Shifting towards the circular economy: Some policies for Vietnam

SHIFTING TOWARDS THE CIRCULAR ECONOMY:
SOME POLICIES FOR VIETNAM
Dr, Lecturer, To Hien Tha

Le Quy Don Technical University
PhD, Student, Nguyen Huu Hoang

Szent István University, Faculty of Economics and Social Sciences, Gödöllő
Master, Nguyen Huynh Đang Khoa

Hong Duc Hospital, HCM City
PhD, Student, Cao Trung Ha

Le Quy Don Technical University
Abstract
The main aim of this article is to analyse the necessity of transiting the Vietnamese
economy towards to the circular economy. This paper will focus on analyzing the basic
concepts of linear economy and its problems, the circular economy and the necessity of
transiting the Vietnamese economy towards to the circular economy. Expected result:
Confirming scientifically the necessity of shifting the Vietnamese economy towards the
circular economy and recommending some policies to support this transiting process.
1. Introduction
The global ecological environment is facing up to the unsustainable socio-economic
development and lacking in attention to the management of natural resources and ecosystems.
Natural resources are becoming increasingly exhausted, and environmental pollution is getting
worse. Many countries have changed their development strategies to wards a clean economy-a
circular economy for sustainable development to resolve these challenges. Vietnam is not an
exception. As a developing country, Vietnam's economy is maintaining its traditional linear
economy, meaning that the growth is still based on broad-based development factors, slowly
moving to growth in depth. The production process still consumes a lot of raw materials,
energy and discharges a massive amount of waste. The exploitation and utilization of natural

resources are not suitable and economical enough which lead to the fact that the environment
and ecosystem of many areas are severely polluted.
According to the Vietnamese Ministry of Natural Resources and Environment, raw
material costs and average disposal levels of Vietnamese enterprises are much higher than
the average level of the regional and all over the world. Besides that, everyday the urban
areas in Vietnam discharge nearly 32,000 tons of household waste, while this figure in rural

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areas is 12,000 tons(QDND, 2016). It is forecasted that by 2025, the amount of rubbish in
Vietnam will be about 100 million tons per year, including the household, industrial, and
medical waste. The status of garbage untreated before being discharged into the environment
has become an urgent issue in the environmental protection of Vietnamese government.
In the face of the challenges of the natural resources depletion and environmental
pollution, the concept of a new economy - the circular economy is receiving the attention
and support of many organizations and governments all over the world. This economic
model tends to reuse of raw materials, reduce raw material consumption, improve
production efficiency and minimize the impact on the environment.
This paper will focus on analyzing the basic concepts of linear economy and its
problems, the circular economy and the necessity of transiting the Vietnamese economy
towards to the circular economy.
2. Method: This paper uses an overall and comprehensive approach to collect and
summarize the recent studies and reports which are related to this topic. All the data and
figures are obtained based on the secondary data provided by some public organizations like
the Vietnamese Ministry of Health and the Ministry of Natural resource and Environment etc.
3. Results:
3.1. Linear economy and its basic problems
The linear economy model is an economic model that has been widely applied in the
early stages of industrialization in most Western developed countries and is also the current

dominant model of developing countries. The characteristic of the linear economy concept is
that waste, as a side result of the production process, is discarded directly into the environment
(Figure 1). The concept is based on the principle: ―take, make, consume, discard‖ and it
assumes boundlessness and easy availability of material resources (Drljača, 2015). That is, take
the resources you need, make the goods to be sold and make the profit and consume it and
discard of everything you do not need – including a product at the end of its lifecycle.
Figure 1. Phases of linear economy model

It is undeniable that the linear economy is no longer a tenable model within the
limits of our planet. The disadvantages of the linear economy outline the urgency for an
alternative model, which can be further interpreted as opportunities for the circular
economy. The main problems of a linear economy are found in the lack of solutions for the
growing shortage of materials, increased pollution, increased material demand and the
growing demand for responsible products. It can be classified into two types of
disadvantages of this economic model such as supply risks and the increase of externality.

