Sustainable Development Impacts of Investment Incentives

This 2009 case study by the Central Institute for Economic Management (CIEM) and the International Institute for Sustainable Development (IISD) examines the impact of investment incentives on the mining and quarrying industry in Vietnam between 2000 and 2006. The report finds that while tax incentives are highly valued by foreign invested enterprises (FIEs), they are not a prerequisite for investment decisions and have failed to drive sustainable development behaviors. FIEs outperformed domestic firms economically but showed passive approaches to social welfare and environmental protection, often doing only the minimum required by law.

• Investment incentives, particularly corporate income tax (CIT) exemptions, are highly valued by foreign investors but are not the decisive factor in their decision to invest in Vietnam's mining and quarrying sector. Many investors would have invested regardless of these incentives due to low labor costs and low natural resource royalties.
• Current investment incentives in Vietnam are decoupled from sustainable development goals. Projects qualify for incentives based on their sector or location, regardless of whether they adopt sustainable practices, meaning incentives do not actively encourage socially or environmentally responsible behavior.
• The Vietnamese government experienced significant state budget losses due to corporate income tax incentives for FIEs in the mining and quarrying sector. These losses accounted for between 0.5% and 0.7% of the total industrial turnover in the sector from 2001 to 2006.
• While FIEs provide significantly higher average incomes for employees than domestic firms, they demonstrate a passive approach to social welfare. There is a lack of active investment in vocational training, health care, and social insurance, with some employers even failing to pay social insurance premiums.
• Environmental protection efforts by FIEs are primarily reactive and designed to satisfy legal requirements rather than proactive. Although many FIEs have environmental units or ISO certifications, there is evidence that pollution treatment equipment is often not operated frequently.
• The sustainable development behavior of FIEs is driven more by the policies of their parent companies and the effectiveness of the host country's legal enforcement than by government investment incentives.
• Local provincial authorities previously engaged in 'fence-breaking,' providing extra-legal incentives to attract investment, which led to unhealthy competition and strained local budgets. The Common Law on Investment 2005 aimed to stop this by unifying regulations.

APA

Nguyet, V. X., Tuan, H. N. M., & Hoa, H. C. (2009). Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/sd_incentives_vietnam.pdf

Chicago

Nguyet, Vu Xuan, Hong Ngo Minh Tuan, and Ho Cong Hoa. Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/sd_incentives_vietnam.pdf.

Wikipedia

{{cite report |last1=Nguyet |first1=Vu Xuan |last2=Tuan |first2=Hong Ngo Minh |last3=Hoa |first3=Ho Cong |title=Sustainable Development Impacts of Investment Incentives |publisher=International Institute for Sustainable Development |date=2009 |url=https://www.iisd.org/system/files/publications/sd_incentives_vietnam.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nguyet2009sustainable, author = {Nguyet, Vu Xuan and Tuan, Hong Ngo Minh and Hoa, Ho Cong}, title = {{Sustainable Development Impacts of Investment Incentives}}, institution = {International Institute for Sustainable Development}, year = {2009}, url = {https://www.iisd.org/system/files/publications/sd_incentives_vietnam.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }