Foreign investment, economic growth, and environmental degradation since the 1986 “Economic Renovation” in Vietnam

Abstract

Vietnam has achieved impressive economic growth principally supported by foreign direct investment (FDI) in the last three decades. However, environmental deterioration is observed. No studies have ever been conducted to examine the link between economic growth and environmental degradation, focusing on the important role of the FDI, in Vietnam in both short run and long run. Using the ARDL and the threshold regression techniques for 35 years from 1986, Vietnam's "Doi Moi" (economic renovation), the U-shaped relationship between economic growth and the environmental quality is found in the long run and at the upper threshold of economic growth. FDI in the long run and at the upper threshold of economic growth also leads to further deterioration of the environmental quality. Also, consumption of fossil fuel energy deteriorates the environment in the long run, and at any level of economic growth. These findings simply mean that Vietnam has to adopt a new growth model with the focus on the quality FDI projects and clean energy sources to achieve the dual objectives: (i) sustained economic growth and (ii) improved environmental quality.

Climate Change and Obesity

“…The relationship between economic growth and environmental degradation is shown in the environmental Kutznets curve (EKC). The EKC hypothesis presents a bell-curved relationship between economic growth and CO 2 emissions and its validity in the context of Vietnam has recently been studied [18]. In that study, Vo and Ho utilized the auto-regressive distributed lags (ARDL) model to investigate both short-term and long-term relationships between variables and grouped different energy consumption types into two ▶Fig.…”

“…Aslan et al [19] found that the effect of economic growth on CO 2 emissions in the United States of America was increasing from 1982 to 1996 and decreasing from 1996 to 2013. In Vietnam, CO 2 emissions have increased approximately ten times while economic growth has increased five times from 1986 to 2018 [18]. Energy consumption has tremendously increased, 14 times by fossil sources and more than 50 times by renewable energy sources [18].…”

“…In Vietnam, CO 2 emissions have increased approximately ten times while economic growth has increased five times from 1986 to 2018 [18]. Energy consumption has tremendously increased, 14 times by fossil sources and more than 50 times by renewable energy sources [18]. The annual economic growth rate has been maintained above 5 % since 1988, principally supported by foreign direct investment which seems to improve environmental quality at the lower threshold of economic growth and in the short-run.…”

Income, Coal Consumption, And The Environmental Kuznets Curve In Vietnam

“…Another econometric problem faced by researchers is the omitted variables bias (Agras and Chapman, 1999;Harbaugh et al, 2002;Richmond and Kaufmann, 2006;Stern, 2017). To mitigate this problem, several EKC analyses take other variables into account, such as renewable energy consumption (Antonakakis et al, 2017;Danish et al, 2017;Erdogan et al, 2020;Pata and Caglar, 2020;Vo and Ho, 2021), oil prices (Balaguer and Cantavella, 2016;Boufateh, 2019;Malik et al, 2020), and among others. In the present study for Vietnam, we will shed light on the influence of renewable energy consumption and oil prices in driving coal consumption because it has been widely discussed in the field.…”

“…As a result, Vietnam is largely dependent on imported coal for its energy needs (Nguyen et al, 2019;Thong et al, 2021) and especially susceptible to energy prices (Apergis and Gangopadhyay, 2020;Pham and Le, 2020). Meanwhile, the reliance on fossil fuels like coal has spurred concerns over adverse consequences on the environment (Al-Mulali et al, 2015;Finenko and Thomson, 2014;Vo and Ho, 2021). In conjunction with the global efforts against climate change, Vietnam committed to greenhouse gas emission reductions by 9% by 2030 compared to the business-as-usual scenario and up to 27% with international support for the mitigation measures under the Paris Agreement.…”