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Supply risks
In a linear economy, there are uncertainties about material availability because our
planet has a limited quantity of materials and this availability depends on several
mechanisms. These uncertainties are fueled by an increase in price fluctuations, the critical
materials, the interconnection between products and processes.
Price volatility
The variation in materials prices have increased since 2006 and significantly raised
average prices. This not only induces problems for producers and buyers of raw materials,
but it also causes increasing risks in the market, making investments in material supply less
attractive. This can ensure the long-term increase in raw material prices.(Lee et al., 2012)
Critical materials

There are some industries making extensive use of critical materials for their
production. These are the metal industry, the computer and electronics industry, electrical
equipment industry and the automotive and transport industry. Dependending on critical
materials will ensure that companies are dependent on fluctuations in material prices, are
unable to make predictions, and are less competitive than less material-dependent
competitors. (Lacy et al., 2014)
Interconnectedness
Because of the expansion in trade activities, the interconnectedness of commodities
has become increasingly sharper. For example water-scarce countries with a surplus of
crude oil, trade oil for food, which results in a link between these products in the market.
Besides, the production of many products is dependent on water and fuels. Because of this
interdependence, scarcity of one raw material would have a widespread impact on prices
and availability of more goods. (MacArthur, 2013b), (Lee et al., 2012).
Increasing material demand
Because the growth of population and increases in prosperity, the number of
consumers with a higher degree of material consumption will increase by three billion in
2030. The consumption of resources has doubled in the period 1980-2020 and will triple in
the period up to 2050 when business-as-usual models are followed. (Macarthur, 2013c),
(Fischer-Kowalski et al., 2011).
Increase of externalities
Remaining to follow a linear economy will also induce negative impact such as
destruction to ecosystems, the decrease in product lifetime.
Degradation of ecosystems
Following the linear model of ‗take-make-dispose‘ will create waste. The
production processes will generate large streams of material that are not used but burned or
left on a garbage dump. This will eventually lead to an excess of unusable material
mountains overloading ecosystems. This ensures that the ecosystem is hampered in

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providing essential ecosystem services (such as providing food, building materials and
shelter, and the processing of nutrients). (MacArthur, 2013a)
Decreasing lifetime of products
In recent years, the life of products reduced grammatically. This is one of the
driving forces behind the expanding material consumption in the Western countries. The
service life of products is still declining, by process of positive feedback: Consumers want
new products more quickly and are using their ―old‖ products for a shorter period. This
results in a decreased need for quality products that can be used in the long term, which
stimulates consumers to buy new products even faster. (Bakker et al., 2014)
3.2. Circular economy and practical solutions
What is circular economy
There are some points of view to define the circular economy. Some of the authors
have provided resource-oriented definitions and interpretations, emphasizing the need to
create closed-loops of material flows and diminish the consumption of original resources and
its attendant harmful environmental impacts (Sauvé et al., 2016, Preston, 2012). Similarly,
there is a scholar who claims that the circular economy ―refers mainly to physical and
material resource aspects of the economy - it focuses on recycling, limiting and re-using the
physical inputs to the economy, and using waste as a resource leading to reducing primary
resource consumption‖(Zoboli et al., 2014). Another author(Morgan and Mitchell, 2015)
goes further and emphasizes the importance in a circular economy of keeping resources in
use for as long as possible as well as extracting the maximum value from products and
materials through using them for as long as possible and then recovering and reusing them.
In the available literature, there are also several interpretations of the concept that
attempt to move beyond the notion of management of material resources and incorporate
additional dimensions (Heck, 2006, Su et al., 2013). (Bastein et al., 2013) emphasize the
economic dimensions of the circular economy and suggest that this transition ―is an essential
condition for a resilient industrial system that facilitates new kinds of economic activity,
strengthens competitiveness and generates employment‘‘. According to (Ghisellini et al.,
2016), the radical reshaping of all processes across the life cycle of products conducted by

