager for Sustainable Development in Hanoi and Magda Lovei, Sector Manager for Environment and Natural Resources in Washington as well as by Jan Bojo, Environment Sector Leader for East Asia and the Pacific and Victoria Kwakwa, the Country Director for Vietnam. The World Bank gratefully acknowledges the financial support of South Korea which financed the original report through the Bank-Korea Environment Partnership (BKEP; P099077). x

10 EXECUTIVE SUMMARY This report is a synthesis of a longer report produced by Experco and LBCD between February and October 2009, with the collaboration of the Ministry of Planning and Investment (MPI). The full report provides a comprehensive analysis of industrial wastewater management in industrial estates and craft villages in selected river basins of Vietnam. The analysis was conducted in three separate stages: (a) A detailed inventory of industries and industrial activities responsible for the pollution of the Nhue-Day River Basin, including industrial zones, industrial clusters, industrial points, craft villages, and large-scale stand alone industries. In the Dong Nai River Basin, an inventory of the industrial parks was carried out. (b) An institutional and regulatory analysis. (c) Identification and determination of appropriate interventions for industrial estates and craft villages. Part A: Inventories The inventory identified a total of: 140 industrial parks (35 in the Nhue-Day basin and 105 in the Dong Nai basin); 188 industrial clusters (59 in the Nhue-Day basin and 129 in the Dong Nai basin); 48 industrial points (Nhue-Day basin only) and 346 craft villages (Nhue-Day basin only). Due to the limited time available to prepare the inventory, these numbers are probably an underestimation. Key conclusions from the analysis were: Industrial Parks: There are significantly more industrial parks in the Dong Nai River Basin (125) than there are in the Nhue-Day Basin (35) and the provision of centralized waste water treatment capacity is much higher in the former (30% of parks have Common Effluent Treatment Plants (CETPs) installed) than the latter (9%) although both levels are unacceptably low. Industrial Clusters: There are also significantly more industrial clusters in the Dong Nai (129) than in the Nhue-Day (59) although the availability of CETPs is extremely low in both cases (only 3% of industrial clusters have CETPs installed). In the Dong Nai catchment, the distribution of industrial clusters across the provinces surveyed is relatively even. In the Nhue-Day basin, industrial clusters are concentrated in Hanoi-Ha Tay Province (which contains 63% of all industrial clusters inventoried), at the upstream end of the catchment, increasing the significance of the failure to install adequate waste water treatment capacity at these enterprises since it maximizes contamination of the total river system. The survey also indicated that another 41 industrial clusters are planned for the Nhue-Day catchment and almost all of these will be located in Hanoi-Ha Tay province, which will further exacerbate the problem. Industrial Point Sources: These were only inventoried in the Nhue-Day catchment where 100% of identified facilities lacked WW treatment facilities with the great majority (43 out of 48) being located in Hanoi-Ha Tay province, at the upstream end of the catchment. xi

11 Craft Villages: These were only inventoried in the Nhue-Day catchment. The overwhelming majority (257 of 346 or 74%) were located in Hanoi-Ha Tay province. None of them have waste water treatment facilities. This inventory represents only a first step. More work needs to be done to extend and amplify it and a recommendation is made for this work to be included in any future investment program. Part B: Assessment of regulatory and institutional framework in industrial estates and craft villages In broad summary, the review showed that there is a quite comprehensive array of laws and regulations governing the establishment and operations of industrial estates whereas the operation of craft villages is less well regulated. In both cases, however, regulatory effectiveness is hampered by overlaps and contradictions between certain laws/decrees/circulars, overlaps in the authority of different agencies, and lack of operational funds, staff, equipment and human resource capacity in regulatory agencies, all of which are aggravated by certain inherent conflicts of interest. The key recommendations arising out of this part of the study are as follows: Regulatory framework for industrial estates Guidelines for implementation of Decree 29 should be issued as soon as possible to clarify the division of responsibilities between Departments of Natural Resources and Environment (DONREs) and Industrial Zone Authorities (IZAs). Regulation/Decrees on Industrial Parks need to be unified to make it clear that a CETP must be established and made operational before an IP can commence operation and that all waste water discharges within the IP must be directed to the CETP. All enterprises discharging liquid wastes to a sewer in an IP or to the external environment should be mandated to continuously monitor waste water flows and make the information available to the IZA and/or DONRE as appropriate. Institutional framework for industrial estates and stand-alone industries Industrial Zone Authorities (IZAs) should be confirmed as the main environmental management institution within the boundaries of the industrial park (IP) and made responsible to the DONRE for meeting all relevant water pollution control standards where discharges from the IP pass into the surrounding environment. It then becomes the responsibility of the IZA to deal with the performance of individual enterprises within the IP. DONREs should only levy waste water discharge fees on IP as a whole (i.e. on the IZA), not on individual enterprises within the IP. The role of IZAs should be extended to include industrial clusters. This is already being done in Ha Nam and Hanoi. In any event, the distinction between industrial parks and industrial clusters is somewhat arbitrary. From an environmental management point of view, they are essentially the same. A better distribution of regulatory responsibility for stand-alone industries needs to be established. At present, they are all regulated by central ministries which can lead to delays in the implementation of measures when environmental problems arise. There are two xii

