THE TEN PRINCIPLES - Global Compact Network Vietnam Research 1.pdf · THE TEN PRINCIPLES HUMAN RIGHTS Principle 1: ... This research was conducted by CSR Asia in cooperation with

GLOBAL COMPACT NETWORK VIETNAM Office for Business Sustainable Development (SD4B)4th floor, VCCI building9 Dao Duy Anh Street, HanoiTel +84 4 3577 2700Fax +84 4 3577 2699 Email: [email protected]: www.globalcompactvietnam.org

THE TEN PRINCIPLES

HUMAN RIGHTS

Principle 1: Businesses shouldsupport and respect the protectionof internationally proclaimedhuman rights; and Principle 2: make sure that theyare not complicit in human rightsabuses.

LABOUR STANDARDS

Principle 3: Businesses shoulduphold the freedom of associationand the effective recognition ofthe right to collective bargaining; Principle 4: the elimination of allforms of forced and compulsorylabour; Principle 5: the effective abolitionof child labour; and Principle 6: the elimination ofdiscrimination in respect ofemployment and occupation.

ENVIRONMENT

Principle 7: Businesses shouldsupport a precautionary approachto environmental challenges; Principle 8: undertake initiatives topromote greater environmentalresponsibility; and Principle 9: encourage thedevelopment and diffusion ofenvironmentally friendlytechnologies.

ANTI-CORRUPTION

Principle 10: Businesses shouldwork against corruption in all itsforms, including extortion andbribery.

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GLOBAL COMPACTNETWORK VIETNAM

The GCNV, launched in 2007, is acutting edge initiative developed inpartnership between the VietnamChamber of Commerce and Industry(VCCI) and the United Nations inVietnam (UN).

The GCNV aims to support itsmembers implement effectivecorporate social responsibility initiativein Vietnam.

The goal of the GCNV is to be thenational corporate social responsibilitycentre of excellence. Our job is toidentify, anticipate and diffuse thetensions between business andcommunities, business and theenvironment, business and thegovernment, business and theconsumer, leading to sustainablebusinesses in a prosperous society.

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A REVIEW OF THE SOCIAL AND ENVIRONMENTALCONDITIONS OF INDUSTRIES IN VIETNAM AGAINST

THE GLOBAL COMPACT PRINCIPLES

2010

A REVIEW OF THE SOCIAL AND ENVIRONMENTALCONDITIONS OF INDUSTRIES IN VIETNAM AGAINST

THE GLOBAL COMPACT PRINCIPLES

This research was conducted by CSR Asia in cooperation with the National Economics University in Vietnam for the Global Compact Network Vietnam

from September to December 2009

CBC-CSR Catalyzing Business Community’s role towardsgreater Corporate Social Responsibility throughGlobal Compact Principles in Vietnam

COCs Codes of ConductCSR Corporate Social Responsibility EU European UnionFDI Foreign Direct Investment GCNV Global Compact Network VietnamGDP Gross Domestic Product GSO General Statistics Office GSP Generalised Tariff of PreferencesHCMC Ho Chi Minh City IFC International Finance Corporate LEFASO Vietnam Leather and Footwear AssociationMPDF Mekong Project Development FacilityTOR Terms of ReferenceUNDP United Nations Development Programme UNIDO United Nations Industrial Development

OrganisationVCCI Vietnam Chamber of Commerce and Industry WTTC World Travel and Tourism Council

List of acronyms used in the report

Over the last 25 years Vietnam has transformed itselfthrough remarkable and sustained economic growthwhich has brought improvements to the quality of life formillions and a reduction in the number of poor. The

activities of the private sector and an enabling environment forentrepreneurship to grow and develop have been fundamental for thistransformation. Doi Moi and a vision of a “market economy withsocialist orientation” unleashed the potential of the private sector togenerate growth with a sustained commitment from the State to equityand poverty reduction.

In 2007 the GCNV was launched to support the government in theimplementation of its Sustainable Development Strategy (Agenda 21)and the development of responsible business practices. The GCNV isimplemented through the Vietnamese Chamber of Commerce andIndustry (VCCI), Office for Business Sustainable Development (SD4B)with funding from UNDP as part of the CBC-CSR project.

From September - December 2009, the GCNV commissioned areview of the current status of responsible business practices inVietnam. The main findings of this research demonstrate how businesshas successfully contributed towards sustainable development andpoverty alleviation in Vietnam and highlight the potential for businessto play an even great role in the future.

The report provides examples of initiatives which promote and addressgood labour, environment, human rights and transparency standards.It also outlines the ongoing risks which companies have to manage inorder to ensure sustainable economic growth in the future. This reportprovides a preliminary mapping of those issues in relation to differentindustries, based on various stakeholders perceptions.

While the views expressed in the paper do not necessarily reflect theofficial view of the GCNV, this paper forms part of our objective ofstimulating discussion in Vietnam on corporate social responsibilityand sustainable business practices. I would like to take this opportunityto congratulate the research team on this careful and thoughtprovoking paper, and to thank the companies involved intheir willingness to share information and views with us.

Fore

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dDr. Doan Duy Khuong, National Project Director, CBC-CSR ProjectVice Executive President of VCCI

““

This research was conducted by CSR Asia in cooperation with the National EconomicsUniversity in Vietnam. Michelle Brown managed the project with support and oversight fromNguyen Van Thang and Richard Welford. This project could not have completed withoutMichelle’s continuous commitment and dedication. The research was commissioned by theGCNV as part of the CBC-CSR project.

Special thanks are due to all the companies and non-government organisations thatparticipated in interviews in preparation of this report along with the governmentrepresentatives that gave the researchers their time and shared their perspectives on CSR andsustainable business practices as well.

The authors are solely responsible for remaining errors of fact or omission. While this is aGCNV paper, the views expressed here are the authors alone and do not necessarily reflectthe views of the GCNV or its members.

Acknowledgements

Executive Summary

Overview of the social and environmental issues for key industry sectors

Recommendations

Brief introduction to the project:

Our approach

Overall findings

The Industries

I Top tier recommendations: Food processing, construction and the extractive industries

1 Food processing2 Construction

THE EXTRACTIVE INDUSTRIES3 Oil and gas

4 Mining

II Manufacturing: Lots of risks and opportunities but other remediation efforts in place or starting…

5. Manufacturing:5.1 Garments, textiles and shoes5.2 Wood products and furniture

III Agriculture, fishing and forestry: Lots of risks but fewer opportunities

6. Agriculture7. Fishing

8. Forestry

III. Other industries we looked at but didn’t prioritise at this time: Tourism (including hotels andrestaurants) and real estate and telecommunications and post

9. Tourism, hotels and restaurants10. Real estate, renting and business activities

11. Post and telecommunications12. Finance and banking as a cross-cutting theme

Conclusion:

Appendix I: Key data on industry sectors Vietnam

Appendix II: Scorecard for Global Compact Issues by Industry in Vietnam

Appendix III: Questionnaire for Ranking Global Compact Vietnam Issues

Appendix IV: Global Compact Principles

Appendix V: General findings for Global Compact

Global Compact

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TABLE OF CONTENTS

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Poverty Reduction, Business andSustainable Development

Over the last 25 years Vietnam hastransformed itself through remarkable andsustained economic growth which hasbrought improvements to the quality of lifefor millions and a reduction in the number ofpoor. The activities of the private sector andan enabling environment forentrepreneurship to grow and develop havebeen fundamental for this transformation.Doi Moi and a vision of a “market economywith socialist orientation” unleashed thepotential of the private sector to generategrowth with a sustained commitment from theState to equity and poverty reduction. Thecountry’s Socio-Economic Development Plan(SEDP) which is also the poverty alleviationstrategy sets a vision for Vietnam ofbecoming an industrialised country by 2020.The plan sets targets for the economy,society, the environment and for goodgovernance and sees the private sector asfundamental for providing resources, wealthand jobs which are needed for the country tomeet its own goals.

While Vietnam has not emerged unscathedfrom the global economic turmoil of 2009it has avoided a recession. It is on target tomeet its goal of becoming a middle incomecountry by 2020. However, the last 25 yearsof growth has not come without both socialand environmental costs and althoughmillions have lifted themselves out of povertythere are now growing concerns over thewidening income gap between the rich andthe poor as well as continued poverty inremote and mountainous areas, particularlyfor minority groups. Climate change,severe weather and other environmentalchallenges exacerbate social challengesand there is increasing recognition of theneed to protect Vietnam’s immense naturalresources in order for growth anddevelopment to be sustained. Recentanalysis from the General Statistics Office(GSO) Household survey shows that a largeproportion of people are ‘just above’ thepoverty line and pointed out that the nextphase of poverty alleviation strategies willbe more challenging1 . Vietnam is currentlyin the preparatory stages for its next Socio-Economic Development Plan which will set

targets and outline a vision and strategy forthe next five year period.

As the themes and discussions take root forsetting the framework for the next five yearSEDP, we believe that the work of the GCNVis timely and hope that this project cancontribute to considering how sustainabledevelopment can be achieved and theopportunities this provides for business. Asbusiness continues to be the driver of thegrowth and the main creator of wealth, jobsand employment, there is an opportunity forother sectors to work together with businessto identify ways in which this growth can bemore sustainable and bring benefits tobusiness and benefits for development. Whilesome costs will be involved, the benefits andthe risks and cost associated with not takingaction will be greater. The Global Compact’sframework for sustainable business through10 guiding principles on labour, environment,human rights and anti-corruption fit within thecontext of Vietnam’s development agendaand could be a rallying call for business tocontribute to the next SEDP.

Since the Doi Moi reforms, Vietnam hastransitioned from an economy reliant onagriculture to one increasingly driven bymanufacturing. Table 1 below shows howmanufacturing has grown in terms ofcontribution to GDP from 18.56 percent in2000 to 21.26 percent in 2007 andcontinues to grow. The table provides asnapshot of some of the key data available

on the size and nature of the sector andfurther details are available in the body andappendix of the report. Apparel andfootwear, fish and food products, furnitureand wood products are key exports. Vietnamis endowed with significant natural resourcessuch as offshore oil and underground mineralreserves. Oil and gas exports are a key sourceof income. In recent years there have beenincreased opportunities for the extractiveindustries in the country. Over the years, theshare of the service sector to the economy hasalso grown considerably and is expected tobe a key driver in the years to come. Whileagriculture (including fishing and forestry)only contributes about 20 percent towardsGDP it is a substantial source of employmentand agricultural products account for nearly23 percent of all exports of the country2.Manufacturing is a critical source ofemployment and although affected by therecent global economy, there is a criticalshortage of workers in some areas3 .

Executive Summary

1 Vietnam Academy of Social Sciences. 2009. Reporton Rapid Impact Monitoring of Global Economic Crisis:Short-Term Vulnerability and Long-Term Measures forSustaining Poverty Reduction in Viet Nam. For 2009Consultative Group Meeting

2 Based on GSO data for agricultural, forest andaquatic products 2000 and 2007 data

3 Vietnam Academy of Social Sciences. 2009. Reporton Rapid Impact Monitoring of Global Economic Crisis:Short-Term Vulnerability and Long-Term Measures forSustaining Poverty Reduction in Viet Nam. For 2009Consultative Group Meeting.

This review of the social and environmental conditions of industries in Vietnam wascommissioned by the Global Compact Network Vietnam (GCNV) and carried out by CSR Asiain cooperation with the National Economics University in Vietnam. It aims to understand theCSR needs of different sectors. The objective was to identify the main social and environmentalproblems of the key industrial sectors in Vietnam and to rank these based on factors such asthe size of the sector and whether or not there are existing efforts to tackle the social andenvironmental challenges within the sectors.

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Tabl

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In order to focus our analysis, we started witha list of about fourteen industries basedloosely on the breakdown provided by theGeneral Statistics Office (GSO). Recognisingthe many sub-industries in manufacturing, wetargeted our analysis to garments, textiles andshoes, furniture and other wooden productsand food processing. We tested this list withthe GCNV and then with the initialstakeholders we interviewed. Through ourinterviews with a range of businesses (bothdomestic and foreign), government and non-governmental organisations and individualsas well as our additional desk based research

we mapped the social and environmentalissues for the sectors based on the four areasof the Global Compact. Many of thestakeholders noted that corruption was oftenan underlying cause and there were differentinterpretations and understanding of humanrights as defined in the context of the GlobalCompact. There are no doubt social andenvironmental risks that are not highlighted inthis report as it is based on the informationwe were able to gather during a 3 monthperiod in 2009. The research presents asnapshot of a range of stakeholderperspectives at a certain point in time.

HUMAN RIGHTS

In the context of other social and human rights there were manyunknowns for the stakeholders we interviewed. People raisedconcerns over land rights and the risk for business in silentcomplicity if not direct complicity.

LABOUR

The key challenges from the perspective of stakeholders weinterviewed related to hidden labour and that which is outsidecontracts as well as hazardous work. Due to the householdbased nature of much of the sector, child labour is a risk andthere are potential (although unknown) risks related to forcedagricultural labour.

ENVIRONMENTAL PROTECTION

The overuse of chemical fertilizers is a risk raised by many forland pollution and associated run offs for water pollution. Thehigh levels of toxic residues raises concerns over food safety.

CORRUPTION

There were not a lot of concerns raised by the stakeholderswe interviewed in relation to corruption and agriculture butonly some concerns over lack of transparency for use ofagricultural land.

AGRICULTURE

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Overview of the social andenvironmental issues for keyindustry sectors

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FISHING

HUMAN RIGHTS

Land rights and conversion issues for aquaculture are a potentialrisk but there were many ‘unknowns’ generally for fishing.

LABOUR

Similar to agriculture, work often takes place at the householdlevel and there can be hidden issues. Stakeholders commentedthat there were many child labour issues for fishing and also alack of safe working conditions (i.e. sea fishing withoutcommunication devices as well as blast and cyanide fishing).


Aquaculture has relied on chemicals and antibiotics –particularly for shrimp and catfish and there are concerns overthe long term effects of chemical inputs. The destruction ofmangroves causes both environmental damage and can affectlocal livelihoods. Cyanide fishing is growing and blast fishingcauses irreparable damage to Vietnam’s precious ecosystems.

CORRUPTION

The primary concern related to access to fishing rights in someareas.

FORESTRY

HUMAN RIGHTS

There were no specific concerns raised by stakeholders weinterviewed.

