The European Union's decision last week to give a "yellow card" to Vietnam for illegal fishing is the latest example of how a lack of sustainability threatens to harm businesses in Asean more than many realise.
As foreign direct investment (FDI) continues to flow into the fast-growing emerging economy of Vietnam, its government has failed to regulate businesses to ensure they are sustainable in the long run.
The European Commission (EC) has now warned Vietnam -- as it has been warning Thailand for years -- that it is not doing enough to combat illegal, unreported and unregulated (IUU) fishing. Shortcomings include the lack of an effective sanctioning system and a lack of action against IUU activities by Vietnamese vessels in the waters of neighbouring countries and Pacific island states.
Moreover, Vietnam has a poor system to control landings of fish that is processed locally before being exported to international markets including the EU, the world's fourth biggest fish importer, according to an EC press release.
Vietnam might have avoided a yellow card had it learned from the experiences of some of its neighbours. Thailand has faced the same warning since 2015. A ban on the export of processed seafood to Europe is possible if the country is deemed to have failed to fix the shortcomings the EU has identified. The moment of truth could arrive next month when EU officials conduct an audit.
Taiwan also faces a yellow card in line with a regulation the EU adopted in 2010 to ensure that its members were not complicit in illegal fishing and to promote sustainable use of the sea.
There had been rumblings that Vietnam was headed for trouble. The Vietnam Association of Seafood Exporters and Processors recently warned the country's seafood sector to up its game when it came to combating IUU fishing. The US National Oceanic and Atmospheric Administration also warned Hanoi that new US regulations to combat IUU fishing would be applied to imported seafood products starting in January.
The consequences of an EU import ban would be huge for Vietnam which, according to the Food and Agriculture Organization of the United Nations, ranks among the top 10 world producers of seafood products. The yellow card could also cause complications.
Ba Ria-Vung Tau Seafood Processing and Import-Export Company expects the yellow card would result in all shipments from Vietnam to the EU undergoing border inspections, resulting in higher production costs.
If exports receive customs clearance, businesses will have to pay €700 for every container stored at ports during the three- to four-week inspection. If exports are refused and forced to return to Vietnam, they will have to pay €4,000 to €5,000 for every container.
The hard line taken by the EU on unsustainable fishing is a welcome wake-up call for an industry that has been accused of everything from environmental despoilation to slave labour. But governments can and should do more besides imposing regulations to promote sustainable development. We need carrots as well as sticks.
Incentives provided to the private sector can be a vital tool to encourage them to more actively adopt sustainable strategies in Asia where threats are looming, especially those related to climate change.
Sustainability doesn't come cheap. Meeting the 2030 Agenda for Sustainable Development Goals (SDG) will cost US$2.5 trillion a year, according to the UN Economic and Social Commission for Asia and the Pacific. With donor and philanthropic funds amounting to only a few billion dollars a year, private-sector funding is essential to help address persistent development challenges.
Government incentives, such as tax breaks and public procurement, can be an instrument for the private sector to move from economics-driven investments to impact investments that improve social and environmental conditions.
"Public policy plays a key role in enabling innovative financing for development by creating a favourable ecosystem where private capital pays more attention to the SDGs," said Song Jong-guk, the president the Science and Technology Policy Institute of South Korea.
Examples of innovative financial approaches include the Social Outcomes Fund in Malaysia that engages entrepreneurs in sustainable development. The India Impact Investment Council, Singapore's Women's Livelihood Bond and the Thai Social Investment Taskforce are other programmes that foster impact investments.
The phrase "prevention is better than cure" is so true. Thus, it is better for companies to make sure they have sustainable business plans in place, while governments and regulators create the environment that encourages and enables the private sector to move in a more sustainable direction.