12 Craft villages options: (i) central agencies should only concern themselves with very large enterprises of national significance leaving the rest to the DONRE s; and/or (ii) the central agencies should sub-contract supervision authority to DONREs subject to close oversight. Ministry of Industry and Trade (MOIT) and provincial level Departments of Industry and Trade (DOITs) should keep some responsibilities for craft village instead of a full transfer of responsibilities to Ministry of Agriculture and Rural Development (MARD)/ Department of Agriculture and Rural Development (DARD) as it is planned OR, the relevant technical expertise from MOIT/DOIT should be transferred to MARD/DARD. Management plans for the most seriously polluting craft villages should be prepared including proposals for waste water collection and treatment and necessary financial measures. The plans should be approved by relevant DONREs. Industrial points could be used as a central tool in a more comprehensive strategy to improve environmental management in the most polluting craft villages through relocation of most polluting activities but the financial arrangements and incentive structures need to be significantly improved. Discharge permits Regulation of waste water discharges to irrigation canals should be transferred from MARD/DARD to Ministry of Natural Resources and Environment (MONRE)/ Department of Natural Resources and Environment (DONRE) and the relevant standards need to be unified with other relevant standards. Building on the work carried out in this study, a complete national inventory of existing industrial parks, industrial clusters and industrial enterprises needs to be prepared with emphasis on whether or not they are treating their liquid wastes (either individually or via CETPs) and whether or not the discharges are in compliance. Amongst other things, this will provide a baseline for implementing a major national program to issue Wastewater Discharge Permits (WWDPs) covering all point source discharges in accordance with Decree 149 (issuance of waste water discharge permits). Attention should be focused on priority enterprises, IPs and regions where industrial wastewater pollution is known to be particularly problematic. The link between findings of an environmental impact assessment (EIA) and the issuance of permits and other authorities to operate needs to be significantly strengthened to ensure that EIA recommendations are converted into enforceable and monitorable actions. Sanctions The sanctions for environmental violations and non-compliance need to be strengthened. The existing schedule of penalties provides insufficient deterrence. Fees for environmental protection Waste water fees for environmental protection should be increased. Currently, the cost of assessment and collection often exceeds the revenues collected and thus provide insufficient revenue for the environmental fund and monopolizes DONRE staff. At the same time, where IPs have a functioning CETP, the DONRE should not levy fees on enterprises discharging to the CETP; fees should only be levied on the operator of the CETP as that is the point of discharge to the surrounding environment. xiii