LABOUR

The work is usually at a household level with land use rights toplant and cultivate forest trees. There were not a lot of labourissues flagged by stakeholders we interviewed.


Forest cover is increasing but the quality of forests (primarycover) is decreasing. The decrease in up-stream forests is aconcern with links to flooding and erosion. There are widerregional issues regarding deforestation.

CORRUPTION

Concerns related to land handover processes and illegalforest logging.

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MINING

HUMAN RIGHTS

Risks and concerns related to relocation and lack of free priorand informed consent or consultation. In particular there wereconcerns for indigenous populations and cultural heritage(particularly in the highlands).

LABOUR

Risks and concerns related to hazardous and unsafe workingconditions. Although labour issues in mining get less mediaattention in Vietnam than say manufacturing, they areconsidered to be very serious and risks also relate to migrantand unprotected workers. Child labour is also a risk.


Mining brings with it severe environmental impacts which needto be carefully managed. The recent attention on Bauxitemining in the Central Highlands was noted by many.

CORRUPTION

Concerns over bribery and facilitation payments and a lack oftransparency and limited information available which raiseseven more concerns and fears over corruption.

OIL AND GAS

HUMAN RIGHTS

Nothing specific was raised by stakeholders we interviewed.

LABOUR

Stakeholders commented that there was a lack of informationover labour issues in the oil and gas industry but a perceptionthat people who worked in this industry were better off in termsof remuneration and benefits. However, as much is offshorethere is a risk of ‘hidden’ issues.


The biggest concern related to recent and potential oil spills.

CORRUPTION

This industry is perceived as ‘secretive’ with a lack oftransparency and some stakeholders assumed corruption butnoted that they had no clear evidence.

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MANUFACTURING

HUMAN RIGHTS

The links to labour issues were the main concern.

LABOUR

Concerns were raised over the minimum wage vs. a ‘living’wage and rising inflation in 2008. Child labour continues to bea concern and although many brands have worked extensivelyon auditing and remediation this covers only a small percentageof factories in the apparel or footwear industries. While largerfirms may be better off, there is a lot ‘unseen’ in the next tier anda risk of sub-contracting. Lack of insurance for workers was aconcern as well as hazardous and safe working conditions.There are continued issues regarding child labour. Concernswere also raised about the quality of life in industrial parks.


Waste water and other forms of pollution are particularlyserious. There is a perception of limited enforcement and a lackof incentive for any enforcement. While the industrial parks aresupposed to manage this better, the systems are also notadhered to in these locations.

CORRUPTION

One stakeholder noted a risk regarding pay-offs to staff forwinning buyer orders. Other concerns were related to the non-enforcement of environmental or labour laws.

Manufacturing is broad and the risks and opportunities will be different given the differentnature of the industries. To manage the scope of this exercise we asked stakeholders aboutapparel and footwear, wood and furniture production and food processing (separately – seebelow) given their current contribution towards the economy of Vietnam. Electronics is growingin importance and is a prioritised industry in the country.

FOOD PROCESSING

HUMAN RIGHTS

Again the issues for most stakeholders related to labour issues.

LABOUR

The key concern is a lack of safety measures for workers whoare in contact with chemicals. Similarly with other manufacturingsectors, there are concerns for child labour and hazardouslabour as well as excessive overtime.


A lack of waste water treatment is a serious risk at the moment.Other concerns related to the overuse of chemicals in theprocessing.

CORRUPTION

The key concern was a perceived lack of enforcement ofenvironmental protection and concerns over corruption. If theright person is paid then a blind eye can be turned onenvironmental issues.

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CONSTRUCTION

HUMAN RIGHTS

The concerns linked to land issues and labour issues.

LABOUR

Worker safety, overtime, unprotected labour, and child labourare risks and concerns for this industry in Vietnam. A largenumber of temporary workers from rural areas and an increasingnumber of migrant workers without any contract (and thereforeany formal protection) was another issue raised.


Dirt, noise, solid waste, transportation of materials to sites aswell as lax building standards and building safety were allconcerns that were flagged.

CORRUPTION

Stakeholders perceived corruption to be a big issue for thisindustry. Although Vietnam has a tender law and is workingon improvements in this area, the issue of ‘fake bidders’ andcorrupt practices in the tendering process is a big risk.

TOURISM

HUMAN RIGHTS

Some stakeholders raised concerns with ‘social evils’ associatedwith tourism such as prostitution, drugs loss of traditional valuesand heritage.

LABOUR

Overtime and potential child labour are risks for the tourismindustry.


The concern over lack of wastewater treatment, the use ofagricultural land for tourism and resorts such as golf resortswere all flagged. Logging of trees was also noted.

CORRUPTION

With any large infrastructure project in Vietnam the risk ofcorruption was noted. Who benefits and how with regards totourism can be affected by corrupt practices.

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REAL ESTATE

HUMAN RIGHTS

Land rights are a sensitive issue as land belongs to thegovernment. Households who want to get the land use rightcertificate (the red book) need to go through many proceduresbut there are always “special cases” and there is uncertainty andlack of transparency.

LABOUR

Aside from concerns over poor management and poor buildingpractices, there were not a lot of concerns linked to labour issues.


Similar to construction some raised concern over how land istaken from farmers to build too many golf course and industrialparks without decent plans and proper waste water and solidwaste systems.

CORRUPTION

This industry is believed to be one of the worst in terms ofcorruption. Lack of transparency and lack of monitoring werekey concerns.

TELECOMMUNICATIONS AND POST

The main concerns raised in relation to this industry related tofacilitation payments for transporting materials through the postor through private companies. There was a concern thatfacilitation payments always needed to be made. No furtheranalysis was made in relation to this industry.

BANKING AND FINANCE AS A CROSS-CUTTING THEME

We initially looked at banking and finance alongside the otherindustries. While stakeholders did not raise concerns about socialand environmental issues directly in the financial institutions, it wasmore how banking and finance could play a pivotal role inpromoting and achieving sustainable development in otherindustries. We therefore see banking and finance as a cross-cutting theme across all of the industries. The direct concerns werein relation to corruption with a risk of insider trading andinformation asymmetry amongst powerful investors along withcredits being provided to unqualified borrowers.

Top tierrecommendations:

Food processing:

The food processing sector plays animportant role in Vietnam’s economy and isexpected to continue to do so. Based on ouranalysis there are substantial environmentalissues along with social issues that need to beaddressed. Given the transition from anagrarian to an industrial economy and therole that agricultural products play incontributing to exports, food processing hassome natural strength as an industry to focuson. Agriculture itself will be a bigger sourceof employment but there is more limitedcapacity for the GCNV to act (as in fishing).By moving one step up the value chain tofood processing there is a potential to addvalue to the development of Vietnam.

Construction:

While construction is lower in terms ofcontribution to GDP it links to other industriesand infrastructure. It is large in terms ofemployment and there are many issues toaddress throughout the industry. Some ofthese are critical with potential to causedisaster such as shoddy building materialsand unsafe infrastructure. There is currentlya lack of remediation efforts. VCCI couldleverage its government links and potentiallybring together some key players. The networkcan also leverage the support of key players

Recommendations

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Based on a review of social and environmental related risks (including labour, environment,corruption and human rights), the presence of any ongoing remediation and the size of thesector and other opportunities, we ranked 14 industries in Vietnam and looked at these forfurther analysis. We came up with 3-4 industries for the Network to concentrate on (with bankingand finance as a cross-cutting theme). These recommendations by sector are as follows:

Cross-cutting theme: Banking and finance

High risk and lots ofopportunity but otherremediation effortsin place

•Manufacturing: •Garments, appareland textile andshoes •Wood productsand furniture

GCNV should workand liasie closelywith ongoingremediation efforts

Limited risk andlimited opportunity

•Tourism (Hotel andHospitality) •Real estate•Telecommunicationsand post

Not a priority at themoment for thenetwork

It should be stressed that we recognise the importance and severity of issues in the primaryindustries but that we see more potential for the GCNV to engage in the next step up the valuechain and focus on the manufacturing process (for example food processing).

Top tierrecommendations

•Food processing •Construction •Extractiveindustries: Oil & gasand mining

GCNV focus furtheron these sectors anddevelop tools forbrining to life theGlobal CompactPrinciples

High risk but morelimited opportunityto act

•Agriculture •Fishing •Forestry


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in the construction materials industry who arelocal members.

The extractive industries:

Vietnam is now ranked South-East Asia’s thirdlargest oil producer. The profits from the oilbusiness have the potential to makesignificant contributions towards povertyalleviation and sustainable development inVietnam. However, experience and lessonslearned from other countries stress that theindustry must grow and develop in atransparent manner in order fordevelopmental gains to be realised. Thenetwork has potential with champions such asTalisman and interest shown from Embassiesand bilateral donors to help to take forwardsome work in this area. Clearly initiatives byorganisations such as TransparencyInternational are important and the GCNVcould help to legitimise and strengthen theirefforts. We would recommend that the GCNVgive serious consideration to leveraging itsstrengths and taking forward work related tothe extractive industries in Vietnam.

As mining is an industry which has thepotential to contribute to Vietnam’s economybut also one that needs to be managedresponsibly due to its significant environmentaland social impacts, it is an area we think anetwork such as the GCNV could add value.This could be in relation to decent work andlabour issues and providing businessstrategies for introducing occupational healthand safety measure’s for mining which couldalso include experiences from other countriesand ways to properly manage environmentalimpacts. Therefore we are recommendingthat mining be combined with oil and gas andthat the network do some further work onissues for the extractive industries. While manystakeholders were concerned with the‘sensitive’ nature of this industry, a multi-stakeholder network such as the GCNV isbetter placed than most to take forward workin this area.

Finance and banking as a cross-cutting theme:

The banking and finance sector initiallyemerged as one of our top-tierrecommendations. While some stakeholderswe interviewed felt that it was too early inVietnam’s reform process to talk aboutsustainable finance and that this would be tenyears later on, others disagreed. There is agreat opportunity now for Vietnam to embedsustainable lending practices in the bankingand finance sector in order to have a knock-on effect and positive influence elsewhere.There is further potential opportunity with

changes to the banking sector and stateowned banks as well as the growing influenceof the stock exchange. There is growinginterest globally and regionally in EquatorPrinciples, a benchmark for the financialindustry to manage social and environmentalissues in project financing. We generally seea lack of remediation efforts but also potentialchampions in country.

The other natural industries which have highrisks as well as opportunities are in otherareas of manufacturing and particularlygarments and shoes as well as wood andfurniture products and possibly electronics.As there has been some attention givenalready to these industries and there are someremediation efforts in place (such as the ILO

and IFC supported Better Work Programme)we recommend to the Network that they focuson those sectors which, as a multi-stakeholdernetwork (government, private sector andNGOs) they can leverage their strengths andadd additional value.

While the risks related to sustainable businessare numerous so are the opportunities.Experience and lessons learned from othercountries shows that a focus on sustainablebusiness can help to contribute to growth ina way that takes into consideration people,the environment and the economy. AsVietnam looks forward and considers its visionfor the future and next SEDP there is anopportunity for business to be a key partnerin sustainable development.

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This project was initiated to identify the main social and environmental problems of the keyindustry sectors in Vietnam, in order to allow the Global Compact Network Vietnam to chooserationally which sectors to focus on. The Global Compact Network Vietnam (GCNV) is analliance of companies, government, trade unions and non-governmental organisations. Itexists to promote and improve the working and environmental conditions of Vietnameseworkers through the implementation of the Global Compact principles by companies. Itsultimate goal is to be the national corporate social responsibility (CSR) centre of excellence inthe country; supporting companies to identify, anticipate and diffuse the tensions betweenbusiness and communities, business and the environment and business and the consumer,leading to sustainable businesses in a sustainable society4. The GCNV was launched in 2007to support the government in the implementation of its Sustainable Development Strategy(Agenda 21). The project is implemented through the Vietnam Chamber of Commerce andIndustry (VCCI), Office for Business Sustainable Development (SD4B) with funding from UNDP.

4 Verbatim from terms of reference

Brief introductionto the project

Ourapproach

To rank the social and environmental issuesand prioritise key industries our approachincluded:

1.A mapping of the most important socialand environmental issues affecting eachindustrial sector in Vietnam (based on theGlobal Compact Principles) as well asimportant initiatives and activities supportedby companies and organisations at agovernment, factory, worker and civil societylevel, regarding the four areas of the GlobalCompact.

2.Developing a scorecard to rank the mostimportant social and environmental risks ofeach industrial sector against the GCNV’sability to influence them.

To develop the scorecard we looked at bothrisks and opportunities:

RISKS:

We mapped the social and environmentalproblem in each industrial sector in relation

to the four areas of the Global Compact. Inour interviews and our focus groups,stakeholders were asked to consider the keyindustries in Vietnam and share theirassessment of the severity of issues withineach of the industries. Appendix III has thetool that was used in the interviews. Basedon the collated answers we then attributed ascore of 0,1,2 or 3 to each of the issues.

OPPORTUNITIES:

For this part of the scorecard we considered:• The relevant size of each sector – relative26

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to number of workers and value of thesector based on its contribution to GDP.

• The presence of ongoing remediationactions.

Ability to influence: Including:• GCNV’s ability to add-value and not

duplicate existing efforts.• External drivers including FDI and

proportion to export.

• Public awareness and interest in the sector.• Presence of local champions.

Again, for the purposes of benchmarking andthe scorecard, each of the areas was given ascore of 0,1,2 or 3 based on the datacollected. In each of the industries highlightedin this report the summary of the scorecardsare presented.

PROCESS: We engaged national companies,multinational companies working in Vietnam,government officials as well as others workingin international organisations, NGOs, localresearch organisations or as consultants. Wecarried out two focus group discussions withVietnamese companies (in the North and inthe South) and one focus group withmultinational companies.

In depth interviews were conducted withgovernment officials in various sectors (i.e.,Government Inspectorate - GI, Ministry ofLabour, Invalids, and Social Affairs - MOLISA,Ministry of Finance, Ho Chi Minh City’sDepartment of Resource and Environment),and several managers of organisations aswell as other stakeholders from a variety ofbackgrounds. Interviews were open-endedbased on a guideline. Each interview lastedfrom 40 to 60 minutes. Depending on the

sector of the interviewees, the interviews couldcover all or only some of the GC issues. Forexample, interviews with GovernmentInspectorate focused mainly on corruptionissues, while MOLISA talked more aboutlabour issues. All the interviews wereconducted from 15th September to 16thOctober, 2009.