innovative actors has the potential to not only achieve material or energy recovery but also to
improve the entire living and economic model.
One of the most-frequently cited definitions that incorporate elements from various
disciplines has been provided by the Ellen MacArthur Foundation which describes the circular
economy as ―an industrial system that is restorative or regenerative by intention and design. It
replaces the ‗end-of-life‘ concept with restoration, shifts towards the use of renewable energy,
eliminate the use of toxic chemicals, which impair reuse, and aims for the elimination of waste
through the superior design of materials, products, systems, and, within this, business
models‘‘. Under this framework, the circular economy aims to keep both types of these
materials at their highest utility and value at all times through careful design, management and
technological innovation(MacArthur, 2013a). The overall objective is to ―enable effective
flows of materials, energy, labor, and information so that natural and social capital can be
rebuilt‘‘ (MacArthur, 2013b).

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At the EU level, the (EC, 2015) has included a description of the concept in its
Communication ―Closing the loop - An EU Action Plan for the circular economy‖.
Specifically, the circular economy is described as an economy ―where the value of
products, materials, and resources is maintained in the economy for as long as possible,
and the generation of waste minimized‘‘. The transition to a more circular economy would
make ―an essential contribution to the EU's efforts to develop a sustainable, low carbon,
resource efficient and competitive economy‘‘.
Based on these schools of thought above, it can be summarised that a circular
economy is an economic system where products and services are traded in closed loops or
„cycles‟. This economic system is characterized as an economy which is regenerative by
design, with the aim at low environmental impact and to maintain as much value as
possible of products, parts and materials. This means that the aim should be to create a
system that allows for the long life, optimal reuse, refurbishment, remanufacturing and

recycling of products and materials.
Circular solutions-Five business models driving the circular economy
According to the report, Circular Advantage, by the National Zero Waste Council
Circular Economy Working Group in 2014(Accenture, 2014), there are currently five types
of circular business models (see figure 2) such as Circular Suppliers, Resource Recovery,
Product life Extension, Sharing platforms and Products as a Services. These types are
identified in its analysis of more than 120 case studies of companies that are generating
resource productivity improvements in innovative ways.
Figure 2. The five business models of circular economy

Source:Accenture, “Circular Advantage: Innovative Business Models and Technologies to
Create Value in a World without Limits to Growth,” 2014. Design adjustments of graphs
by Elmar Sander and Katharina Olma.

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3.3. The necessity of transiting towards circular economy in Vietnam
During the 20th Century, the notation of closed-loop production was very popular in
Vietnam, especially in the agricultural sector. At that time, there was a prevalent farming
model named Vườn (Garden) - Ao (Pond) - Chuồng (Cage) which used waste from one
activity as input for another one. For instance, organic garbage from growing vegetables, such
as damaged vegetables, old leaves, etc., was used as animal food for fish in a pond or for
poultry and livestock living in an enclosure (cage). However, in recent years, the production
models which are environmentally friendly like the V-A-C have not received attention from
most of the enterprises. As a replacement for these models, the use of chemicals (fertilisers,
pesticides) and the application of automatic farming machines have not only broken the natural
circle of materials but also generated more waste, even toxic waste, often released into the
environment (Hoa, 2016).
Environmental aspect