13 Monitoring The requirement for DONREs to give prior notice of an intention to carry out environmental monitoring should be removed. They should be authorized to monitor at will and without notice. DONREs should not concern themselves with monitoring discharge from individual enterprises within an IP if they are discharging to a CETP. The problem of regulating discharges to sewer becomes a responsibility of the owner/operator of the CETP. The owner/operator of the CETP will be responsible to the DONRE for meeting all relevant discharge requirements however, and the DONRE should monitor the outflow from the CETP as if it were an industrial point source. Part C: Identification of interventions: Recommendations for an investment program A set of recommendations is suggested for planning an intervention program for industrial pollution control based on this assessment in Vietnam and a review of international Official Development Assistance (ODA) financing for pollution control. A technical assistance program could support river basin committees and possibly a national steering committee on industrial pollution control. The funds for infrastructure capital (loans and grants) could be managed by a financial intermediary. Recommended activities within a Technical Assistance program Recommended activities to receive priority funding from the Technical Assistance Program are: 1. Investing into data management equipment and training to increase capacity in industrial environmental management for officers at Industrial Zones Authorities and provincial departments (DOIT, DONRE, and DARD) officers in charge of environmental management and monitoring. 2. Investing in a program of Environmental Management Plans for the most polluting craft villages. 3. Investing in technical support for a cleaner production program. Interventions and criteria for polluting industries A. Industrial zones and clusters As a central tool to improve industrial and environmental management, industrial estates should also be given priority financial support. All estates should have centralized wastewater treatment plants that are flexible enough to welcome new industries over the years as the estates are fully occupied and industry productions and wastewater discharge can increase. High-tech biological treatment plants are recommended for industrial parks that present higher flow and less land. Smaller industrial clusters and industrial clusters, however, present lower discharge of wastewater and lower economic capacities. Cheaper technologies (capital and operation costs) are then proposed, but they require more land area. It is assumed that these clusters and points located in rural areas and managed by local authorities can find the required xiv

14 land. It is estimated that natural technologies can easily cost 2 to 3 times less than high-tech technologies (and very cheap operating costs) but use 2 to 3 times the land area. In case land is not available, some specialized treatment equipment as Bionest or DAF (Dissolved Air Flotation System) could be purchased for each industry, or used for combined wastewater from the same industrial sector. These systems use very little land area, but they have to be operated carefully by skilled operators and are more expensive to operate, as they require electricity and chemicals. B. Craft villages The river basin committee should prepare detailed environmental management plans for the most polluting craft villages. The plans should include options for cleaner production training, low-cost options for communal wastewater treatment, and financial measures for implementation. C. Industries within industrial estates and stand-alone industries For stand-alone industries and individual industries within industrial estates, we recommend targeting a limited number of high polluting industrial sectors, rather than supporting all industries. The priority interventions (relocation, closure or treatment) should go to: (1) the plants with the most toxic discharge in terms of toxicity (Dore et al., 2008) and (2) a few strategic high polluters industrial sectors where cleaner production have demonstrated good results. : We recommend that a clean production expert team should be created within the river basin committees. Clean production has demonstrated good results in pollution reduction and quick payback period for in terms of reduced production costs. Implementation and process modifications costs would be recovered by industries. Relocation of industries into industrial estates in Hanoi and Ho Chi Minh City are led and supervised by a Steering Committee chaired by the People s Committees (PCs). They both lead a program to implement Decision 64 with some flexibility to adapt the relocation scheme to the urban planning and Master plan. Both programs are handling the relocation with a series of financial and tax preferential measures. However, it appears that these measures have not been sufficient for small and medium enterprises to afford relocation costs. We recommend that each PC should establish a new unique Funds for Urban Industrial Pollution Reduction with simplified procedures. The fund should provide partial grants (30 to 40% of costs for small and medium enterprises (SMEs)) for new production and treatment works. D. Infrastructure costs estimation We have prepared a first budgetary cost assessment that will help the Government of Vietnam (GOV) and the donor community to plan their support program for industrial pollution reduction. The budgetary cost assessment uses the updated inventory of polluting industries and industrial estates to estimate the costs of pollution reduction. The report includes useful summary tables. xv

15 E. Financing options and mechanisms Beyond the financing of specific infrastructure projects, the funders could take into account the potential benefit of approaching environmental finance as a capacity building issue. There is potential, though not without risk, of developing sustainable and innovative pollution abatement products. An IBRD (Internal Bank for Reconstruction and Development) loan managed through a financial intermediary and on-lent at concessional rates to individual banks is a possibility. Financial support should be granted to industries according to their economic needs (access to credit), micro-economic viability (reimbursement capacity), technical feasibility of the pollution reduction and technology prices. The support could be a preferential loan managed by a financial intermediary and/or some partial grants to the maximum value of 20% of the construction costs. We recommend that funds go to the private sector, including privately owned industrial parks and private industries. Industrial parks and clusters should be eligible to receive grants and loans on the condition of presenting a viable cost recovery plan transferring the wastewater treatment cost, complete or partial, to their industries. Industrial estates should present a serious management plan including regulation for wastewater treatment fees collection and environmental monitoring and management, as suggested by Decree 29. Financial mechanisms for small and medium enterprises (SMEs) SMEs in Vietnam have difficult access to credit. Access to preferential loan and grants would definitely be an incentive to invest in wastewater treatment system. Furthermore, the successful reimbursement of this subsidies loan with a financial intermediary will improve their credit line. The usage of a grant element should also be considered vital to SMEs and craft villages as they have more difficult access to market finance. Financial mechanism for craft villages Most micro-industries/households have limited economic resources and cannot afford any waste treatment costs. A combination of grants and subsidized loans is recommended for carefully selected craft villages that show interest in pursuing deeper training and organizational processes by obtaining additional funding. Craft villages with a relocation plan to industrial points provide an interesting option for both economic viability and technical feasibility of wastewater treatment over the long-term. xvi