The three focus groups were conducted withmanagers of domestic companies (13 inHCMC, and 10 in Hanoi) and multinationalcompanies (11 in HCMC). The focus groupslasted for more than 2 hours, with opendiscussions on key specific issues, pressingindustries, as well as any initiative orsuggestion to address these issues in eachGC area.

A final step was to walk through the researchprocess with the GCNV and test ourpreliminary findings (October, 2009). Theprinciple researchers were Michelle Brown(CSR Asia) and Nguyen Van Thang (NationalEconomics University). Oversight for thewhole project was provided by RichardWelford (CSR Asia and the University of HongKong) with some advisory support fromNicholas Freeman (CSR Asia representativeand affiliate consultant in HCMC) and someadditional research assistance from QuanMinh Chau (CSR Asia).

CHALLENGES AND LIMITATIONS:With regards to the ranking exercise, werecognise the challenge of applying a ‘score’or ‘flag’ to such complex issues as thoseenshrined in the Global Compact yet, at thesame time the tool proved useful as aconversation starter to further explore theissues with stakeholders. For our ranking, wealso took into consideration existing researchor analysis on the issues in Vietnam and thoserisks generally for the industries based on ourexperience in the region.

We were able to speak to and interview thosethat were interested in being engaged andwho we may have had easier access to. Wehave made attempts to compensate for thisby drawing on any alternative and existingresearch and continuously checking ourpreliminary findings with stakeholders andtesting and retesting as we go along.

In terms of the industries chosen to look at inthe study, we based this on our preliminaryassumptions and initial secondaryinformation. We also asked those weinterviewed to flag any additional ones thatweren’t covered in our research questions.

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Figure 1 presents the overall findings based on the scorecard we developed and used for theresearch. Each industry examined was given a score for both risks (in relation to the severityof issues for the four areas of the Global Compact) as well as opportunities based on relativesize of the sector, remediation efforts already present, capacity of GCNV to add value as wellas other drivers such as FDI and contribution towards export, public awareness locally andpresence of any champions in country.

Figure 1: Risks and opportunities ranking

Presence of remediation efforts had been taken into account in the overall score (with equalweighting as the other industries). We originally looked at all industries in the top right quadrantand then prioritised those which had a lack of remediation efforts. Based on this assessmentour recommendations for the Global Compact Network Vietnam are presented in table 1:

Table 1: Recommendations

We recognise the importance and severity of issues in the primary industries but that we seemore potential for the GCNV to engage in the next step up the value chain and focus on themanufacturing process (for example food processing).

Overall findings

Cross-cutting theme: Banking and finance

High risk and lots ofopportunity but otherremediation effortsin place

•Manufacturing: •Garments, appareland textile •Wood productsand furniture

GCNV should workand liasie closelywith ongoingremediation efforts

Limited risk andlimited opportunity

•Tourism (Hoteland Hospitality) •Real estate•Telecommunications and post


Top tierrecommendations

•Food processing •Construction •Extractiveindustries: Oil & gasand mining

GCNV focus furtheron these sectors anddevelop tools forbrining to life theGlobal CompactPrinciples

High risk but morelimited opportunityto act

•Agriculture •Fishing •Forestry


1. FOOD PROCESSING

Based on our analysis of both the severity of issues and risks associated with the areas of theGlobal Compact as well as the opportunities and capacity to act on the issues within thesector, we have come up with three industries which are our ‘top tier’ recommendations. Thisdoesn’t mean there were not serious risks or problems in other sectors but based on a rangeof factors related to the opportunities certain industries were prioritised. A brief summary ofeach industry, the key GC issues and the opportunities within the sector are presented below.

The IndustriesI - TOP TIER RECOMMENDATIONS:FOOD PROCESSING, CONSTRUCTIONAND THE EXTRACTIVE INDUSTRIES

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5 Friedrich-Ebert-Stiftung. 2008. P.286 BMI research Vietnam Food and Beverage Report 7 BMI research

Food processing contributes significantly tothe overall GDP in Vietnam and is forecastedto maintain an average annual growth rate of10 to 15 percent for the short term. It is animportant source of employment. TheGovernment Statistical Office (GSO) datafrom 2007 shows that there are over 4.5million people working in the sector.However this may underestimate the truenature of the industry with others finding thatsugar factories alone are estimated to employaround 1 million laborers5.

The sector has attracted a significant level offoreign investment in recent years fromcompanies such as Unilever, Nestle and SanMiguel and P&G. At the same time, analystscomment that the requirement for jointventures is deemed to have deterred someforeign investors6.

The sector is made up primarily by micro,small and medium sized enterprises and isfragmented with the exception of the dairyand confectionary sector7. It is comprised of

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ENVIRONMENTAL PROTECTION • Waste water and water pollution critical issue • Perception that products in Vietnam competing on

price and waste treatment seen as too expensive • Overuse of chemicals • Food safety and sanitation

CORRUPTION • Concerns over lack of enforcement of environmental

protection and possible anti-corruption issues

HUMAN RIGHTS • Many ‘unknowns’• Food safety and human

rights • Land transfer issues for

manufacturing

LABOUR ISSUES • Safety and handling of

chemicals • Potential for other labour

issues – child labour,overtime, etc…

sea-food processing plants; slaughter houses;beverage plants; fruit and vegetableprocessing plants; instant noodlemanufacturers, confectionary manufacturersand many others. Like other parts ofmanufacturing, there are numeroushousehold and village level enterprises.

The global recession has impacted this sectorin Vietnam with reduced global prices and

falling demand with reports of some firmsreducing output by 50 to 60 percent8.

KEY ISSUES FOR THE GLOBALCOMPACT IN VIETNAM

Table 2 below provides an overview of the keyissues for the food processing Industry inrelation to the Global Compact.

OTHER HUMAN RIGHTS RELATED ISSUES For many stakeholders, human rights arelinked to labour issues. Concerns were notedon safe working conditions, overtime hours,gender issues and women’s rights.

KEY LABOUR ISSUESThe key concern here is the lack of safetymeasures for workers who are in contact withchemicals. Some stakeholders noted thatthere were also other potential labour issuessimilar for other manufacturing sectors rangingfrom: child labour and hazardous labour aswell as excessive overtime (although this is notas well researched or documented comparedwith the garments and shoe industries).

KEY ENVIRONMENTAL ISSUESEnvironmental issues in food processing wasa serious concern for nearly 80 percent of thepeople we spoke to. Recent media attentionaround cases such as Vedan and San Miguelhave helped to put environmental issues infood processing in the spotlight. Manystakeholders believed that food processingproducts in Vietnam are competing on price.Thus, investment in a proper waste treatmentcould be too expensive.

Table 2: Global Compact Issues in Food Processing

“Fish processing firms – if you visit you maysee that the premises are so clean, evencleaner than some hospitals. They used a lotof chemicals to clean the premises, then theyjust discard them it to the environment.”(A manager)

A lot of small, traditional food processingpremises use manual techniques andseriously pollute the environment. Wastewater discharge from village level enterprisesis a serious problem with high concentrationsof toxic substances exceeding permittedstandards.

There is a challenge with enforcement. Onestakeholder commented that “environmentalprotection certificates (in the food processingindustry) currently issued are not worth thepaper they are written on” (representativefrom a multinational).

CORRUPTION RELATED ISSUES There is a perceived lack of enforcement ofenvironmental protection linked to corruption.Basically questions were raised that if the rightperson is ‘facilitated’ then a blind eye can beturned on environmental issues.

8 In 2009 both of these companies were in the news forreported water pollution

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OPPORTUNITIES ANDDRIVERS

SIZE, FDI AND EXPORT

As indicated above, the industry is quitesignificant for Vietnam in terms of size with agrowing level of foreign investment and animportant contributor to Vietnam’s globalexports. A combined estimate for foodprocessing and packaging is that it accountsfor about 40 percent of total export turnover 10.

SEAPRODEX controls the lion’s share offishing and aquaculture related exports. Thecompany appears to be taking a leadershiprole in relation to some aspects of CSR andhas recently worked with the National Instituteof Nutrition to reduce iron deficiencyanaemia, marking the “first time that thehealth sector and manufacturing anddistribution companies have joined forces tofight malnutrition in Vietnam.”11 The projecthas support from the Global Alliance forImproved Nutrition (GAIN). While this is notspecifically addressing the principles of theGlobal Compact it shows how somecompanies are looking to use their coreproduct and services to address developmentchallenges in the country.

10 Industry - Vietnamhttp://www.nationsencyclopedia.com/Asia-and-Oceania/Vietnam-INDUSTRY.html#ixzz0Xx4AZ8Sl

11 quote from NIN director Mr. Nguyen in VN news 215 08

12 http://xttmnew.agroviet.gov.vn/loadasp/tn/en/tn-spec-nodate-detail.asp?tn=tn&id=20801713 Huong. Huong, Bui Thi Lan. 2008 The Perspective on Corporate Social Responsibility in Emerging Countries:

The Case of Vietnam Ouverture International - International Vision CFVG Excellence Europeen en ManagementNo. 12 June 2008

13 List of priority industries and cutting edge industries for the period 2007 to 2010 with the outlook to year 2020(issued with Decision 55-2007-QD-TTG of the Prime Minister of the Government dated 23 April 2007).

ON-GOING REMEDIATION

Initiatives such as the cleaner production workof UNIDO have touched on the foodprocessing sector. Given the severity of theissues, we did not see a significant amount ofremediation in this industry. However, the sub-sector has recently had an injection of financingwith the ADB committed to a loan of USD 95million to support the industry to adhere tohealth, safety and quality requirements12.

PUBLIC INTEREST AND OTHERINFLUENCING FACTORS

While food safety has been a growingconcern in Vietnam, the milk scare whichbegan in the PRC in 2008 and also affectedVietnamese supplies, raised further concernsabout product safety13. In the first 6 monthsof 2009, the Food Safety and HygieneDepartment reported that food poisoningcases were up 55 percent compared with thesame period last year. Since November 2008,exporters to the United States have had toproduce certificates to the effect that theproducts are safe and not harmful to childrenand adult consumers. Manufacturers andimporters will announce their voluntary andmandatory standards, which must be certifiedby independent third parties through a test ofeach product or a reasonable testingprogram. The United States is Vietnam’s

biggest export market with 2008 exportstotalling $10.2 billion.

GCNV’S ABILITY TO ADD VALUE ANDRECOMMENDATIONS

Unilever has been an early signatory to theGlobal Compact Network in Vietnam and is arecognised leader from the perspective ofmany stakeholders in terms of CSR in Vietnam.Companies such as Duc Viet Foods Joint StockCompany, Hung Cuong Trading Company,Hung Trung Viet Joint Stock Company are allGC Vietnam signatories and food producers.Processing of agricultural, forestry andaquaculture products is a priority industry forthe periods 2007-2010, 2011-2015 and2016-2020 and will play a key role in helpingVietnam achieve its development goals14.

It is recommended that food processing is a(sub) sector that the GCNV should follow upwith. As noted above there are substantialenvironmental issues along with social issuesthat need to be addressed. Given the transitionfrom an agrarian to an industrial economy foodprocessing has some natural strength as anindustry to focus on. Agriculture itself will be abigger source of employment but there is morelimited capacity for the GCNV to act (as infishing). By moving one step up the value chainto food processing there is a potential to addvalue to the development of Vietnam.

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2. CONSTRUCTION

While construction itself does not factor as highas other industries in terms of contributiontowards GDP, the construction material industryhas recorded an annual growth rate of morethan 17 percent higher than the wholeindustry’s average growth taking intoconsideration products such as cement,ceramic tiles, artificial granite, porcelain andglass15. As urbanisation continues to increasethe construction industry has boomed.Construction creates the infrastructure for themanufacturing and other industries. Some ofthe current large scale construction projectsinclude the Son La hydroelectric power plant,Dung Quat oil refinery, Ca Mau thermo-electric plant, Buon Lop hydroelectric powerplant, Thu Thiem Bridge, and Xekamanhydroelectric power plant No 3.

The Industry is a source of employment fornearly 2.2 million people and alsoparticularly for migrant and unskilled workers.According to the GSO, construction accountsfor 5.13 percent of the jobs for the workingpopulation although it is likely that this is nota true reflection of the size of the sector giventhe unofficial nature of much of the work. Italso provides an additional source of incomefor those predominantly reliant on agricultureduring the off-season. As noted below, the

unofficial nature of much of the work posessubstantial risks.

Larger companies such as Song DaConstruction Corporation, the NationalCement Corporation, the Hanoi ConstructionCorporation and numerous others are underthe Ministry of Construction. Since 2005 andthe enterprise law the number of privatecompanies and corporations has increasedsubstantially. According to the most recentavailable data from the GSO, nearly 97percent of ownership in the constructionsector is now national and private with only2.6 percent state ownership and less than onepercent foreign direct investment16.

While there has been a focus in recent yearson updating production techniques there is aheavy reliance on outdated machinery and16 percent of cement and half of all bricksare still produced manually17.


Table 3 below provides an overview of the keyissues for the Construction Industry in relationto the Global Compact.

OTHER HUMAN RIGHTS RELATED ISSUES The issues on human rights linked to labourrights and issues around safe workingconditions, overtime hours, and child labour.There were also concerns over land use andhow land is taken and how communities arecompensated. As the Ministry of NaturalResources and the Environment’s websiterecently reported in late 2008, city inspectorsfound that Construction Company 623 in ThuDuc District of HCMC had used over 100mof a local canal, without Government’spermission18.

KEY LABOUR ISSUESThe key concern raised by stakeholders weinterviewed was in regards to safety onconstruction sites. Recent stories in the local presshave highlighted the health and safety risks inthe construction industry. Many workers aretemporary and unskilled and from rural areas.Overtime hours were a concern especially in abusy time when the construction needs to getfinished. Some stakeholders raised concernsregarding illegal migrant workers on large scaleinfrastructure sites. In such cases there are noformal contracts and there is limited ability of the

15 2008 Vietnam Country Report from the 14th Asia Construct Conference16 GSO17 BMI construction report 18 http://www.monre.gov.vn/monreNet/default.aspx?tabid=259&idmid=&ItemID=58333

ENVIRONMENTAL PROTECTION • Many stakeholders raised concerns

related to: dirt, noise, solid waste,transportation of materials

• Lax building standards and buildingsafety

CORRUPTION • Stakeholders perceive corruption to bea big issue for this industry • Tender law and fake bidders (red troopand blue troops)

HUMAN RIGHTS • Linked to land issues • Linked to labour issues

LABOUR ISSUES • Work safety • Overtime • Unprotected labour • Temporary workers from rural areas and• Increasing migrant workers (from abroad)• Child labour

Table 3: Global Compact Issues in Construction

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labour inspectorate to follow up, monitor andensure labour protection.

