Banking and Finance
LEGAL BARRIERS AND SOLUTIONS TO ENHANCE THE INVESTMENT EFFICIENCY OF MUNICIPAL SOLID WASTE-TO-ENERGY PROJECTS IN VIETNAM
At the seminar to announce the Report “Flow of business law in Vietnam 2024 and the Assessment Report on standards and technical regulations” of Vietnam Chamber of Commerce and Industry (VCCI) on April 22, 2025
LLM., Lawyer Nguyen Thanh Ha
Vice Director – Vietthink Law Firm & IP Agent
Vietnam aims to attract investment in waste-to-energy (WTE) projects to simultaneously solve urgent issues in environmental protection, combat climate change, promote sustainable development and enhance the circular economy [1], in which it is necessary to improve management efficiency, urban waste treatment in the direction of promoting new technologies to replace outdated and adversely affecting incineration and landfill technologies, promoting energy regeneration and recycled products and fuels [2],[3]. For developing countries, shifting public investment towards private-sector participation presents an opportunity to leverage technological expertise, financial resources, and international experience in waste-to-energy project development. However, in Vietnam, investment attraction in this sector remains largely ineffective due to unresolved legal barriers. These obstacles stem from overlapping regulations, systemic inadequacies, and the absence of detailed legal guidance on bidding, environmental compliance, and related processes. Even in somes provinces where the National Assembly has approved specialized mechanisms to facilitate such investments, the effectiveness has been limited, and the framework has not been widely replicable across other regions [4],[5]. Since 2018, the expert team of Vietthink Law Firm has provided legal advisory services for numerous municipal solid waste (MSW) treatment projects (WTE projects) in Vietnam. Through this experience, it has become evident that most WTE projects face significant “deadlocks” affecting both investors and local authorities. These challenges hinder project implementation, resulting in delays and the failure to meet expected investment progress [6]. Drawing from practical consulting experience, as well as policy and legal research in the WTE sector, this research summarizes key legal barriers and proposes solutions to eliminate obstacles. The objective is to enhance investment effectiveness and accelerate the development of WTE projects in Vietnam.
Legal barriers restraining investors and challenging local authorities
Regulations on bidding for investor selection and bidding for procurement of MSW treatment facilities
In accordance with the provisions of the Law on Investment 2020 and the Law on Bidding 2023, guided by Decree No. 23/2024/ND-CP dated February 27, 2024, an investment project on the construction of MSW plant is subject to the bidding of investor selection. Furthermore, pursuant to Article 78 of the Law on Environmental Protection 2020 (Law on Environmental Protection), the selection of MSW treatment facilities must be conducted by the provincial-level People’s Committee through bidding process in accordance with the law on bidding, and selection in the form of ordering and task assignment is permissible only when selection through bidding is not feasible.
Under the above provisions, the investor of a new investment MSW treatment plant project must undergo two bidding procedures: (i) Bidding for investor selection to implement the project in accordance with the law on investment, bidding and specialized laws; and (ii) Bidding for selection of MSW treatment facilities in accordance with the law on bidding and regulations on ordering public non-business services funded by the State budget. However, practical application of Article 78 of the Law on Environmental Protection reveals the following shortcomings:
First, many local authorities struggle to distinguish these two bidding procedures: Bidding for investor selection to implement land-use projects is typically applied to newly invested WTE projects or those under the public-private partnership (PPP) model. However, it does not apply to existing projects that undergo technological conversion (e.g., transitioning from traditional incineration and landfill methods to incineration with power generation). The investor selection bidding process is conducted once for the entire project implementation period and must be completed before the investor begins project execution and investment. In contrast, bidding for the selection of MSW treatment facilities is a procedure for identifying establishments that provide public non-business services funded by the State budget. This process is organized annually or periodically in accordance with budget management regulations. Generally, investors are only eligible to participate in bidding for the selection of MSW treatment facilities once they have completed the investment and construction of the plant. In consulting practice, our expert team has observed inconsistent understandings and views on the aforementioned regulations in certain localities. This has resulted in local management agencies offering conflicting opinions and guidance to investors regarding procedures and requirements for project implementation and provision of MSW treatment at the provincial level.
Second, Article 78 of the Law on Environmental Protection outlines general regulations for bidding in the selection of MSW treatment facilities. However, it lacks specific provisions for power generation MSW treatment projects (WTE project), failing to account for the distinct characteristics of these projects compared to conventional MSW treatment projects. WTE projects utilize modern technology and require substantial investment, necessitating a commitment or guarantee regarding project inputs. Specifically, the input MSW for these projects is managed by the State, not under the autonomy of the investor. The stability and sufficiency of input waste volume throughout the project’s term are essential to ensuring its output and financial viability. Key revenue streams include electricity sales, fuel, recycled products derived from waste, and income from MSW treatment services.