16 1. INTRODUCTION This report is derived from a much longer report prepared by a team of consultants (LBCD Consultants and Experco International Ltd.) commissioned by the World Bank and the Ministry of Planning and Investment of the Government of Vietnam to study industrial waste water management problems in two important river basins in Vietnam: the Nhue-Day in the north and the Dong Nai in the south. The consultants final report is over 360 pages long and filled with a wealth of technical and analytical information. This summary report focuses on the findings and recommendations of the study rather than on the data collection and analytical methods. Readers interested in these latter aspects are referred to the full report, available at and (search for report No ). 1.1 Brief introduction to the industrial wastewater problem Vietnam has seen its economy grow at over 10 percent per annum since 2001, driven mostly by an increase in industrialization and urbanization which is shifting the economy away from its traditional agricultural base. At the same time, the government has also been switching its role from being an owner of the economy to being more of a facilitator and regulator. At the same time we are witnessing increasing environmental degradation. This report looks at the contribution of industrial wastewater to water quality. Domestic wastewater collection and drainage systems are practically non-existent outside large urban areas in Vietnam and even though infrastructure has improved in the last few decades most of it dates back to the French colonization are (pre-1954) and is in need of improvement. One result of this is that most industrial wastewater is discharged untreated into the aquatic environment; either through sewer systems that provide inadequate or no treatment, or directly. The Government of Vietnam is not unaware of this problem and, in recent years, has taken various measures to address the problem. For example, amendments to the 2005 Law on Environmental Protection (LEP) have established new policy tools for strategic environmental assessment and management of pollution prevention and cleanup controls for the private sector. Similarly, the Ministry of Natural Resources and Environment (MONRE) has adopted a River Basin Management approach for three severely polluted river basins (Nhue-Day, south of Hanoi; Cau, north of Hanoi; and the Dong Nai flowing through Ho Chi Minh City). However, the essential starting place for such an approach is an accurate inventory of pollution sources. The present study was designed to remedy these deficiencies, at least as concerns industrial wastewaters, in two catchments; the Nhue-Day in the northern part of the country and the Dong Nai in the south of the country. Essential to any understanding of the industrial water pollution issue is an understanding of the terminology used in Vietnam to refer to various parts of the industrial sector. Key terms are as follows: Industrial zones: also called industrial parks (Khu công nghi p), are financed, and managed by provincial governments, through the provincial Industrial Zone Authority (IZA). The IZA reports directly to Provincial People s Committee (PPC). 1