Child labour is recognised as being an issue inconstruction. Even when a construction sitedoes not have children ‘on its books’, thepeople working may not be the same as onpaper. Participants cited the collapse of CanTho Bridge as an example: a lot of people arenot the same as the names in registered papers.

KEY ENVIRONMENTAL ISSUESThe construction industry has hugeenvironmental impacts. If properly managedthe construction industry has the potential tomake significant contributions towardsachieving Agenda 21 in Vietnam. Peoplecommented that there were few measures toprotect the environment in the constructionindustry and flagged concerns over dirt,

noise, solid wastes, etc. There are also clearlinks to health and safety issues in this respect.

CORRUPTION RELATED ISSUES This issue raised “red flags” for many of thestakeholders we interviewed who wereconcerned with corruption at all stages ofconstruction.

Bidding: Although Vietnam has a tender law, theimplementation of the law depends a lot on theindividual who manages the tender. In manycases, there are “red troops” and “blue troops”(red troops refers to the real bidder, while bluetroops refer to fake bidders, who are alsomanipulated by the red troop, but participate inthe tender to make the tender look lawful).

“The tender process has not been “clean” inpractice of many cases. It depends a lot onthe person in charge.” (A government official)

Implementation: The media have reported anumber of corruption incidents in theconstruction phase. Stakeholders pointed outthat these incidents are only part of the issue.Corruption happens in all phases: designing,monitoring, and construction. In thedesigning phase, if the “investor” (normally arepresentative of the government) iscorrupted, the designers could increase thespecification of the construction. Then, duringthe construction phase, they could take awaysome materials without worrying about thequality of the construction. Similarly, therewere concerns over land use during theconstruction phase and how this isappropriated by certain departments.



While the construction industry itself is not thebiggest industry in terms of contribution to GDP,when placed together with the constructionmaterials and related industries it has a verysignificant impact. The industry is mostlyinternal facing although some of Vietnam’scompanies have bid and won projects inneighbouring countries such as Laos.


A local green building council has beenlaunched with a Vietnam specific ratingsystem, Lotus, currently being developed. Therating includes credits for conservation (water,energy and materials); ecology andenvironment (site ecology and waste andpollution); health and well being; climatechange (adaptation and mitigation);community and social; along withmanagement approaches. Essentially it isadapting global standards such as LEED,

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Green Star and BREAM for the VietnameseMarket. Founding members have mostly beeninternational property firms such as CBRE andarchitectural firms such as Woods Bagot andROK. The council is affiliated with the Ministryof Construction and other partners.

Other related work and initiatives include theConstruction Transparency Initiative (CoST)which Vietnam joined in 2008 which aims toenhance the accountability of procuring bodiesand construction companies for the cost andquality of public-sector construction projects19

along with work that is being undertaking bythe Ministry of Construction with the support ofDFID to provide more financial transparencyin the construction industry.


Given the significant attention to corruption ininfrastructure as well safety there has beenincreasing attention on linked issues in general.


Based on the research and analysis webelieve that the GCNV could potentially addvalue in this industry. Holcim is an active

member of the GCNV. They are perceived bymany stakeholders to be playing a leadershiprole in the cement industry which is animportant part of the construction industry.They could help to champion work in thisarea in general.

While construction is lower in terms ofcontribution to GDP it links to otherindustries and infrastructure. It is large interms of employment and many issues toaddress throughout the industry. Some ofthese are critical with potential to causedisaster such as shoddy building materialsand unsafe infrastructure. There is currentlya lack of remediation efforts. VCCI couldleverage its government links and potentiallybring together some key players.Champions in the construction materialsindustry such as Holcim could also help toplay a pivotal role.

Crude oil was responsible for 17.5 percent ofVietnam’s exports in 2007 and the country isone of the largest producers in South-EastAsia. To date it has contributed nearly USD30 billion to the State’s budget and hasattracted large sources of foreign investment.The industry has been mostly upstream withoffshore oil sourcing. While it is significant interms of income it is not as significant in termsof employment. Mining and quarrying(including oil and gas) employ roughly 1.7million people according to recent GSOfigures but this is higher for coal and metalore mining and less substantial for extractionof petroleum and natural gas due to thenature of the work20.

In February 2009, the first downstream oilrefinery was opened in Quang Ngai provincewith another expected to be operational in2013 and a third is in preparation.

The industry is state-controlled withPetroVietnam playing the leading role who,together with Vietsovpetro are the principlepartners for foreign investment and controlthe country’s oil production. PetroVietnam isrequired to participate in all ventures. The

Russian state company Zarubezhneft is thebiggest foreign producer (via the VietsovpetroJV), while Petronas, Chevron andConocoPhillips are all significant investors.Between 2006 and 2008, Premier Oil andSOCO International along with Talisman allmade significant offshore discoveries.

The islands and surrounding waters in theSouth China Sea are disputed betweenVietnam and China (with other countries alsolaying claim). The oil reserves offshore havetherefore been a potential source of tensionbetween the countries and there have beenrumors in the press that China has putpressure on some companies over their oilexploration in Vietnam. In 2009 BPannounced a withdrawal from some of itsVietnam operations citing economic reasons.

19 CoST web page. URL: http://www.constructiontransparency.org/CountriesSupporters/Countries/Vietnam/ 19 GSO

3. OIL AND GAS

THE EXTRACTIVEINDUSTRIES

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KEY ISSUES FOR THE GLOBAL COMPACT IN VIETNAM

Table 4 below provides an overview of the key issues for the Oil and Gas Industry in relationto the Global Compact.

Table 4: Global Compact Issues in Oil and Gas

ENVIRONMENTAL PROTECTION • Concern over spills

CORRUPTION • Nothing specific raised

HUMAN RIGHTS • Nothing specific raised

LABOUR ISSUES • Health and safety • Uncertainty over labour issues • Off shore issues

OTHER HUMAN RIGHTS RELATED ISSUESNothing specific was raised nor uncovered inthe additional research. Some NGOs haveraised concerns over how the indigenouspopulations on shore near the off shorediscoveries will benefit from the oil.

KEY LABOUR ISSUES A general perception exists that peopleworking in the oil and gas industry are betteroff in terms of remuneration and benefitshowever there is a lack of available data inVietnam. With offshore labour it is possiblethat many issues go undetected. Generally,the stakeholders we interviewed did not raisea lot of concerns in this area.

KEY ENVIRONMENTAL ISSUESThe biggest concern raised by stakeholdersrelated to potential oil spills. In 2007, an oilspill washed ashore along the central coast

near Danang (including the UNESCOheritage site of Hoi An) with spills affecting 20provinces damaging the environment andwreaking havoc on fisherman lives. The spillswhich were originally deemed to be fromoutside of Vietnam but conclusions wereunclear and may have also come from oil rigswithin the borders of the country.

CORRUPTION RELATED ISSUES The general perception of stakeholders weinterviewed was that this is an industry wherethere is not a lot that is known and is generallyquite secretive. Some were clear in voicingconcerns over lack of transparency and howthe benefits from the oil and gas industrywould be helping to address povertyalleviation. Business Monitor International’sreview of the Oil and Gas Industry for Vietnamhas flagged the fact that corruption and ruleof law is a major business risk in Vietnam.



Crude oil is the number one export forVietnam and a significant contribution to theGDP. It is not currently one of the largestemployers. Foreign investment is significantand always in partnership with a Vietnamesecompany.


Aside from some work around transparency,there is little remediation efforts in this industry.

Public interest and other influencing factors: Given the recent oil spills, the industry hasreceived a fair amount of press in the last year.However, other social and environmentalissues have received little coverage.


Talisman has been an early founding memberof the GCNV. In addition the CanadianEmbassy with the involvement of Talisman

recently organised a workshop to share goodpractice in the extractive industries Althoughsome stakeholders have commented that thismay be an industry where it would be difficultto work in, given the nature of the GCNV webelieve there is potential for the network toadd value and work with others.

Vietnam is now ranked South-East Asia’s thirdlargest oil producer. The profits from the oilbusiness have the potential to make significantcontributions towards poverty alleviation andsustainable development in Vietnam.However, experience and lessons learned fromother countries stresses that the industry mustgrow and develop in a transparent manner inorder for developmental gains. The networkhas potential with champions such asTalisman and interest shown from embassiesand bilateral donors to help to take forwardsome work in this area. Clearly initiatives byorganisations such as TransparencyInternational are important and the GCNVcould help to legitimise and strengthen theirefforts. We would recommend that theNetwork give serious consideration toleveraging its strengths and taking forwardwork related to the extractive industries inVietnam.

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OTHER HUMAN RIGHTS RELATED ISSUES The most pressing human rights related issuelinks to labour regarding safe workingconditions for miners. Other human rightsrelated issues which stakeholders commentedon were for land rights issues (when minesneed to be established) and cultural heritageissues for indigenous populations (particularlyin the highlands).

LABOUR ISSUESA lack of safe working conditions was the keyconcern raised. While there may not befrequent reports in the media of accidents, theparticipants in the focus groups and thepeople we interviewed suggested that safeworking conditions for mining workers is aserious issue in Vietnam. Labour accidentsand occupational diseases are still high in this

4. MINING


For many of the issues there were lots of ‘unknowns’ from the perspectives of the stakeholderswe interviewed. This was matched with a lack of empirical research in many of the areas.

Table 5: Global Compact Issues in Mining

ENVIRONMENTAL PROTECTION • Severe environmental issues • Bauxite mining raised by numerous

stakeholders - untreatable caustic toxic redmud in area of significant biodiversity

CORRUPTION • Concerns over bribery and facilitation

payments • Limited information available• Lack of transparency raising concerns over

corruption

HUMAN RIGHTS • Relocation • Indigenous populations

LABOUR ISSUES • Health and safety • Hazardous and unsafe working

conditions • Less media attention but serious • Migrant and unprotected workers

In 2007, mining accounted for 10 percent ofGDP in Vietnam21. There was general declinein output in this sector in 2007 and 2008which has been partly attributed to a policyon conserving natural resources22. Theownership of the sector is 25.5 percent state,9.7 percent private and 64.8 percent isforeign investment23. In terms of statistics, theGSO defines the overarching sector asmining and quarrying which then includeswithin it: mining of coal; oil and gas; miningof metal ores and quarrying of stone andother mining. For the purpose of this research

we have initially separated out oil and gasfrom other types of mining and quarrying. Inaddition to petroleum, coal is a primarymineral export while antimony, bauxite,chromium, gold, iron, natural phosphates, tinand zinc are also mined in country.According to most recent figures roughly 1.7million people work in the mining andquarrying industry.

In 2009, mining was brought to the forefront ofthe national media due to the concerns over thebauxite mine in the central highlands. Vietnamhas one of the largest bauxite reserves which areused to produce aluminium. To tap this, thegovernment’s master plan calls for investmentsof around USD 15 billion by 2025. However,the reserves are situated in the central highlands- an area of rich biological and cultural diversity.Local and international concerns have beenraised over the potential adverse environmentalimpacts and on livelihoods and local crops suchas coffee and cacao. Presently, the VietnameseState Owned Enterprise Vinacomin has movedahead with operations and contracted asubsidiary of Chinalco for one mine and Alcoais working with them to ascertain feasibility fora second mine24.

21 GSO 2007 data 22 http://www.asiantechenterprise.co23 2007 GSO figures 24 http://blog.socialrisks.com/2009/05/vietnam-risk-

bauxite-mines-china-and.html

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While the mining sector’s contributiontowards GDP has decreased somewhat inrecent years it is anticipated that it willcontinue to be significant for Vietnam in thecoming years and its growth is part of thestrategic plan of the Government.


Aside from the work of TransparencyInternational and embassies such as theCanadian Embassy, along with oneorganisation working specifically on theseissues, we did not encounter many championsfor driving the GC principles in the miningindustry in country.

Public interest and other influencing factors:Given the events over the last year particularlyin relation to the Bauxite mine there has beensome growing awareness and stakeholderinterest in mining and environmental andsocial issues in Vietnam.


Some stakeholders raised concerns over theability of the GCNV to add value in this giventhe perceived sensitivity of some of the issues.

However, given the nature of the Network itmay be better placed than others to add valueand should seriously consider this. Given thepotential significant impacts on issues ofconcern to the global compact, the lack ofremediation efforts and ability to capitalise onthe nature of the network we think there issome potential.

In other countries, issues around transparencyhave been directly linked to mining andpoverty alleviation. There was interest in theapproach of the Extractive IndustriesTransparency Initiative and the benefits thatthis could bring to the industry in Vietnam.There have been some initial discussionsabout this in Vietnam. The CanadianEmbassy has also considered bringingtogether a working group to look at issuesrelated to CSR and the extractive industries inVietnam.

As mining is an industry which has thepotential to contribute to Vietnam’s economybut also one that needs to be managed welland has significant environmental and socialimpacts, it is an area we think a network suchas the GCNV could add value. This could bein relation to labour issues and providingbusiness strategies for introducing safetymeasure’s for mining which could alsoinclude experiences from other countries andways to properly manage environmentalimpacts. We therefore are recommendingthat mining be combined with oil and gas andthat the network do some further work onissues for the extractive industries.

sector and while the breaking of labourregulations may be widespread, investigationand supervision are inadequate25.

There were also concerns raised over migrantworkers who may be entering Vietnam ontourist visas (particularly Chinese migrantworkers on the Bauxite mine) and who maynot be protected by the national labour law.

KEY ENVIRONMENTAL ISSUESNearly 40 people we spoke to raised a ‘redflag’ for environmental issues in relation tomining. Due to the nature of the businessthere are adverse environmental impactswhich need to be carefully managed. InVietnam, traditional coal mining is well knownfor its pollution problems for the miners andthe people in the surrounding communities.

The current government decision on miningbauxite in the Highlands also triggered a lotof concerns about environmental issues.While the caustic red mud was flagged bysome interviewees most people we spoke towere not aware of the specific risks related tothis type of mining.