Waste generated by industrial activities and urbanisation is one of the most serious
environmental issues in Vietnam. Vietnam has been called as one of the top ten countries
in the world with the worst air pollution since 2012(EPI, 2012). On 6 October 2016, Hanoi
- Vietnam‘s capital - was ranked the second worst city in the world regarding urban air
pollution (Saigoneer, 2016). According to the Report on the state of the national
environment in Vietnam in 2016, every year, Vietnam "uses" more than 100,000 tons of
plant protection chemicals; generates over 23 million tons of household waste. Besides
that, more than 7 million tons of industrial solid waste and over 630,000 tons of hazardous
wastes are released each year, while there is a little amount of waste and wastewater
treated before disposing to the environment.
Notably, there are 615 industrial zones, of which only about 5% have concentrated
wastewater treatment systems. There are more than 500,000 manufacturing establishments;
over 5,000 mining enterprises and about 4,500 craft villages, many of them using old
technology which causes the pollution for the environment. Every day, more than 13,500
medical centres generate about 47 tons of hazardous waste and 125,000 m3 of medical
wastewater. Besides that, Vietnam currently has 787 municipalities releasing 3,000,000 m3
of wastewater per day, but most of them have not been processed, and nearly 43 million
motorcycles and over 2 million cars are operating. There are 458 landfill sites, of which
337 landfills do not ensure the hygienic standard and more than 100 small-scale domestic
waste incinerators, which are in danger of generating dioxin, furan (OpendataVietnam).
The conversion of forest land, mineral exploitation, hydropower construction, and
exploitation of biodiversity resources have led to the narrowing area of natural ecosystems,
the fragmentation of habitats and the decline of biodiversity.
Human health aspect
As a consequence, the number of people who are suffering from cancer, acute and
chronic respiratory diseases and allergic reactions in some big cities of Vietnam is rising.
According to a study in 2013 of the Hanoi-based Central Lung Hospital, 95% of patients

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experience chronic obstructive pulmonary disease because of living in a polluted
environment. Another 2013 study by the Vietnam Ministry of Health noted that of every
100,000 people, 4,100 or 4.1% have lung diseases; 3,800 contract inflammation of the
throat and tonsils; and 3,100 have bronchitis, all of these diseases have certain relation to
the environment pollutions. The most worrisome problem is that people of working age are
those most often affected by air pollution (Vietnamnet, 2013).
Understanding of Vietnamese SME’s about circular economy
In June 2016 the Centre for Creativity and Sustainability Study and Consultancy
(CCS), a spin-off of the EU-funded SWITCH-Asia project ―Sustainable Product
Innovation,‖ researched with 152 Vietnamese SMEs operating in a variety of sectors.
78.8% of surveyed enterprises said that they do not have any idea about the concept of
circular economy. Only 13.3% of the surveyed company had some knowledge related to
the circular economy like sustainable production and consumption, cleaner production,
cradle to cradle and resource efficiency. The practice of Vietnamese SMEs towards
applying these concepts in business is still insufficient. According to another report
produced in 2014 by the Vietnam Environment Administration, only 0.1% (around 200 out
of 200 000) of the company all over Vietnam have been applying cleaner production
technology in their factories (VEA, 2014). Based on these facts, the demand for transiting
Vietnamese economy towards a circular economy is more urgent than ever.
4. Discussion and Conclusion
The circular economy model has been widely applied in many European countries
and other developed countries in the world today. The benefit that this economic model
can contribute to each county not only in economic sector but also in advancing the quality
of the environment and protecting the diversity of the ecosystem.Based on the analyzes of
the current state of the environment in Vietnam by the effects of traditional linear
economic models above, it can be argued that the need to shift towards linear models is
essential for Vietnam.
In recent years, the Vietnamese Government also has been aware of the negative
impacts of the linear economic model on the ecosystem, and on human health, so there

have been many policies and measures applied to protect the environment and develop
socio-economy. However, to date, the principles of the circular economy are relatively
new in Vietnam, and the government-level activities in supporting businesses to move
towards a circular economy only stop at specialized conferences. So the Government need
to build an action plan for the circular economy with the specific objectives to orient the
economy towards sustainable development.
Besides that, to take advantage efficiently the circular economy concept and learn
from the pioneering enterprises, the Vietnamese firms should consider the whole value
chain to find possibilities for innovating their business models. Capacity building, an
increase in productivity and especially the promotion towards factory workers and
stakeholders along the value chain (upstream to downstream) are also necessary for

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companies to apply a circular economy approach successfully in the longer term. Finally, a
strong commitment to these long-term sustainable strategies is essential to ensure the
development of circular economy business models and to convince investors to invest in
new circular economy ideas.
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