17 Export processing zones (Khu ch xu t): are industrial zones focused on the production of export goods. They are financed by the National Government and are governed by the same regulations that apply to regular industrial zones. Industrial clusters (C m công nghi p) are concentrated industrial areas created specifically for smaller-scale industries. By regulation, industrial clusters are smaller than 75 ha in area, they are approved at the district level but they fall under the management authority of the provincial DOIT. They may be either publicly or privately owned. Craft villages (Làng ngh ): Craft villages are entities created by the government to support development of very small scale household-based or micro-businesses. For any village to be identified as an official craft village by a provincial government, a minimum of 30% of households in the village should take part in craft activities, business production activity must have been stable for at least 2 years, and the village should be registered with the relevant provincial authorities. Industrial points ( i m công nghi p): originally developed by district authorities for relocation and expansion of craft village s production activities, they may be funded privately or publicly and are governed by a patchwork of regulations covering both craft villages and industrial clusters. Industrial points are mostly located in Hanoi-Ha Tay province. The development of industrial zones (IZs) and industrial clusters (ICs) has contributed considerably to recent industrialization in Vietnam. They are also seen as providing water pollution control benefits as they provide the promise of providing centralized wastewater collection and treatment that might not otherwise be feasible for individual enterprises operating in isolation. The government has also envisaged that they might be suitable locations for the accommodation of problematic and polluting industries relocated from urban areas. In December 2008, there were 219 approved IZs in Vietnam of which 118 were in operation and 101 were under construction. They cover a total land area of 61,472 ha in 54 provinces and cities. According to current Government plans, by 2015, 22 of these IZs will be expanded in area (by a total of 3,543 ha) and an additional 91 (covering 20,839 ha) will be constructed, together representing a 40% increase over the current area. The potential of these areas to facilitate collection and treatment of industrial wastewater has not yet been realized. As of 2008, only 60 IZs had functioning centralized wastewater treatment plants (WWTP) Overall design of the study The study comprised three main parts: Part A was compilation of a detailed inventory of the industrial zones, industrial clusters, industrial points, craft villages, and large-scale stand-alone industries within the three most polluted provinces of Nhue-Day River Basin (Hanoi-Ha Tay, Ha Nam, and Nam Dinh). In Dong Nai River Basin, an inventory only of the industrial zones was compiled covering the five most polluted provinces in the river basin (meaning that 6 provinces were excluded). The inventories were compiled through distribution of questionnaires to relevant government 1 An additional 20 WWTPs were supposed to be constructed in 2009 although progress could not be ascertained at the time of completion of the report. 2

18 agencies, industrial management boards and individual industrial enterprises supplemented by face to face meetings and an analysis of government databases (the methods are discussed in Section 2.1 of the Final Report and Annex A-1: Gathered inventories).the inventories data is presented in an Excel sheet. The format has been chosen as the easier format for importing into any database software. This simple inventories format is an evolving database to be used by the GOV authorities Part B was a study of the complex institutional framework affecting environmental management of industrial estates and craft villages. Part C, which is based on the findings of Parts A and B plus a review of relevant international experience, comprises a set of recommendations to guide a possible program of World Bank assistance including some provisional cost estimates for construction and operation of centralized WWTPs for all IZs covered in the study. 3

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20 PART A: THE INDUSTRIAL INVENTORIES 2. AREAS INVENTORIED Nhue-Day River Basin: The inventory covered industries using wet industrial processes producing industrial wastewater in the three most highly polluted provinces of the Nhue-Day River Basin (Hanoi-Ha Tay, Ha Nam, and Nam Dinh). The boundaries of the river basin are shown in Figure 2-1. Figure 0-1: Nhue-Day River Basin administrative boundaries (source: International Centre for Environmental Management, ICEM, 2008). Dong Nai River Basin: due mainly to time limitations, the survey was confined to the five most industrialized provinces that are polluting the river basin. This included only five of the 11 provinces that comprise the river basin: Ho Chi Minh City; Dong Nai; Binh Duong; Binh Phuoc; and, Ba Ria-Vung Tau. The boundaries of the Dong Nai River Basin are shown on Figure

21 Figure 0-2: Dong Nai river basin administrative boundaries (source: Center for Environmental Technology and Management) 3. INVENTORY RESULTS Some of the key findings of the survey (summarized in Table 3-1) are: Industrial parks: There are significantly more industrial parks in the Dong Nai river basin (125) than there are in the Nhue-Day basin (35) and the provision of centralized waste water treatment capacity is much higher in the former (30% of parks have CETP installed) than in the latter (9%) although both levels are unacceptably low. In both catchments, the distribution of industrial parks is more or less even across all provinces surveyed. Industrial clusters: There are also significantly more industrial clusters in the Dong Nai (129) than in the Nhue-Day (59) although the presence of CETP is extremely low in both cases (only 3% of industrial clusters in either catchment have CETP installed). In the Dong Nai catchment, the distribution of industrial clusters across the provinces surveyed is relatively even. In the Nhue-Day basin, industrial clusters are concentrated in Hanoi- Ha Tay province (which contains 63% of all industrial clusters inventoried), which is at the upstream end of the catchment, increasing the significance of the failure to install adequate waste water treatment capacity at these enterprises since it maximizes 6