CORRUPTION RELATED ISSUES There were not a lot of specific concerns ordiscussion on this issue but it was an areawhere many stakeholders raised questionmarks and potential concerns. These relatedfrom concerns over bribery and facilitationpayments to a lack of transparency whichgenerally raises concern over corruption.One interviewee noted how rumours hadspread around regarding an allegedfacilitation payment for a mining project.

25 Friedrich-Ebert-Stiftung. 2008

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II - MANUFACTURING: LOTS OF RISKS AND OPPORTUNITIESBUT OTHER REMEDIATION EFFORTS INPLACE OR STARTING…

5. MANUFACTURING

In recent decades the share of manufacturingtowards GDP has increased significantly.Overall, manufacturing is responsible for 21percent of Vietnam’s GDP and employsroughly 6.4 million people accounting for 14percent of the working population.Productivity has increased 3.9 times over theyears since 1980 to VND11.4 million perworker in 200726. This has grown as the shareof labour in agriculture has declined and theeconomy has shifted from an agricultural toa manufacturing economy.

Manufacturing was responsible for 44percent of exports in 200727. Textiles,chemicals and electrical goods,cigarettes/tobacco and food processing areoverall the top manufacturing sectors inVietnam. For the purpose of this research wehave looked at general issues formanufacturing and then pulled out garments,textiles and shoes, as well as food processingand wood related manufacturing based oninitial assumptions of where there wereopportunities.

While manufacturing has been a source ofgrowth, industries which are often regarded

as competitive such as textiles, garments,furniture and footwear have a very low profitrate. For instance, the rate of profit for theseindustries in 2006 was as low as 0.11percent, 0.61 percent, 1.99 percent and even-0.05 percent (a minor loss), respectively.Most manufacturing in Vietnam involves athird party working on sub-contracts utilisingcheap labour to produce low value-addedproducts for large foreign-owned firms andare dependent on imported intermediateinputs. By and large, manufactured productsare not diversified, and product quality isrelatively poor compared with global norms.Overall, the structure of the manufacturingsector is mostly domestic non-state privateenterprises (86 percent), foreign ownership(11 percent) and state ownership (under 3percent)28. However this varies significantlybetween sub-sectors with 42 percent foreigninvestment in garments, 32 percent in textilesand 63 percent in leather products. Stateownership dominates the tobacco industry at99 percent of ownership. Furnituremanufacturing is approximately 47 percentfor both foreign ownership and local privateownership with the remaining being stateinvolvement29.

26 VIR article 27 GSO 28 GSO 29 GSO

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(Manufacturing in general: Food processing has been covered separately in Section 4 above.)

Table 6: Global Compact Issues in Manufacturing (General)

ENVIRONMENTAL PROTECTION • Severe issues • Concerns over industrial parks

where systems are supposed tobe in place but not adhered to

• Limited enforcement • Lack of incentives

CORRUPTION • Labour rights as human rights • Women with small children

HUMAN RIGHTS • Labour rights as human rights • Women with small children

LABOUR ISSUES • Minimum wage vs. living wage• Child labour still persists particularly in ‘non-

branded’ factories • Insurance avoidance: SMEs try to avoid paying

insurance • Hazardous work and safe working conditions• Sub-contracting. While larger firms may appear

better there is a lot unseen in next tier and sub-contracting

• Industrial parks and quality of life

issue is more linked to the concept of a livingwage – particularly with the rising inflation in2008. As one government official noted:“The minimum wage is too low. If we only relyon it as a measure to protect our labourers,we are not protecting them well.”

Child labour continues to be an issue. Whileimage conscious brands working extensivelyon auditing and remediation may have beenable to tackle this issue in their factories itcontinues to be a real issue for most othermanufacturers in the country.

Insurance for workers: Most of private smalland medium sized enterprises (SMEs) havetried to avoid paying insurance for theirworkers. In other cases, the “nominal” salary– as a basis for insurance payment – is verylow (to avoid paying insurance), while the realsalary was much higher. In many cases, eventhe workers themselves do not want to pay forinsurance and prefer to take the money asincome. This points to the fact that, one theone hand, the workers may not have goodknowledge of insurance purposes – they don’teven care or want it. On the other hand, theinsurance services in Vietnam may not beregarded as helpful.

Working conditions: Access to safe and cleanworking conditions was also a key issueraised by many stakeholders in thediscussions. This will vary between industrysub-sectors but was an issue in all.

Problems in small firms: Big and exportoriented firms could be monitored by foreigncustomers and the government. They arefollowing some measures to ensure workers’rights. However, the vast majority of smallfirms are hard to monitor. These small firmsare sometimes sub-contractors to larger firmsand even if foreign customers audit theirsuppliers, they cannot monitor these sub-contractors. Even with people who have hada wealth of experience working for majorbrands there were concerns that the ‘auditculture’ that has not helped to bring aboutsustained change and benefits for workers.

Due to decreases in orders towards the endof 2008, many enterprises were faced with aneed to downsize production with anestimated 20 percent of small and mediumenterprises faced a danger of bankruptcy. Thishas helped to exacerbate labour relationsand there have been more and more ‘workstoppages’. Labour relations have heated upresulting in more and more strikes. Workersat industrial parks are facing more difficultiesin terms of housing, transportation, daily life,study, medical care and cultural life.

KEY ENVIRONMENTAL ISSUESManufacturing is believed to be extremelypolluting. Stakeholders pointed to concernsover high costs of clean technology andproper waste treatment systems. In the past10 years, pressure for more investment hassuper-ceded sensitivity to environmental

OTHER HUMAN RIGHTS RELATED ISSUESAgain the key issues here were linked tolabour issues. Some stakeholders commentedon rights for pregnant women and womenwith small children.

KEY LABOUR ISSUES Minimum wages: While the Labour Code hasa clear regulation on minimum wages andthere have been very few, if any, reportedincidents of minimum wage violation, the

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protection. It is now too easy to establish acompany and the environment protectionconditions are not carefully assessed whenissuing business licenses. Specificenvironmental impacts will vary from sub-sector to sub-sector.

Problems in industrial parks: Almost allprovinces and cities have some industrialparks to bring companies together in oneplace. One of the perceived benefits is thatit will be easier to monitor environmentalpollution in these parks. By law, companiesneed to undertake waste treatment to acertain level, then the waste is put to the

parks’ system, where it is treated one moretime. However, in practice many companiesdo not carry out their own treatment andwhen the waste enters the park system it isthen overloaded.

“It is very hard for us [government officials] tomonitor every company in the parks.Sometime they don’t even turn the system on.When they know we are visiting, they turn itone, and it takes only 5 minutes – we cannotknow.” (A government official)

Key industries: While a focus has been ongarments and textiles as well as shoes andfood processing some stakeholders in theSouth commented that critical industries aremetal plating and chemistry-relatedmanufacturing in terms of environmentalimpact.

“People may not recognize pollution frommetal plating – the magnitude is not that big.But it is very dangerous and long-lasting. InHo Chi Minh City, there are more than ahundred and several dozens firms like that.”(An official)

CORRUPTION RELATED ISSUES One stakeholder interviewed mentioned thatstories of bribes between firms were fairlycommon place in manufacturing in order towin buyer orders. Another companyrepresented commented that short-cuts canalways be taken if the right people canbenefit.

“one of our factories had a potentialcommunity conflict which could have been‘fixed’ if we paid someone…” (foreigncompany manager)

OPPORTUNITIES


The garment, textile and footwear sector allare significant for the Vietnam economy. Aftercrude oil exports they are the second andthird largest export industries and havecreated millions of relatively low skilled jobs

Total export value for leather and footwear fellto USD 2.8 billion for the first eight months of2009, USD 327 million lower than the sameperiod last year. Besides the world economiccrisis the halt in joining the generalised tariff ofpreferences (GSP) in the European Union (EU)beginning on January 1, 2009 for leather andfootwear exports. The EU represented 60 percent of Vietnam's total leather and footwearexport market. The Vietnamese Governmenthas listed the textiles and leather footwearindustries as 2 of the 7 priority industries. Until2020 the government will pursue a number ofpolicies to foster their development.


Recognition of CSR as a concept grew inVietnam through the introduction of buyers’codes of conduct (COCs) and SA8000. Inthe late 1990s, various brands, together withthe VCCI and other associations such asLEFASO (the Vietnam Leather and FootwearAssociation) came together for the VietnamBusiness Links Initiative, which worked todevelop a locally relevant code of conduct forthe footwear sector.

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Companies face challenges implementingCOCs. Experience and research elsewhere inthe region has shown that auditing has notbrought about improvements to workers. Asnoted by one auditing firm “Despite numerousefforts made by different stakeholders, there islittle change at the workers’ lives apart fromthe minor improvement on the health andsafety condition.”30

The ILO’s Factory Improvement Programme wasimplemented in 2006 and 2007 to addresslabour relations, working conditions andincrease competitiveness. In July 2009, the IFCand the ILO officially launched the ‘Better Work’programme in Vietnam which builds on thelessons of the Cambodia Better FactoriesProgrammes and aims to minimise excessivefactory audits and improve overall factoryconditions. In the first year it is limited to under100 factories in the South. Other efforts byUNIDO have focussed on cleaner production.

While some stakeholders have commentedthis is still just a ‘drop in the ocean’ it is clearthat there are increasing efforts in place –particularly in export oriented garment, textileand shoe factories. However, those for thenational or regional (non-branded) market orthose facilities which are sub-contracted arelikely not to benefit from any currentremediation efforts.


There is growing interest and concern overenvironmental pollution as a result frommanufacturing. Some research has arguedthat there is less local interest and concernfrom the general public on labour issues31.


Aside from the Vietnam Leather and FootwearAssociation, the local network does not haveany members in this sector. Companiessourcing from Vietnam such as adidas-Groupand Nike pay significant attention tosustainability issues as part of their businessmodel.

While there are skills in the network toaddress issues in this sector, given that thereare other remediation efforts in place, wehave not prioritised garments, textiles or shoesat this time but would recommend that thenetwork stays involved with existing efforts.



Given the increasing contribution towards GDPthat wood products and furniture provides thisseemed like a potential and important optionfor the Network to consider prioritising.

Between 2000 and 2006, the exportturnover from wood furniture increased fromUSD 200 million to USD 2 billion a 10 foldincrease. By 2008, Vietnam was exportingUSD 2.8 billion worth of wooden furniturewith 63 percent going to US and EU.Vietnam is the fourth largest producer inSouth East Asia after Malaysia, Indonesiaand Thailand32.


In 2008 and 2009 IUCN, MARD, andVIFORES, the Vietnam Timber and ForestProduct Association launched a multi-stakeholder initiative to look at the drivers andbarriers for more sustainable woodenfurniture production in Vietnam. VIFORESbrings together over 150 local producers.

Forest Stewardship Council Certification isrising in Vietnam. Presently, 178 FSC COCcertificates have been issued.

The Cleaner Production Centre with supportfrom UNEP and TU (Netherlands) hasfocused on training and capacity building andproduct redesign for environmental gains.

GCNV ABILITY TO ADD VALUE ANDRECOMMENDATIONS

IUCN is a member of the network. Togetherwith other organisations such as WWF theyhave the ability and capacity to potentiallymake an important contribution to thesustainable development of the woodproducts and furniture sub-sector.

Given the multi-stakeholder efforts already inplace we do not think this is a sector GCNVshould priorities at this time but should beinvolved with current remediation efforts.

5.2 Wood products and furniture

30 www.scsa.com31 Huong 2008 30 DED CSR Study

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III - AGRICULTURE, FISHING ANDFORESTRY: LOTS OF RISKS BUTFEWER OPPORTUNITIES

Vietnam has transformed from an economyreliant on agriculture to one more dominatedby industry and service sectors. The share ofagriculture towards growth dropped from 27percent in 1995 to 21 percent in 2005.Vietnam’s SEDP stipulates a goal of acontinued transition from agriculture toservices and industry which have fuelledoverall growth.

Agriculture provides a source of livelihoodsdirectly and indirectly for a rural populationof 54 million. With the recent economicrecession there have been movements ofmigrants back to rural areas who have, onceagain, become dependent on the agriculturalsector.

Large amounts of agricultural products areexported each year. 20 percent of rice isexported while 95 percent of coffee and 90percent of cashew nuts, 98 percent of pepperand 75 percent of tea are exported. Fruit,vegetables and meat are mostly produced tomeet domestic demand. Competiveness is

generally low with low quality and high costproducts such as sugar, corn, soya bean,cotton, tobacco, milk and pork33. Coffee andsugar are of particular importance – both theeconomy generally and due to the number ofpeople dependent on it. One report estimatedthat coffee harvesting employs about 1.83percent of the whole labour force and 2.93percent of the agricultural sector labour force.While 1990s surge in prices helped manygrowers escape from poverty, the drop at theturn of the century caused many to slip back.Sugar has more modest yields but it is oftenharvested in the poorest and most remoteareas of the country. Under WTO accessionVietnam has rights to apply special tariff quotason sugar to protect the domestic industry.

The sector is anticipated to shrink further overthe years. While FDI in agriculture is low, ithas made significant contributions throughenhancing capacity through technology,equipment and markets as well asinfrastructure.

33 FES 2008

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Table 7 below provides an overview of the key issues for Agriculture in relation to the GlobalCompact.

Table 7: Global Compact Issues in Agriculture

ENVIRONMENTAL PROTECTION • Land pollution – over use of

chemical fertilizers • Water pollution – from

chemicals used in agriculture • Food safety and high levels of

toxic residues

CORRUPTION • Not a lot documented • Related to lack of transparency

HUMAN RIGHTS • Land rights: less productive and poorer

households may be forced to sell off • Potential for silent complicity if not direct

complicity • Many ‘unknowns’

LABOUR ISSUES • Hidden labour and not contracted • Hazardous work • Child labour (family); forced labour (unknown)

OTHER HUMAN RIGHTS RELATED ISSUES The agricultural sector is dominated byhousehold business and SMEs. Typical farmsare low yield, subsistence based and smallwith the average farm only 0.7 hectares perhousehold34.

Stakeholders we interviewed raised questionsand concerns in relation to land rights andthe appropriation of land. One stakeholder

from a local NGO pointed out that there areso many issues we don’t know about. Whena company needs land for a plantation howdoes the government decide? Many withoutland use titles (red books) are ethnicminorities in rural areas. The government cantake land from the farmers if it is for the‘public good’. There are differentarrangements for foreign invested enterprises,state enterprises and local private sector firms.

