Vietnam: What’s happening in the pulp and paper sector?

28 Feb

About 750,000 tonnes of new pulp and paper capacity is planned or under construction in Vietnam. The development of new industrial tree plantations to feed this industry is being supported by the Vietnamese government and by international aid agencies, despite the lack of research into whether such plantations alleviate poverty.

By Chris Lang. Published in WRM Bulletin 115, February 2007.

Vietnam’s paper industry is booming. In 1995, paper production stood at 220,000 tonnes. In 2007, the Vietnam Paper Association aims to produce more than one million tonnes of paper. Demand far exceeds supply and in 2006, Vietnam imported 709,000 tonnes of paper products. A large proportion of paper produced is for packaging – a result of Vietnam’s expanding export economy.

At present, Vietnam’s pulp industry supplies only 37 per cent of domestic demand and Vietnam also has to import pulp to keep its paper mills running. In 2007, the industry anticipates importing 232,000 tonnes of pulp.

This could be about to change. According to a 2006 Ministry of Industry paper industry plan,Vietnam’s pulp and paper sector needs US$6 billion of investment by 2020. Some of this investment has already started and about 750,000 tonnes of new capacity is currently planned or under construction.

In May 2006, construction began on the 130,000 tonnes a year An Hao Pulp Factory in Tuyen Quang province, in the north of Vietnam. Japan’s Marubeni Corp won a US$130 million contract to build the mill. A paper mill is planned in a second phase of the project. The government has approved an area of 380,000 hectares forest land to supply the mill.

In the south of Vietnam, construction is under way on the Phuong Nam Pulp Mill in Long An province. Phuong Nam will produce 100,000 tonnes of kenaf pulp a year. Financing to the tune of US$70 million comes from the French bank Société Générale for imports of equipment and services. Petrovietnam Finance Company and the Transport, Communication, Development and Investment Company are also funding the project. Austria’s Andritz is supplying machinery with backing from the Austrian, German and Swedish export credit agencies.

In August 2006, the Saigon Export-Import Company announced plans to invest US$150 million in a 115,000 tonnes a year pulp mill in Nui Thanh district, in the central province of Quang Nam. To supply the raw material for the mill, Quang Nam authorities have allocated 30,000 hectares of land for acacia and eucalyptus plantations.

In November 2006, the Vietnam Paper Corporation announced plans to invest almost US$300 million in an expansion of the Bai Bang Paper Company in Phu Tho province. Vinapaco plans to build a 250,000 tonnes a year pulp production line at the Bai Bang site. A further US$100 million will be spent on “material forest zones”, otherwise known as industrial tree plantations, covering a total of 160,000 hectares in five provinces.

In January 2007, Hong Kong-based Lee & Man Paper Manufacturing announced plans to build a 320,000 tonnes a year containerboard paper mill and a 150,000 tonnes a year pulp mill in Vietnam. Lee & Man is reported to be also interested in investing in plantation projects in Vietnam.

These pulp mill projects (with the exception of Phuong Nam, which is to be supplied by farmer-planted kenaf) will mean more industrial tree plantations, more biodiversity loss, more dried up streams, lowered water tables and less land for agriculture and rural communities.

Recently, William Sunderlin and Huynh Thu Ba, researchers at the Centre for International Forestry Research, asked themselves two research questions about Vietnam: how forests help alleviate poverty; and whether the plans for large scale tree planting are consistent with the government’s goal of eliminating poverty. They concluded that their questions could not be answered, because “there has not yet been any primary empirical research directed specifically at answering these questions”.

Yet, even without this research, the development of industrial tree plantations to feed the pulp industry is heavily subsidised by the Vietnamese government as well as by bilateral and multilateral aid agencies. While the benefits of these subsidies go to the pulp and paper industry and to exporting industries, the impacts are felt by rural people.

In August 2006, the Ministry of Agriculture and Rural Development (MARD) announced that it would be conducting “concentrated afforestation” on 258,000 hectares of land in the Central Highlands. In February 2007, the MARD announced plans to establish 2.4 million hectares of plantations over the next five years in the northern mountainous region. According to the Vice Minister for Agriculture and Rural Development, Hua Duc Nhi, the plantations are intended to provide raw material for the pulp industry, which will produce 700,000 tonnes of pulp a year in the northern region of Vietnam, once the plantations are established.

The German government is supporting a project to establish plantations in five northern provinces in Vietnam. The Asian Development Bank has approved a US$45 million loan for an “afforestation” project in the central highlands. The World Bank is funding a Forest Sector Development Project in four central coastal provinces. The project aims to establish 66,000 hectares of plantations.

Meanwhile, the government’s flagship tree planting project, the Five Million Hectare Reforestation Programme (5MHRP) seems to be imploding. The 5MHRP started in 1998, and aimed to plant one million hectares of industrial tree plantations to feed the pulp and paper industry. “In Vietnam, they make plans which are inappropriate and then they cancel them,”a World Bank forestry specialist explained to Keith Barney, a Canadian academic, in 2003. The Bank’s expert described the 5MHRP as “not realistic”. Two years later, Hua Duc Nhi, MARD Vice Minister for Agriculture and Rural Development acknowledged that tree planting was “way behind schedule”. Government surveys found that the quality of plantations was poor and the supply of wood was small. The target has now been reduced to three million hectares.

In January 2007, Education Nature Vietnam reported that, “Government audits have revealed that between 1998 and 2005, a total of 35 billion VND (US$2.25 million) was misappropriated from a forestation fund nationwide and put to private use by provincial authorities.”

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