22 contamination of the total river system. The survey also indicated that another 41 industrial clusters are planned for the Nhue-Day catchment and almost all of these will be located in Hanoi-Ha Tay province, which will further exacerbate the problem. Industrial point sources: These were only inventoried in the Nhue-Day catchment. It was found that no facility had wastewater treatment facilities with the great majority (43 out of 48) being located in Hanoi-Ha Tay province at the upstream end of the catchment. Craft villages: These also were only inventoried in the Nhue-Day catchment. The overwhelming majority (257 of 346 or 74%) were located in Hanoi-Ha Tay province. None of them have wastewater treatment facilities. Table 3-1: Number of industrial estates (Existing and Planned) in Nhue-Day and Dong Nai River Basins Industrial parks Polluting Industrial clusters Industrial points (and EPC) craft villages Total Without (no CETP 1 Without Without Total Total wastewater CETP (%) CETP (%) treatment) Ha Noi (92%) (95%) Nam Dinh (91%) (100%) 75 Ha Nam (91%) 6 6 (100%) Sub-Total Nhue-Day (91%) (97%) HCMC 15 2 (13%) (93%) Dong Nai (69%) (98%) Binh Duong 28 9 (32%) 9 8 (89%) Binh Phuoc (95%) (100%) Ba Ria-Vung Tau (100%) (100%) Sub-Total Dong Nai (70%) (97%) Note: 1 CETP means Common Effluent Treatment Plant. The data indicate whether a CETP is actually in operation or, for planned developments, whether a CETP is planned to be constructed. The survey data (presented in main report only) also show that the majority of the polluting industries fall into the metal, agro-processing, textile, and wood products (pulp and paper mainly) sectors. The largest industrial parks mainly accommodate big state-owned manufacturing industries and foreign and joint stock industries. They also tend to be well supplied with all relevant infrastructure and services and to be well organized and managed. The smaller industrial clusters and industrial points are mostly associated with private sector development of small and medium enterprises (SMEs). The pollution situation of craft villages has been subject of great attention in the recent years due to their particular micro-scale model and their important role in the rural economic development of the northern region. Craft village production is sometimes associated with heavily polluting activities (agro-processing, textile dyeing, metal works, wood and bamboo works, chemical lacquer manufacturing or plastic recycling and melting) which are of particular concern due to the complete lack of treatment facilities and the location of individual enterprises within residential villages. 7

23 PART B: ASSESSMENT OF THE REGULATORY AND INSTITUTIONAL FRAMEWORK FOR INDUSTRIAL ESTATES AND CRAFT VILLAGES Part B of the study assesses the regulatory and institutional frameworks governing the control and discharge of waste water from industrial estates and craft villages. The objective is to identify environmental responsibilities and gaps and challenges in the system to provide a basis for proposing specific strengthening measures. Sections 5 and 6 review the regulatory instruments applying specifically to industrial zones and craft villages respectively while subsequent sections address issues that are of more general application including permitting requirements, the program for relocating highly polluting industries and river basin management. The analytical work was done through a combination of legal research, literature review and meetings with relevant State and provincial agencies. 4. THE GENERAL REGULATORY FRAMEWORK Industrial estates and craft villages are subject to a variety of national laws and regulations that govern all forms of water pollution, most important amongst which is the Law on Environment Protection (LEP) which was passed in 2005, superseding an earlier law that had been passed in The current LEP is a significant improvement on its predecessor although, from a water pollution control point of view, there remain some continuing issues including: Lack of specific regulations governing the implementation of industrial environmental monitoring has created technical and financial problems for some businesses and avoidance of environmental monitoring requirements. There are no provisions to ensure that the findings and conclusions of environmental impact assessments (EIA) should actually be implemented, creating a major disconnect and leading to frequent violations of pollution regulations and environmental standards. Prescribed fees and penalties for water pollution are too low. There are no regulations specific to the problem of emissions from craft villages. There are still no environmental protection ordinances covering significant sources of pollution such as cement and chemicals production. Prime responsibility for implementation of the LEP at the central level rests with MONRE which, inter alia, issues relevant legal documents and implements environmental management for interdisciplinary or interregional large-scale projects and establishments. Responsibility for day to day application of the environmental laws and regulations is mainly delegated to MONRE s provincial and local counterparts; the DONREs, which are responsible for administration of EIAs, and environmental inspection and supervision. However, these are not the only agencies having a say on environmental management standards. There are also departments in charge of environmental protection in ministries, such as the MOIT, MOC and MARD. Some of these ministries have responsibilities of particular importance in the industrial water pollution context. For example, MARD controls the development of craft villages. 2 2 This is a new responsibility which previously was assigned to MOIT/DOIT. 8