Consequently, the requirement for investors to dedicate significant capital and resources to a project while simultaneously participating in annual bidding processes for the selection of MSW treatment facilities poses substantial financial risks. A key prerequisite for investors to commit capital and for banks and credit institutions to finance the project is the assurance from local management agencies regarding a stable supply of input waste. However, under the provisions of Article 78 of the Law on Environmental Protection, local Authorities are restricted from making commitments to guarantee input waste supply or from deciding to order long-term MSW treatment services for investors. Some localities, such as Da Nang City and Ho Chi Minh City, have implemented specific mechanisms for ordering MSW treatment services for projects involving technological conversion with energy recovery. Nevertheless, these mechanisms remain limited in scope, have not been fully institutionalized, and are not uniformly applicable across other localities nationwide. As a result, since the Law on Environmental Protection 2020 took effect, nearly all WTE projects have stagnated, unable to progress due to the lack of viable solutions to overcome these regulatory obstacles faced by both investors and local authorities.
Third, in terms of purpose, bidding for investor selection in MSW treatment projects and bidding for the selection of MSW treatment facilities are intended to uphold competitiveness, fairness, transparency, and economic efficiency in MSW investment and treatment. However, the rigid application of Article 78 of the Law on Environmental Protection creates contradictions and overlaps with planning, investment, and waste management regulations. Specifically, for both new investment projects and technology transformation projects, when assessing and approving an investor’s implementation of a project, the competent Authorities have already evaluated its alignment with various planning frameworks, including the local general plan and the MSW management plan. Pursuant to the Law on Planning and the Law on Environmental Protection, MSW treatment areas and WTE projects are incorporated into provincial planning or inter-regional and inter-provincial waste management planning. Therefore, in principle, competent Authorities have already allocated and determined the volume of input waste assigned to each solid waste treatment area within the planning framework before granting investment approval. As a result, organizing bidding for MSW treatment services in areas that have already been designated within the planning framework may no longer be necessary to ensure competition, fairness, and transparency.
Fourth, regarding the need for bidding to ensure economic efficiency and competitiveness in solid waste treatment service pricing, we believe that these objectives can still be achieved through mechanisms and principles governing price adjustments and service quality regulations, in accordance with the Law on the State Budget and its guiding documents. Moreover, our consulting experience indicates that many localities remain concerned about the need to conduct bidding to ensure competitive pricing, often by comparing outdated MSW treatment technology costs with those of modern WTE technologies. We find these concerns to be misplaced, as the inevitable increase in costs associated with adopting new technologies is a necessary step toward achieving the broader goal of gradually phasing out (and ultimately eliminating) MSW treatment plants relying on outdated technologies. The transition to modern technologies aligns with strategic objectives related to environmental protection, climate change mitigation, and the advancement of a circular economy ranging from the national level to regional, inter-regional, and provincial levels.
Lack of regulations and mechanisms enabling competent Authorities to commit to the volume of input waste for WTE projects
As analyzed above, MSW treatment services fall under public non-business services funded by the State budget. As a result, competent Authorities cannot commit to ensuring the supply of input waste for the entire project implementation period without first conducting a bidding process, due to the absence of a specific mechanism or any legal document providing clear guidance on this matter. Although local Authorities recognize the legitimate needs of investors and the distinct characteristics of waste-to-energy projects compared to conventional MSW treatment projects, Article 78 of the Law on Environmental Protection and its guiding documents fail to specify what constitutes “impossible cases for selection through bidding” to justify applying the ordering mechanism as prescribed.
Meanwhile, when evaluating the conditions for applying the ordering mechanism under Clause 2, Article 12 of Decree No. 32/2019/ND-CP dated April 10, 2019 - which governs the assignment of tasks, ordering, or bidding for the provision of public products and services using State budget funds from recurrent expenditures - two of the three conditions are challenging to fulfill before an investor completes the construction of the facility. These include: (i) demonstrating specificity related to intellectual property or proving that only one supplier has registered to provide the service; and (ii) requiring economic and technical norms, unit prices, and pricing for public non-business services to be issued by competent authorities as a basis for placing orders.
In order to support investors but still ensure that there is a basis to apply the form of ordering MSW treatment services for WTE plants, some localities also consider organizing bidding to have a basis to prove the case of “only one supplier registering to implement” according to Clause 2, Article 12 of Decree No. 32/2019/ND-CP or in cases where it is impossible organize bidding according to Article 78 of the Law on Environmental Protection. However, after that, local management agencies also faced difficulties in developing the conditions and criteria of the bidding package because there were no detailed guidelines for bidding for the selection of MSW treatment facilities for waste-to-energy projects, and there were no economic-technical norms and unit prices and public service prices are promulgated [7]. If approached in the above way, then even if the bidding is successfully organized, the order cannot be carried out for the entire operation time of the project.
