Chronic. Vietnam has experienced, since the start of the “Doi Moi” economic reform in 1986, an average annual growth of more than 5% in gross domestic product (GDP). But this has resulted in rapid environmental degradation (Foreign investment, economic growth, and environmental degradation since the 1986 “Economic Renovation” in VietnamDuke Hong Vo and Chi Minh Ho, Environmental Science and Pollution Research2021).
This observation seems to contradict the optimistic scenario according to which, after a certain threshold of development, the negative impact of growth on the environment would decrease thanks, among other things, to an improvement in productive efficiency, via foreign direct investment (FDI ).
This scenario has however been the subject of numerous studies… with variable results depending on the countries and periods studied. The case of Vietnam is therefore particularly interesting in an attempt to see things more clearly.
A dilemma for the government
Economic growth since 1986 has in fact led to a sharp increase in fossil fuel consumption and CO emissions.2 , multiplied in both cases by 15, against “only” a multiplier factor of 9 for the gross domestic product. This growth has benefited from the massive influx of foreign direct investment, which multiplied by 250 between 1986 and 1987 then by…1,500 between 1987 and 2019!
Should we then continue to think that FDI, favored by financial openness and the liberalization of trade, will ultimately contribute to reducing the negative effects of growth on the environment thanks to the importation of foreign technologies, or should we limit them, at the risk of slowing growth? This is the dilemma facing the government.
To answer this question, the two Vietnamese economists, Duc Hong Vo and Chi Minh Ho, analyze the evolution, between 1986 and 2018, of the relationship between GDP per capita and CO2 emissions.2by distinguishing short- and long-term effects, by breaking down energy consumption into two categories (fossil and renewable), and by studying the impact of FDI on the environment.
Government intervention needed
In short, they show that environmental degradation tends to increase (not decrease) as the country becomes richer. Moreover, while FDI contributes to slowing down this process in the short term, this is not the case in the long term. Indeed, if more efficient technologies reduce pollution, the increase in production subsequently erases this advantage.
You have 31.41% of this article left to read. The following is for subscribers only.