If there is a plantation for export are there dueprocesses for consultation with farmers? OneNGO commented that when they looked atland rights in the Central Highlands andMekong they found that many ethnic minorityfarmers could not join in the plantation andalso lost their land facing a double penalty.

“…assume there are different criteria forsetting up plantations but we are concernedhow people are involved and consulted in theprocess… likely ‘under the table’transactions….” (local NGO interviewedwho works in highlands areas)

Some reports and some stakeholders notedthe discriminatory purchasing practices whichdisadvantage ethnic minorities. They receiveless for their products and buyers sometimestry to push the prices even further.

KEY LABOUR ISSUESWithin agriculture, much of the labour will be‘hidden’ and not covered by formal contracts.Due to informality of the sector most are noton contracts and protected within the law.Freedom of association and the right tocollective bargaining is perceived differentlyin Vietnam than some multinationalcompanies may see it in terms of their codesof conduct.

A particularly important labour issue inagriculture relates to handling of hazardouschemicals. This is not explicitly covered in theprinciples on labour standards but could linkto issues for child labour and hazardous work(although it is not just young people handlinghazardous chemicals).

Some stakeholders we interviewed raisedquestions and concerns in relation tochemicals usage as there are potential risksthrough sub-contractors and throughout thesupply chain, but this is a relatively unknownand unexplored issue.

Significant child labour exists withinagriculture but this is a complex issue. TheUN Committee on the Rights of the Child(CRC) has raised concerns about exploitationof children in the agricultural sector inVietnam (as well as in gold mines and timberoperations)35.

The UN Committee on the Elimination ofDiscrimination Against Women has raisedconcerns regarding deep-rooted stereotypesand discrimination against women but nostakeholders raised this explicitly in ourconversations. Women and in particularethnic minority women are usually the leastwell off. More women than men are engagedin agricultural work

34 FES page 98 35 Concluding Observations of the CRC, 2003, op cit; paras 31 & 51

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KEY ENVIRONMENTAL ISSUES

Agriculture has contributed to land pollutionand water pollution through extensive use ofchemical fertilizers and improper use of them.One report noted that “in the Mekong delta,farmers generally apply more than tenfungicide and insecticide sprays per year, withsome of them reporting forty sprays peryear36”….

The overuse of fertiliser has killed otherspecies in the fields, and polluted theenvironment. As the recent SEDP reviewnoted there is a high concentration of “toxicagents and heavy metals in the soil willincrease the amount of harmful substancesabsorbed by plants and animals causingnegative impact on human health. Theextensive use of chemicals in agriculture hasled to an increase in the number of foodpoisoning” (SEDP review).

Food safety is a growing concern whichrelates to both agriculture and foodprocessing. Recent research found that one-third of meat samples (and in particular pork)tested positive for salmonella and that thereis a high rate of diarrhoea per person inVietnam attributable to food poisoning. Otherresearch has found that 10 percent ofvegetable samples in big cities exceednational standards for pesticide residue and2 to 3 percent show use of banned pesticideproducts. The use of antibiotics in meat is abig problem.

CORRUPTION RELATED ISSUES

While there is not a lot documented in termsof corruption in the agriculture sector, a few ofthe stakeholders we spoke to noted concernsmostly related to the lack of transparency.They assumed there were different criteria forsetting up plantations but were concerned howpeople were involved and consulted in theprocess and that there was a likelihood of‘under the table transactions’. People don’treally have legal land rights so if thegovernment decides it is beneficial to turn overland for a large plantation this can be done.

Stakeholders interviewed were concerned withissues such as assigning land use right tohouseholds, appropriating land for golf coursesand corruption related issues. According toofficials from the Government Inspectorate,about 80% of complaints related to land issues,and lots of these come from rural areas.



Agriculture provides source of livelihoodsdirectly and indirectly for estimated 54 millionpeople. It is estimated that agricultureprovides jobs for about 60 percent of theworkforce. Coffee and sugar are particularlyimportant to the economy and a largenumber of people are dependent on theseproducts. As Vietnam transitions from anagricultural economy the share of agriculturetowards growth dropped from 27 percent in1995 to 21 percent in 2005. FDI is limited.


The government has issued a number ofregulations on converting lands into differentpurposes, yet the implementation of theseregulations at the local levels has shown lotsof symptoms of corruption. There have beennumerous initiatives by NGOs anddevelopment agencies on integrated pestmanagement and alternative approaches tousing large amounts of fertilizer.

Fair and fairer trade has the potential to bringbenefits to farmers. One INGO who worksglobally in fair trade noted that there was nota lot of interest for this in Vietnam.

Some value chain partnerships have beenestablished to bring triple bottom linebenefits to farmers but are particularlyfocussed on livelihoods and connectivity tobuyers.

There is growing interest and recognition inthe Global GAP standard and certificationand Vietnam is developing its own VietGAPstandard.


Unilever is a member of the Global Compactand committed to CSR. Monsanto (globally)recently signed the Global Compact but is notyet involved locally.

As much of production is at a householdlevel, we think that the network can add morevalue by moving one step up the value chainand focussing, first, on food processing. 36 http://www.idrc.ca/uploads/user-S/10536112540ACF122.pdf

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Fish and fish products are an important partof the Vietnamese diet. Vietnam has around3,260 km of coastline and more than 3,000islands, where over 70 percent of thepopulation live. Overall fishing only accountsfor roughly 4 percent of GDP37 but after oiland garments fish products are the 3rdbiggest export item for Vietnam and worth 12percent of the total valued at close to 2.5billion USD. The main exports are shrimp (54percent) followed by fish, squid, cuttlefish andoctopus. Over 50 types of commercialspecies are found in Vietnam’s water. 20percent of fish is exported. Japan is thebiggest buyer followed by US and then EU,South Korea, mainland China, Hong Kong,Taiwan and others38.

Fishing is an important source of livelihoodfor millions. Most of the ownership is localand private and at a household level. FDIaccounts for only 2 percent of the sector.There has been an increased focus onaquaculture which has brought challenges tosmall scale mobile fishers.

The industry depends on a network ofwholesalers and only small amounts arepurchased directly from producers. There hasbeen increasing pressure from global buyersfor the raising of standards with regards tofood safety but studies note that although thedomestic market is important, little attentionis focussed on product standards for domesticconsumption.

7. FISHING KEY ISSUES FOR THE GLOBAL COMPACT IN VIETNAM

Table 8 below provides an overview of the key issues for Fishing in relation to the GlobalCompact.

Table 8: Global Compact Issues in Fishing

ENVIRONMENTAL PROTECTION • Aquaculture and use of chemicals and

antibiotics particularly shrimp and catfish)• long term effect of chemical inputs • Blast fishing and destruction • Salinisation due to shrimp raising • Mangrove destruction • Outbreak of diseases connected to

environmental factors

CORRUPTION • Access to fishing rights

HUMAN RIGHTS • Land conversion issues for aquaculture• Not many specific points raised here

but also ‘black flags’ and ‘unknowns’

LABOUR ISSUES • Similar to agriculture, household level• Many child labour issues • Safe working conditions (i.e. sea

fishing without communication devicesas well as blast fishing)

OTHER HUMAN RIGHTS RELATED ISSUESThere were not a lot of comments on thisissue and the majority of people do notbelieve this is a ‘red flag’. The only concernswe did find related to how some decisionswere made over who was able to have waterrights for aquaculture activities.

KEY LABOUR ISSUES Labourers are primarily fishers in rural orcoastal areas. They mainly work for their ownfishing or on household fish farms althoughthere is also larger scale commercial fishing.There are many child labourers due to thehousehold nature of the work.

The key issues include safe workingconditions, such as sea fishing without propercommunication devices and risks for severeweather. While forecasting and early warningsystems are getting better, typhoons pose aserious hazard for those who rely on off shorefishing. Additional safety issues relate tofishing with cyanide and explosives.

KEY ENVIRONMENTAL ISSUESThe key concern for many stakeholdersrelated to aquaculture and overuse ofchemical inputs. There are a number ofaquaculture areas that have been pollutedabove the acceptable level. Similar to

37 GPO 38 World Bank

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agriculture, stakeholders interviewed notedconcerns that farmers do not (or cannot)consider the long-term effect of chemicalinputs on their own lands/ponds. Even ifpeople do understand household poverty candrive people to only consider short term pay-backs. In 2001 the EU banned use ofantibiotics in shrimp which posed a seriousissue in Vietnam. Chemicals and antibioticsare difficult to control.

“Whatever is aqua-cultured, there is lots ofpollution. But we have not controlled pollutionclosely.”(An official from environment managementdepartment)

One website recently referred to research onthe Thot Not Canal connected to the HauRiver whereby an environmental officer “saidwater discharged from catfish farms alsoadded to the pollution”. Dung Canal alsofaces similar challenges with pesticides andweed-killer left from catfish breeding alongthe banks.

Shrimp farming along the coastline especiallyin the Centre of Vietnam pollutes and enhancesunderground salinisation. A number of areashave converted forestry into aquaculture landsand many of these areas have becomepolluted. Environmental damage is also causedby cyanide and blast fishing.

CORRUPTION RELATED ISSUES There were not a lot of comments raised fromstakeholders we interviewed on this issue and

the majority of people did not believe this wasa ‘red flag’.


Fishing is an important source of livelihoodfor millions of Vietnamese and fish productsare a key export for the country.

ONGOING REMEDIATION EFFORTS

There are some remediation efforts in place.DANIDA has provided some support for thefisheries sector together with the CSR VietnamCompany. WWF has worked with otherpartners on Marine Stewardship Council(MSC) and starting to link with internationalbuyers. They have worked on small scaleshrimp production also pangasius to identifybest management practices. GTZ has alsosupported efforts with pangasius.


Clearly fishing is an important industry inVietnam. Despite the relative size of the sectorin terms of contribution to GDP andlivelihoods, we did not see much potential orcapacity for the GCNV to act in this area.Instead we are recommending the network tofocus one step up the value chain in foodprocessing (including fish processing).

39 http://www.idrc.ca/uploads/user-S/10536112540ACF122.pdf

The forestry industry in Vietnam hastraditionally been an important one and manyrural communities and particularly the poorrely on the forests for their livelihoods.Research by CIEM in 1999 estimated at thattime about 25 million people relied on non-timber forest products for their livelihood.War and industrialisation have wreakedhavoc on Vietnam’s forests. In 1943 recordsshow the total forest cover was 43 percent.The American war devastated forests withAgent Orange and other chemicals as well asfrom the use of explosives, land mines andgeneral fighting. Coverage changed to 27.2percent in 1990 but in 2007 increased to 40percent again. However while quantity maybe up quality has been severely depleted.Only 7 percent is now natural forest.Between 1990 and 2005 it was estimatedthat 78 percent of primary forest was lost.Only .66 percent of forest coverage is oldgrowth forest. Deforestation rates since theend of 1990s have fallen 18 percent.Decreasing forest coverage has had knock oneffects in water quality and flooding.

Today’s forest clearing is mainly due tocommercial agriculture and subsistenceactivities such as small scale agriculture andfuel wood usage. Forest products accountedfor 2.9 percent of exports in 2007 and forestindustries include wood processing, seedlingproduction, and trading forest products.There has been a general shortage of woodfrom Vietnam with much wood for furnitureproduction being imported and concerns overillegal logging growing40. According to Hieu(2007), enterprise size and a technology gaphave limited further expansion41.

It is estimated that State Forest Enterprises(SFEs) control roughly 40 percent of forestland but are now being restructured.Restructuring over last 10 years has started totransform SFEs into commercially viablebusiness but progress is slow and incomplete.

8. FORESTRY

40 See 2008 report by Global Witness for example 41 Hieu. 2007. “The changing administration and

role of forestry in the economy of Vietnam”Springer, Netherlands

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Table 9: Global Compact issues in forestry

ENVIRONMENTAL PROTECTION • Red flag raised my many stakeholders • Forest cover increasing but quality

(primary) decreasing • Decrease in up-stream forests and

links to flooding and erosion

CORRUPTION • Land handover process • Forest logging

HUMAN RIGHTS • Forests provide a source of livelihoods for

many of the poorest of the poor

LABOUR ISSUES • Household level work with land use right

to plant and cultivate forest trees

OTHER HUMAN RIGHTS RELATED ISSUES There was not much discussion on this issue– the majority of stakeholders do not believethis is a red flag although it was pointed outthat many of the poorest of the poor aredependent on the forests for their livelihoods.

KEY LABOUR ISSUES Similar to agriculture and fishing industries,most workers in forestry are in farmhouseholds.

KEY ENVIRONMENTAL ISSUESForestry has been indicated as “red flag” bynumerous stakeholders engaged in thisreview. The key concern is, while the forestareas have been gradually increased in the

last 5 years, quality of the forest has beendown. Protection and up-stream forests havebeen decreased, causing floods and erosion.In the past, planting forest mostly belongedto state-owned firms. Currently, thegovernment has given households the landuse right for 30-50 years to plant andcultivate forest (Plantation forest). This shouldbe a key issue to watch since farmers may cutthe quality trees for immediate gains, whileplant low quality trees instead.

CORRUPTION RELATED ISSUES Some people remarked that key corruptionmay relate to land handover process, andforest logging.


The government currently has a policy to giveland to farmers for forestry which could be aninitiative to increase forest coverage. Thereare also a number of international donors(JICA, Tropenbus, etc.) working in the forestryindustry. WWF has helped launch the VietnamForest and Trade Network. Vietnam is a pilotcountry for a UN REDD (Reduce Emissionsfrom Deforestation and Forest Degradation)which is also looking at cross-bordercooperation issues as much of the wood usedin furniture in Vietnam comes from other

countries such as Laos, Cambodia andfurther afield.


Similar for agriculture and fishing we wouldagain recommend the network to look onestep up the value chain in terms of woodproducts and furniture and to be a part of thecurrent remediation efforts in this area.Another opportunity for the network would beto look at how companies could get involvedin REDD projects and support the protectionof the remaining primary forests in the country.