The Investor may propose various forms of guarantee regarding the volume of input waste to the local management agency, including: (i) A long-term contract between the Authority and the Investor, stipulating the volume of waste that the locality will provide to the Plant throughout the project implementation period. This volume is typically based on the Investment Policy Approval. The contract may also outline the unit price for solid waste treatment services, temporarily calculated according to the pricing principles set forth in Circular No. 02/2022/TT-BTNMT dated January 10, 2022, issued by the Ministry of Natural Resources and Environment. Additionally, the contract should define the rights and obligations of the parties at each stage of project implementation; (ii) An administrative document or decision issued by the Authority, committing to provide a sufficient volume of input waste for the entire project duration and specifying the temporarily calculated unit price for MSW treatment services.
From the perspective of credit institutions and banks providing capital, a long-term contract between the Authority and the Investor offers a stronger legal basis for financial appraisal and mitigates risks associated with policy changes compared to administrative documents. However, as previously analyzed, both methods face challenges. Local management agencies struggle to find legal documents detailing these provisions and lack standardized long-term contract templates issued by specialized ministries. Consequently, localities remain hesitant to implement these approaches. Some may refer to long-term contracts previously signed between Investors and other localities, such as Hanoi City and Phu Tho Province, as potential models.
Proposed Solutions to Address Legal Barriers and Enhance Investment Efficiency in Waste-to-Energy Projects in Vietnam
Based on practical experience in providing investment consulting for waste-to-energy projects in Vietnam and in-depth research into relevant policies and legal regulations in this field, we propose several solutions to eliminate legal barriers and enhance the investment efficiency of WTE projects in Vietnam:
First, it is necessary to introduce specific mechanisms and normative documents permitting the application of the ordering mechanism for MSW treatment services for WTE projects. To ensure transparency and economic efficiency in the selection and payment of MSW treatment services in accordance with budget management regulations, detailed conditions could be added regarding the application of the ordering mechanism, the timing and duration of orders, and principles for price adjustments, specifically tailored for WTE projects.
Second, there should be specific mechanisms and normative documents outlining the forms through which local management agencies can commit to providing the volume of input waste for WTE projects that have been approved in alignment with relevant planning frameworks and MSW management plans. Consideration could be given to issuing a model contract for MSW treatment services with power generation, specifically applicable to WTE projects.
Third, it is essential to review and refine waste management planning at the provincial, regional, and inter-regional levels to ensure the appropriate allocation of waste treatment facilities and the streamlined flow of waste collection, transportation, and treatment to centralized facilities. If WTE projects and centralized MSW treatment facilities are appropriately allocated within provincial, regional, inter-regional, and local waste management plans, the obstacles related to ensuring the volume of input waste for waste-to-energy projects can be resolved.
Fourth, there is an urgent need to issue detailed guiding regulations and model contracts for waste-to-energy projects, particularly those aimed at attracting and selecting investors under the public-private partnership (PPP) model.
List of References
Central Committee (2022). Resolution No. 24-NQ/TW of the Politburo on Socio-Economic Development and Ensuring National Defense and Security in the Southeast Region until 2030, with a Vision to 2045.
Prime Minister (2021). Decision No. 1658/QD-TTg Approving the National Green Growth Strategy for 2021–2030, with a Vision to 2050.
Prime Minister (2022). Decision No. 896/QD-TTg Approving the National Climate Change Strategy until 2050.
National Assembly of the Socialist Republic of Vietnam (2024). Resolution No. 136/2024/QH15 on Urban Governance and Pilot Implementation of Specific Mechanisms and Policies for the Development of Da Nang City.
National Assembly of the Socialist Republic of Vietnam (2023). Resolution No. 98/2023/QH15 on Pilot Implementation of Specific Mechanisms and Policies for the Development of Ho Chi Minh City.
Dau Anh Tuan, Pham Ngoc Thach, Pham Van Hung (2024). Investment Procedures for Waste-to-Energy Plants: Barriers and Solutions, Report, Vietnam Chamber of Commerce and Industry (VCCI).
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Tam An (2025). Waste-to-Energy Faces Mounting Challenges, with Projects Taking 5–8 Years to Complete. Vietnamnet, https://vietnamnet.vn/dien-rac-gap-kho-chong-chat-mot-du-an-mat-5-8-nam-moi-hoan-thanh-2387083.html, accessed: April 21, 2025.
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05 June 2025