24 The environmental work of the specialist ministries is mainly concerned with providing guidance regarding the ordinances on environmental protection and supporting enterprises to find technical means to comply with environmental rules and regulations. These ministries do not carry out compliance activities. Finally, the management boards of the export processing zones and industrial zones also have an environmental protection function. The effectiveness of the current system is limited by a number of factors including: DONREs have insufficient staff to adequately supervise industrial point pollution sources and they have insufficient equipment to adequately carry out environmental monitoring. DONREs have no control of individual enterprises inside industrial zones, export processing zones and no authority to monitor individual discharges within an enterprises or zone. In theory, the responsibility for environmental management within an enterprise or industrial zone is the responsibility of the enterprise or zone (i.e. the IZA; the Industrial Zone Authority) but, in reality, few enterprises or zones have an environmental management section and, if they do have one, it is usually not effective. Punishment for violations of environmental protection laws is not strict and the penalties are too low to encourage compliance. The overlap of authority between MONRE and other ministries and lines creates confusion and mitigates against effective management. The drafting and issuance of regulations and ordinances is still spontaneous and reactive (i.e. ordinances tend only to be issued when a problem arises), is rarely based on any background studies and projections, and rarely involves close coordination with related management agencies. Thus, the regulatory framework is deficient; issues are not adequately identified or defined, provisions are often incoherent, impractical or repetitive, and it is often very difficult to identify the difference between compliance and noncompliance. 5. REGULATORY AND INSTITUTIONAL FRAMEWORK PERTAINING SPECIFICALLY TO INDUSTRIAL ESTATES Industrial estates include: i) industrial parks; ii) export processing zones; and (iii) industrial clusters. The term industrial zones is often used in the regulations and is assumed to be interchangeable with industrial parks. 5.1 Industrial parks Regulatory framework Table 5-1 summarizes the main regulations related to industrial parks. The three main national regulations covering industrial parks are: 9

25 Decree 29/2008/ND-CP, issued by Ministry of Planning and Investment (MPI); Decree No. 88/2007/ND-CP issued by MOC; and, Circular No. 08/2009/TT-BTNMT, issued by MONRE. 3 These three regulations originate from different ministries which do not have the same objectives. There are some inconsistencies/overlapping between these regulations. For example, the LEP and Circular 08 (and former Decree 62) require the building of a CETP prior to the operation of an industrial park, but Decree 29 requires a CETP only in the case of expansion of an industrial park. Circular 08 also requires that industrial estates and clusters which have operated without concentrated wastewater treatment plants shall build and commission such plants before December 31, Given the huge backlog, this is not a realistic requirement. The fact that the vast majority of IPs in Vietnam, including many of those recently established, have no or inadequately installed CETPs, is a clear indication that the provisions of the LEP and former Decree 62 concerning waste water management have not generally been applied as conditions for the establishment industrial zones. Even where provincial governments have passed their own regulations requiring the construction and operation of CETPs as a condition of approval of industrial estates (see Table 5-1), the effect has been less than satisfactory Management of industrial parks As indicated in Table 5-1, there is a wide variety of agencies that have some role in either the establishment or management of industrial parks but, from the point of view of this report the key relationship is operational relationship between the DONRE and the vehicle established in all relevant provinces and cities to manage these entities, namely, the Industry Zone Authority (IZA) DONREs Following the issuance of Decree 81 in , each DONRE now has an Environmental Protection Agency (EPA). The first provincial EPA was established in 2004 in Ho Chi Minh City (HCMC). By the end of 2007, EPAs had been established in every province as extensions of the former Divisions of Environmental Management. Because the EPAs are generally new, they lack experience, capacity and physical resources. 3 Circular No. 08/2009/TT-BTNMT replaced in September 2009 Decision 62/2002. Because Decision 62/2002 (from Ministry of Science, Technology and Environment (MOSTE), former MONRE) was in use during the last 7 years, it is still frequently referred. 4 Decree No.81/2007/ND-CP of May 23, 2007, on establishment of Provincial Environmental Protection Branches under DONREs. 10