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III - OTHER INDUSTRIES WE LOOKED ATBUT DIDN’T PRIORITISE AT THIS TIME:TOURISM (INCLUDING HOTELS ANDRESTAURANTS) AND REAL ESTATE ANDTELECOMMUNICATIONS AND POST

Tourism is extremely important for Vietnam’seconomy. Tourism encompasses within itother industries such as transport,accommodation, catering, recreation andservices for visitors. The GSO data providesa break down for data for hotels andrestaurants but not specifically for tourism asa separate category. According to a recentarticle in Vietnam Investment Review, fourmillion visitors went to Vietnam in 2008.Tourism (and the industries within it) employover a million people of which 285,000people were direct workers and 750,000people were indirect workers. The WorldTravel and Tourism Council (WTTC) forecastthat the tourism sector will have the biggestlabour demand in Vietnam by 2015,accounting for around 15 percent of thewhole country’s labour force. Chinese touristscurrently account for the largest market atroughly 15 percent of tourists and areexpected to fuel future growth42.

Like other sectors of the economy, tourism hasbeen hit hard by the current global recession.The Vietnam National Administration ofTourism (VNAT) has indicated that, in the firsthalf of 2009, tourist arrivals decreased bynearly 19 percent (year on year). The globalH1N1 virus is believed to have also affectedarrivals. This has had knock on effects onVietnam Airlines as well with foreign passengerarrivals declining by nearly 12 percent.

KEY ISSUES FOR THE GLOBALCOMPACT IN VIETNAM For some of the stakeholders we spoke to therewere considerable red flags around tourismand environmental impacts while for otherstakeholders we spoke to it did not raise a redflag in any area. Some participants were alsoconcerned with ‘social evils’ associated withtourism such as prostitution, drugs, loss oftraditional values and heritage. People raisedquestions about child labour as well. Therewere a lot of ‘unknowns’ in this area.

OPPORTUNITIES AND DRIVERSSome sustainable tourism activities have takenoff. Mui Ne (a popular coastal resort town)beach resorts must treat all waste, and the VinhSuong resort has been equipped with solarenergy water heating devices. The ADB has asustainable tourism initiative and has publisheda sustainable tourism guidebook for Vietnam.


Given that the issues within each of theindustries within the tourism sector would bedifferent (for transport, for accommodation,for catering and for services) we did notconsider this as a priority area for further workat this time for the Global Compact NetworkVietnam. However, the secretariat should stayinvolved with other stakeholders working onthis area and revisit this at a later stage. Thenetwork could also make use of its smallgrant fund to support local small scale effortsfor more sustainable tourism.

9. TOURISM, HOTELSAND RESTAURANTS

42 http://vibforum.vcci.com.vn/news_detail.asp?news_id=18504

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Up until the 1990s there was virtually no realestate market in Vietnam as all land wasowned by the state. With the ‘Doi Moi’reforms the first land laws came into forcebetween 1990 and 1998 and privateownership began to be recognised. Foreigninvestment into the real estate market hasbeen increasing steadily since the 1990s.Speculation and large scale investments in thelate 1990s resulted in soaring land prices andthere were later revised land laws. The landlaw was revised in 2004 which has helped toattract an increasing amount of foreigninvestment.


The main ‘red flags’ for real estate were inrelation to corruption. This industry is believedto be one of the key on corruption issues.

-Lack of transparency: the conversion ofagricultural land into different purposes wasdone in many provinces. But the process andcriteria are often not very clear. Also pricing ofland has been manipulated by some parties.

-Lack of monitoring: Even though someprovinces have clear policies, the real estatecompanies and some officials stillmanipulated the process. One interviewee (inDa Nang) shared the experience:“My city built some residential buildings forpeople. The policy requires that informationon who bought what block needs to be postedevery week, and the bought blocks arehighlighted in yellow. I went to buy, all goodblocks were yellow. I came to the office and

asked for the list of buyers. The officials couldnot provide it. I was angry, made some noise,and said I would call the City’s leaders. After2 hours, they showed me one good block thatwas not bought. I bought it, and saved about100 million VND.”(Manager of a businessassociation)

-Not clear requirements: Land has been asensitive issue in Vietnam – land belongs tothe government. Thus, households want toget the land use right certificate (the redbook), they need to go through manyprocedures. Since there are all “special”cases, it is very uncertain on how one couldget the “red book”.

There was not a lot of concern or issuesraised in relation to labour issues and realestate. Some stakeholders raised concernover environmental issues and how land istaken from farmers to build too many golfcourses and industrial parks without goodplans and proper waste water and solid wastesystems. People in the sector mentioned poormanagement and building practices.

Aside from the land use requirements there wereno other human rights related issues raised.

OPPORTUNITIES AND DRIVERS

RECOMMENDATIONS

Given the nature of the sector, we did not finda lot of opportunities here for the GCNV.However, anything that helped to deal withcorruption and increase transparency wouldbe seen to have positive benefits.

10. REAL ESTATE, RENTING AND BUSINESS ACTIVITIES

Vietnam’s telecom sector has developedrapidly over the last 20 years and particularlyin the last 10 years. Prior to the 1990s (andthe Doi Moi reforms), the sector was agovernment owned ‘postal, telecom andtelegraph’ (PTT) model with one state-ownedcompany responsible for all aspects.

The country has changed from one in themid-1990s where only four people in 1,000had a telephone line to one in which 5percent of the population now has a land lineor mobile connection43. Nearly 90 percent ofthe rural areas now have connectivity.Research has found that “Vietnam appears tohave a well run and reliable telecom networkthat provides relatively fast connections, butoften slow transmission speeds” and thatthere are concerns regarding relatively highprices when compared to other countries inthe region.

Telecommunications has been a fast growingsector in the economy. In 2007 it contributednearly 5 percent of Vietnam’s GDP up fromnearly 4 percent in 2000.


This was not a high priority in terms ofconcerns from the stakeholders weinterviewed. Some noted potential issuesregarding labour and the environment but no

specific details or concerns for this industry.There was no available secondary data aswell. The only potential red flag raised herewas in relation to corruption and somestakeholders particularly noted issues withregards to transporting materials through thepost or private companies. There wasconcern that facilitation payments alwaysneeded to be made.


RECOMMENDATIONS

Given the smaller size of the sector and the factthat this was not a priority area for thestakeholders we interviewed, we do notrecommend that the network prioritise this sector.

11. POST AND TELECOMMUNICATIONS

43 A USAID review of the telecoms sector noted that“the country has more than 5M land lines and2.5M mobile users, increasing telephone density tonearly 5%.

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74

Finance and banking itself accounts for alimited contribution towards GDP and arealso not big sources of employment.However, financial intermediation has thepower and potential to greatly influence otheraspects of business in general.

The banking sector in Vietnam is currentlygoing through a transition. From an economywith one large “mono-bank” it began atransition to four public banks and joint-stockcommercial banks and started to allow foreigninvestment. Two-thirds of the banking sector isdominated by four state owned banks:Vietcombank; Incombank; Bank for Investmentand Development (BIDV) and Agribank whooriginally focussed in their own areas. All havebeen owned by the State Bank of Vietnam.

Early foreign (and disclosed) investors in theJoint-Stock Commercial Banks (JSCBs) wereDragon Capital and Jardine Matheson whoeach had a seven percent ownership in theAsia Commercial Bank since around 1997.Later investors such as IFC, ANZ, HSBC andthe Overseas Chinese Banking Corp haveinvested in other (joint stock) Vietnamesebanks. JSCBs account for roughly 15 percentof the banking stock but are growing rapidly.Generally the foreign banking presence whilelimited is growing rapidly and since 2007foreign banks have been allowed to establish100 percent foreign-invested subsidiaries.Branches of foreign banks, wholly ownedsubsidiary banks and joint venture banks

accounted for roughly 10 percent of themarket (2007 figures). ANZ, HSBC,Citibank, JP Morgan Chase, Far EastNational Bank, are only a few.


As with any business in Vietnam there will belabour issues and environmental issues for thecompany to manage. We did not uncoveranything specific for the banking and financeindustry in our research and the significantimpacts will be how the industry financesother industries. Similarly with regard to otherhuman rights related issues nothing specificwas raised aside from potential lack of creditas a human rights issue.

With regards to corruption, there were someconcerns raised by stakeholders we spoke to.This was manifesting itself in credits tounqualified borrowers as well as insidertrading and the creation of powerful investors.



The sector is currently in transition and theopening up to increasing foreign investmentpresents a potential opportunity to establishmore sustainable lending practices. There is ahuge potential to use this industry to influenceother actors with respect to the GC Principles.


Globally responsible investment andinitiatives such as the Equator Principles arehelping to drive more responsible financing.Based on a cursory scan there do not appearto be any Vietnamese banks who have signedup to the Equator Principles. The EquatorPrinciples are based on the performancestandards of the International FinanceCorporation which is working to strengthenthe financial sector (among other things) andare entirely consistent with the GC Principles.In introducing Equator Principles into projectfinancing requirements the finance andbanking sector therefore has a great deal ofopportunity to ‘leverage’ improvedsustainability practices by other businesses.

In early 2005 the United Nations Secretary-General invited a group of the world’s largestinstitutional investors to join a process todevelop the UN Principles for ResponsibleInvestment (UNPRI) based on a view thatconsideration of environmental, social andgovernance issues can affect the performanceof a portfolio. The UNPRI are voluntary andinspirational and provide a menu of possibleactions for incorporating ESG issues intomainstream investment decision-making andownership practices. According to websitedata only Anpha Capital in Vietnam hasbecome a signatory to date.


Compared to other industries there may notbe as many pressing concerns directly linkedto banking and finance (as compared tolabour issues in garments or construction forexample). However, as the economy hastransitioned, people and businesses are

reliant on the banking and finance industryfor day to day business and longer terminvestment. The development of the stockmarket is also increasing people’s awarenessof the role of investors in this arena.


International companies like Citigroup, HSBCand Manulife who are working in the countryare signatories of the Global Compact. IFChas a substantial presence in Vietnamthrough the Mekong Private SectorDevelopment Facility (MPDF). Investors suchas Anpha and Dragon Capital may also beable to play an important role here. While the team may have to draw on externalexpertise in the areas of finance, working witha network to leverage the key strengths ofother people and institutions, GCNV couldadd significant value in this area.

Banking and finance initially emerged as oneof our top-tier recommendations but cannotbe looked at through the same lens as theother industries given the cross-cutting natureand its impact on other sectors. While somestakeholders we interviewed felt that it was tooearly in Vietnam’s reform process to talkabout sustainable finance and that this wouldbe ten years later on others disagreed. Thereis a great opportunity now for Vietnam toembed sustainable lending practices in thebanking and finance sector in order to havea knock-on effect and positive influenceelsewhere. There is further potentialopportunity with changing to banking sectorand state owned banks as well as theinfluence of the stock exchange growing.There is a growing interest globally andregionally in Equator Principles. We generallysee a lack of remediation efforts but alsopotential champions.

12. FINANCE AND BANKING ASA CROSS-CUTTING THEME

HIGH RISK AND HIGH OPPORTUNITY

Based on our analysis we found that industries such as: manufacturing(garments and textiles and wood and furniture products); foodprocessing; construction; mining and to some degree oil and gaswere classified in this area. Given that there are ongoing remediationefforts (although still many issues) and people looking at the issues ingarments, wood and furniture products we recommend that thenetwork prioritises the other sectors in this category.

LOWER RISK BUT HIGH OPPORTUNITY

We see banking and finance as providing and opportunity for the networkto leverage to affect change in Vietnam. While banking and finance itselfwill not have the same level of issues in terms of the global compact onesthat we looked at it will influence these issues in other sectors.

HIGH RISK BUT LOWER OPPORTUNITY

The primary industries of agriculture, fishing and forestry have manyissues in relation to the global compact. Given their connection to rurallivelihoods and the size and nature of the sectors they were importantones for us to consider. We have not included them in our priorityrecommendations as we feel it would make more sense for the networkto move one step up the value chain and focus on food processing.

LOWER RISK AND LOWER OPPORTUNITY

Tourism was a challenging sector for us to plot as it contains within itmany different industries ranging from transport, hotels, restaurantsand others. We looked at the GSO data for hotels and restaurantsand also other existing literature on the tourism sector. Only onestakeholder we interviewed thought that it should be a priority sectorfor the network and others did not raise as many ‘red flags’ incomparison with the other sectors we looked at. Real estate andtelecommunications, while each having their own issues andchallenges were not prioritised or ranked as highly as the other sectorswe considered.

The nature of the issues within each of the sectors can change rapidly.For many of the sectors there were a lot of ‘unknowns’ and certainsectors and issues were more at the forefront of people’s minds asthey had been reported on more broadly in the press or talked aboutmore openly. Our research has been based on trying to betterunderstand stakeholders’ perspectives and priorities and cross-checking this with available evidence and research within the limits ofour time-frame.

The next step for the network will be to drill down into more detail intothe prioritised sectors and work with companies in these sectors todevelop suitable tools and approaches to bring the principles of theGlobal Compact to life in the Vietnamese context.

Con

clus

ion

7776

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Global C

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etwork Vietnam

78 APPEN

DIX

I:

KEY

DATA

ON

IND

UST

RY

SECTO

RS

VIET

NAM

Econ

omic

Secto

rG

DP (%

)at

cur

rent

price

s 20

00

GDP

(%)

at c

urre

ntpr

ices

2007

Est.

worke

rsno

s. 20

00

(in 1

.000

)

Est.

worke

rsno

s. 20

07

(in 1

.000

)

Num

ber b

y31

.12.

2007

*(in

1.0

00)

Est.

work

ers

nos.

2000

(in %

toto

tal la

bour

forc

e)

Est.

worke

rsno

s. 20

07(in

% to

tota

l labo

urfo

rce)

Net

turn

over

*

(Bill.

VN

D)

Net

turn

over

from

busin

esse

s*

(Bill.

VN

D)

Prof

itbe

fore

taxe

s*(B

ill. V

ND)

Tax a

ndfee

s pai

d*

(Bill.

VN

D)

Agric

ultu

re

(incl.

fore

stry)

Fishi

ng

Fore

stry

Min

ing

(incl.

qua

rryin

g)

Oil

and

Gas

Man

ufac

turin

g

Gar

men

ts, te

xtile

s,sh

oes (

texti

les a

ndwe

arin

g ap

pare

l)

Woo

d pr

oduc

tsan

d fu

rnitu

re

Food

pro

cess

ing

21.1

6%

3.37

%

n. d

.

9.65

%

n. d

.

18.5

6%

n. d

.

n. d

.

n. d

.

16.3

%

4.03

%

n. d

.

9.77

%

n. d

.

21.2

6%

n. d

.

n. d

.

n. d

.

23,4

91.7

988.

9

n. d

.

256

3,55

0

3,55

0.3

n. d

.

n. d

.

n. d

.

22,1

77.4

1,63

4.5

n. d

.

398

6,30

6

5,96

3.4

901.

2*

124.

4*

463.

9*

222.

1

31.3

17.1

186.

6

8.6

6,30

6.2

901

124.

5

463.

9

62.4

6%

2.63

%

n. d

.

0.68

%

n. d

.

9.44

%

n. d

.

n. d

.

n. d

.

50.2

%

3.7% n. d

.

0.9% n. d

.

13.5

%

n. d

.

n. d

.

n. d

.

24,5

87

5,14

2

1,96

2

158,

689

116,

869

1,18

5,43

5

107,

445

19,4

87

271,

148

23,4

26

4,89

3

1,86

5

156,

474

115,

798

1,16

1,99

7

104,

964

19,3

01

266,

772

5,40

4

372

103

66,0

09

64,1

89

50,7

71

2,17

2

472

13,8

17

1,67

2

107

228

43,9

06

42,1

40

64,4

91

2,91

4

535

18,5

01

1 2 3 4 5 6 7 8 9

Econ

omic

Secto

rG

DP (%

)at

cur

rent

price

s 20

00

GDP

(%)

at c

urre

ntpr

ices

2007

Est.

worke

rsno

s. 20

00

(in 1

.000

)

Est.

worke

rsno

s. 20

07

(in 1

.000

)

Num

ber b

y31

.12.

2007

*(in

1.0

00)

Est.

work

ers

nos.

2000

(in %

toto

tal la

bour

forc

e)

Est.

worke

rsno

s. 20

07(in

% to

tota

l labo

urfo

rce)

Net

turn

over

*

(Bill.

VN

D)

Net

turn

over

from

busin

esse

s*

(Bill.

VN

D)

Prof

itbe

fore

taxe

s*(B

ill. V

ND)

Tax a

ndfee

s pai

d*

(Bill.

VN

D)

Con

struc

tion

Tour

ism*

(sole

ly ho

tels

&re

staur

ants)

Real

Esta

te, re

nting

and

busin

ess

activ

ities

(GSO

defi

nitio

n)

Telec

omm

unica

tions

(sole

ly tra

nspo

rt.St

orag

e an

dco

mm

unica

tion)

Finan

cein

term

edia

tion

(GSO

def

initio

n)

5.35

%

3.25

%

4.34

%

3.93

%

1.84

%

6.97

%

3.93

%

3.8%

4.47

%

1.81

%

1,04

0.4

685.

4

63.9

1,17

4.3

75.2

2,26

7.8

813.

9

216

1,21

7.4

209.

9

1,07

9.2

141.

1

280.

6

117.

8

148.

5

2.77

%

1.82

%

0.17

%

3.12

%

0.2%

5.13

%

1.84

%

0.49

%

2.76

%

0.48

%

207,

983

29,4

92

68,6

17

75,0

63

203,

509

200,

790

25,5

95

62,0

26

69,9

05

176,

480

7,28

0

3,96

1

9,95

5

20,1

07

29,8

28

12,4

69

2,86

5

5,31

4

9,71

7

12,8

07

10 11 12 13 14 Data

Sou

rce:

Gen

eral

Sta

tistic

s Offi

ce V

ietn

am (G

SO).

Stat

istica

l Dat

a, E

mpl

oym

ent a

nd P

opul

atio

n.(*)

Sou

rce:

GSO

: The

Situ

atio

n of

Ent

erpr

ises.

Thro

ugh

the

Resu

lts o

f Sur

veys

Con

ducte

d in

200

6, 2

007,

200

8. S

tatis

tics P

ublis

hing

Hou

se, H

anoi

, 200

9.

EXPOR

TS O

F G

OOD

S B

Y EC

ON

OM

IC S

ECTO

R A

ND

BY

COM

MOD

ITY

GR

OU

P

Global C

ompact N

etwork Vietnam

81

Global C

ompact N

etwork Vietnam

80

EXPORTS OF GOODS BY ECONOMIC SECTOR AND BY COMMODITY GROUP

TOTAL

By economic sector

Domestic economic sector

Foreign invested sector(*)

By commodity group

Heavy industrial products and minerals

Light industrial and handicraft goods

Agricultural products

Forest products

Aquatic products

TOTAL

2000 2007

53.0%

47.0%

37.2%

33.9%

17.7%

1.1%

10.1%

100%

42.8%

57.2%

32.9%

44.5%

14.5%

7.8%

100%

7672.4

6810.3

5382.1

4903.1

2563.3

155.7

1478.5

14482.7

2

0785.7

27775.7

16000.0

21598.0

7200.0

3763.4

48561.4

2000 2007

Structure in % Mill USD

APPEN

DIX

II S

COR

ECAR

D F

OR

GLO

BAL

COM

PACT

ISSU

ES B

Y IN

DU

STR

YIN

VIE

TNAM

(*)Included crude oil.

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ompact N

etwork Vietnam

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ompact N

etwork Vietnam

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APPENDIX III QUESTIONNAIRE FOR RANKING GLOBALCOMPACT VIETNAM ISSUES

On a scale of 1-5 please rank your impressions of the following issues for each of the industries

APPENDIX IV GLOBAL COMPACT PRINCIPLES

Scoring

Green Flag

Yellow Flag

Red Flag

1

2

3

4

5

0

Description

There are no problems that I can think of related to this issue for this industry

There are a few problems related to this issue in this industry - this issueis mildly important

There are some problems related to this issue in this industry – this issue isof average importance

There are many problems related to this issue in this industry – this issueis very important

There are a lot of problems for this industry – this issue is extremely important

I don’t know anything about this

Industry (score one mark in relation to

each issue)

Labour Issues EnvironmentIssues

Corruptionrelated issues

Other social orhuman rightsrelated issues

Agriculture

Fishing

Forestry

Mining

Oil and Gas

Manufacturing

Food processing

Construction

Tourism

Finance

Real Estate

Telecommunications

Other: Please Specify

Area Global Compact Principles

Human Rights

1

2

Labour

3

4

5

6

Environment

7

8

9

Anti-corruption

10

Business should support and respect the protection of intermationallyproclaimed human rights

Make sure that they are not complicit in human right abuses

Businesses should uphold the freedom of association and the effectiverecognition of the right to collective bargaining

The elimination of all forms of forced and compulsory labour

The effective abolition of child labour

The elimination of discmination in respect of employment and occupation

Businesses should support a precautionary approach to environmentalchallenges

Undertake initiatives to promote greater environmental responsibility

Encourage the development and diffusion of environmentally friendly technologies

Business should work against corruption of all forms, including extortion andbribery

(http://www.unglobalcompact.org/AboutTheGC/ThePrinciples/index.html)

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etwork Vietnam

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etwork Vietnam

84

APPENDIX V GENERAL FINDINGS FOR GLOBALCOMPACT

GLOBAL COMPACT

The Global Compact is an international pledge for business leaders to commit to 10 principlesin four key areas of labour; environmental protection; anti-corruption and human rights.Appendix II includes a copy of the principles. The local network has around 40 members44.Aside from those who have already joined the local network, it should be noted that most ofthe stakeholders we spoke to in Vietnam were not aware of the Global Compact. In addition,there were some common issues in regards to the principles of the compact that we havehighlighted in table 10 below.

It was easier to speak to stakeholders about labour and environmental issues. Vietnam has agood labour code. As one stakeholder noted “the Labour code in Vietnam is quite good aslong as it is implemented” (INGO representative). There is growing recognition and publicawareness over environmental issues. Human rights are talked about differently in Vietnam thanin the context of the Global Compact. The topic of corruption is considered to be a sensitiveone by many stakeholders and while some opened up their concerns others were more reticent.

GENERAL FINDINGS

Pressure for competition is considered to be too high for the domestic companies to thinkabout applying sustainable measures for business development. Most of the companies try tocompete on price, with a short-term orientation. Investments in waste treatment system,avoiding corruption, or labour rights were viewed as “luxury expenses”.For some national companies that are adopting measures such as SA8000 or ISO 14000,the motivation was mainly instrumental, i.e., pressures from foreign customers. However,companies that have implemented the system (SA8000) for some years suggested that thisprovides many benefits in the end, which they did not think of at the beginning. The benefitsinclude: developing a culture of discipline, being organized, and pushing managers to try forbetter solutions.

Even for big companies that were (to some extent) pushed to follow sustainability measures,their subcontractors were hard to monitor. This is evidenced in the garment and constructionindustries, in particular.

HUMAN RIGHTS • Concern over definitions and that this is

seen as ‘abstract’ for some who prefer totalk about specific rights

• National cultural context • In relation to GC, land rights is one that

came up frequently through some of theconsultations

LABOUR ISSUES • Representation – trade unions only cover

small fraction of workers (one intervieweenoted 8 %)

• Workers knowledge of their rights andhow to protect them

• Legal strikes do not exist • Some improvements in export oriented

factories and implementation of SA8000

ENVIRONMENTAL PROTECTION • Environmental issues have moved

rapidly up the agenda • Increasing public concern (and

media coverage) • Environmental protection needs to be

aligned with business (not seen as cost)

CORRUPTION • Some see confusion over definition • Many stakeholders see corruption as

a root cause of the other issues andconcern that this is getting worse

• Facilitation payments and ‘that’s justbusiness in this region’

• Differently affecting exporters andimporters, foreign and local

Table 10: Overview of Global Compact Issues Identified in the Research

39 According to data given to researchers in September 2009

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The GC or CSR issues cannot be separated from general business development issues. Asone participant said: “Firms would do it if they see the benefits of doing so is greater than notdoing so.”

HUMAN RIGHTS ISSUES:

Human rights are not talked about in the same way as in Western societies nor in an openmanner. Vietnam has signed and ratified many human rights conventions. Stakeholders weinterviewed raised some important points:

What do we mean by human right? Human rights are often perceived as an “abstract” and“foreign” terminology for the Vietnamese. Hence, many participants preferred to talk aboutspecific rights, but not “human rights” in general.

Human rights in national-cultural context: Participants believed that human rights issues shouldbe discussed or assessed based on the national cultural values and history. Purely imported“human rights” from other countries may not be appropriate.

Important rights: Participants agreed that the right to access information is important for bothbusiness owners and labour.

Some international stakeholders raised concerns that even by applying an internationalframework for human rights there is still a risk of complicity for companies operating inVietnam. The issue regarding land rights was raised by a number of people we interviewedwho were concerned over how land is appropriated and allocated for business purposes.Many environmental, social and governance (ESG) ratings have Vietnam as a high risk, inthis regard.

LABOUR ISSUES

Industries: Stakeholders felt that industries that are labour intensive and employed low skilledworkers should get attention. Examples include: garments and shoes, construction, assemblyand agriculture.

Representative: Workers in Vietnam do not seem to have an effective representative to helpthem negotiate with the business managers/owners. The trade unions covered only a smallfraction of the workers (one person said: 8% in the private sector). In both SOEs and theprivate sector, the trade union has not been independent and protective of the workers. Forthose that do not have unions, there is a need to carefully study if a trade union is realisticsolution. One official said: “I checked the list of national trade union members of the years2009 – they are all in SOEs”. From the perspective of some of the stakeholders they felt thateither the trade union was not effective enough or workers rights were not prioritised by thegovernment.

Knowledge of the workers: Stakeholders were concerned that workers do not understand theirrights, especially in having a safe working environment and insurance. The majority of workersaccept working in unsafe conditions (especially in construction). There was a perception thatworkers do not care about insurance (or do not see the benefits), and would prefer that themoney is paid to them instead.

Lack of clear ways for workers to ask for their benefits: It is believed that workers in Vietnamdo not have a clear and safe way to ask or fight for their benefits. Collective negotiation andagreement has not been common since Vietnamese workers are not organised for that (andthe trade union is weak). Legal strikes do not exist, and illegal strikes are discouraged.

ENVIRONMENT ISSUES:

The main concerns were raised around chemicals, fishing, mining, forestry, and manufacturingindustries.

Participation of different stakeholders: Environmental issues are complex, requiringparticipation of at least four key stakeholders: firms, government, scientists, and the public. InVietnam, the cooperation of these four stakeholders is not apparent. Perhaps pressure fromthe public – as consumers – could be a trigger at this point to motivate firms to take care oftheir environment.

Environmental protection as a business weapon: Aligning environmental protection withbusiness development is the key to motivate firms. Thus far, firms see environmental protection

Global C

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88

as their enemy because it is perceived to increase their costs. But there should be many waysto protect the environment and save costs – long and short-term (using energy saving facilities,saving papers, etc.).

CORRUPTION ISSUES:

Definition: The most difficult issue for the participants was in having a workable definition ofcorruption. In Vietnam, petty corruption is every where and is hidden in many forms (e.g., giftgiving). Many of these forms are implicitly accepted by the public as “normal”. Stakeholdersthen questioned what should be “unacceptable” behaviour?

Increasing in severity: Many of the stakeholders we interviewed commented that corruptionhas become much more severe in recent years and is embedded in every transaction privateor non-private. One NGO commented that they could not get anything accomplished unlesssomeone was paid or action was ‘facilitated’ at every step. There was a perception thatcorruption is sometimes ‘hidden’ from international companies and organisations who do notneed to see it if they don’t want to.

Corruption as lubricants for business: Given the perceived bureaucratic and slow system ofthe government, coupled with low motivation of officials (in part because of low salaries),some corruption was deemed as “necessary to get things done”. One participant put it: “They[officials] take some gifts, they then work overtime to get the paper work done for us.” Manybusiness people were perceived as not seeing the danger of this thinking as it leads to“corruption is normal” mentality.

Social tolerance: Another danger we are facing is that corruption has a high tolerance fromthe public. “Do I give gifts? Yes. Do I take gifts? Yes. Everyone is doing so. I don’t want to bedifferent. I just want to be like other people.” (A business manager).

“…corruption takes place when someone for the sake of personal gain abuses the poweror trust that he/she has been granted through his/her job” From Danish GC reference guide

Publication License No: 39-82/LÀ date 02/6/2010 No 514/QÀLK-LÀPhoto: GCNV, VCCI, Dreamstime, TTXVN

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THE TEN PRINCIPLES - Global Compact Network Vietnam Research 1.pdf · THE TEN PRINCIPLES HUMAN RIGHTS Principle 1: ... This research was conducted by CSR Asia in cooperation with