26 Table 0-1: Analysis of legal and institutional framework linked to industrial estates Legislation Agency responsible Findings Possible improvements INDUSTRIAL ESTATES Establishment LEP 2005 Decree 29/2008/ND-CP, March 14, 2008 providing for Industrial Parks, Export-Processing Zones and Economic Zones (at the proposal of MPI) Decree No. 88/2007/ND-CP of May 28, 2007, On urban and industrial park water drainage (at the proposal of MOC) Decision No. 62/2002/QD-BKHCNMT, August 9, Regulation of the Protection of the Environment in Industrial Parks (at the proposal of Ministry of Science, Technology and Environment (MOSTE), former MONRE) replaced by Circular No. 08/2009/TT-BTNMT of July 15, 2009, providing for the environmental management and protection of economic zones, hitech parks, industrial parks and industrial complexes (MONRE). Management of industrial parks Decree 29/2008/ND-CP, March 14, 2008 providing for Industrial Parks, Export- Processing Zones and Economic Zones (at the proposal of MPI) Chairman of provincial-level People s Committees shall decide on the establishment or expansion of industrial zones already incorporated into the approved Master Plan on Development of Industrial Zones MONRE Issue regulation on management and protection of the environment; Guidance to local agencies for their The LEP clearly indicates the necessity for all industrial zones and even craft villages to build waste water treatment systems The provisions of the LEP and former Decision 62 concerning waste water management have been, most of the time, not taken as conditions for the establishment of an industrial zone There are a number of serious overlaps and inconsistencies about how these general responsibilities can be interpreted Some provinces (Binh Duong, Dong Nai) chose to comply fully with the LEP and require a CETP before the start of operation of all new IPs. Other provinces should follow these examples. The issuance of guidelines to implement Decree 29 is needed rapidly to clarify the roles of each agency. MOIT/DOIT, MARD/DARD, and IZA have established environmental departments. However, the environmental 11

27 Legislation Agency responsible Findings Possible improvements tasks related to the environment; and undertaken by individual Impose sanctions Ministries and Agencies. Decree No. 88/2007/ND-CP of May 28, 2007, On urban and industrial park water drainage (at the proposal of MoC) Decision No. 62/2002/QD-BKHCNMT, August 9, Regulation of the Protection of the Environment in Industrial Parks (at the proposal of MOSTE former MONRE) MPI Development of industrial parks. Issues investment certificates MOC Responsible for infrastructure related to waste management ( including waste water treatment system) IZA approval of EIA, inspection examinations, sanctions for administrative violations Industrial Development Companies (IDCs) Maintain and operate infrastructures (including CETP) Collect fees from industries DONRE Responsible for supporting the PPC with issues related to environment. Provincial/City People s Committees PPCs could also be the owners of infrastructures, (in particular CETP) DOIT/Department of Planning and Investment (DPI)/Department of Construction (DOC) DOIT/DPI/DOC has the same responsibilities as MOIT/MPI/MOC at the provincial level. The most important areas of overlap and inconsistency are: The responsibility for EIA approval appears to be divided between MONRE/DONRE and IZA. In some provinces/cities (DONRE) has kept the EIA responsibilities while in others, IZA is claiming responsibility under the new Decree 29/2008. Inspection powers are shared by MONRE/DONRE, IZA, the infrastructure companies and the environmental police. These multiple responsibilities can lead to varying interpretations of the requirements and confusing advice and compliance efforts protection DOITs have created environmental departments (usually 2 staff). However, the tasks and responsibilities of these staff are not clear. Currently, they mainly participate in EIA review and approval. They are also involved in safety issues. protection departments need to be strengthened with adequate staff numbers, training, budgetary resources and authority within the ministry. There is a need, in particular, for IZA to strengthen their environmental department if they want to assume their role. Coordination between IZA and DONRE is essential. If not, DONRE will not be informed of problems until they affect neighbouring communities. It is expected that the new regulation to be issued by MONRE on environmental will clarify the monitoring role. Most of the environmental responsibilities within Industrial Parks could be given to IZA, which are closer to industries and infrastructures companies. 12