2022-1-13

Projecting the future of a formal recycling industry for construction and demolition waste in Vietnam

Researchers from Japan and Vietnam evaluated the financial and economic feasibility of a construction and demolition waste recycling industry in Vietnam and offered suggestions for accelerating the introduction of this industry based on Japan’s experience. There has been a great deal of interest in Vietnam about the economic conditions that have been indicated for the establishment of a recycling business for construction waste.

Our recent Japan-Vietnam collaborative study1 determined strong feasibility for a stationary plant for recycling construction and demolition waste (CDW) in Hanoi, Vietnam. The introduction of a CDW mobile recycling plant is also viable if socio-economic benefits are factored in. This research is the latest in a series of published studies addressing CDW in South-East Asia in general, and in Vietnam in particular. Its findings can be used to greatly assist business investors and policy makers in developing a formal CDW recycling industry in Vietnam.

Similar to Japan in the 1980s, Vietnam is now confronting an unprecedented increase in CDW as a repercussion of rapid urbanization. The absence of a formal CDW recycling industry exacerbates the inadequacy of CDW management in Hanoi, where illegal dumping is prevalent, and the reuse and recycling rate is as low as 10%. The lack of a sound understanding among relevant parties, be they investors or government agencies, about the potential of this industry is largely at fault.

Addressing this knowledge gap, the research team estimated the possible supply and demand for two hypothetical CDW recycling plants and evaluated their viability. Whilst the focus of many feasibility studies is limited to financial performance, this study projected further the plants’ socio-environmental performance by monetizing positive externalities of CDW recycling. The research team applied a weight-per-construction-area method for supply and demand estimation, and a discounted-cash-flow method for financial and economic evaluation.

figure of Discounted cash flows of the recycling plants
figure of Greenhouse gas (GHG) emissions and landfill amount in business-as-usual (BAU) and recycling scenarios

The research team’s estimations indicate a promising market for recycled concrete aggregates (RCA), owing to a wide range of infrastructure development plans/schemes in Hanoi. The results of the financial consideration signal that CDW recycling as an industry is worth venturing into. Feasibility indicators imply that the stationary plant can function profitably, with its internal rate of return (IRR) of 18%, at a competitive price of RCA compared with virgin aggregates and an attractive procurement price of waste concrete, i.e., equaling to that of backfilling, VND42,000/ton or US$1.81/ton. On the other hand, the mobile plant will struggle to be self-sustainable (IRR of -0.4%) when only financial income is considered. However, if positive socio-environmental impacts of recycling are factored in, the mobile plant will also become a viable investment. Once in operation, the CDW recycling plants could contribute to a reduction of up to 80% in GHG emissions and 90% in landfill occupation compared with current situations in Vietnam, where CDW is mainly marked for disposal and virgin materials are quarried for construction.

These findings suggest a strong need for integrated and prompt intervention by the government to stimulate the introduction of the CDW recycling industry. Drawing from success stories from Japan and other countries, the research team recommended punitive fines for illegal dumping, compulsory green procurement, and development of quality standards for recycled construction materials for Vietnam.

*Net present value (NPV) is a feasibility indicator. It shows the difference between the present value of cash inflows and the present value of cash outflows over a certain time period. A positive NPV signals a profitable investment or project.
** IRR is another feasibility indicator. IRR is the discount rate when NPV equals nil. The general rule of thumb: the higher the IRR, the more attractive the investment.

Research dissemination

This research has attracted a great deal of interest in Vietnam. The research team was interviewed by the Science and Development Newspaper of the Ministry of Science and Technology of Vietnam, which stressed the need to promote CDW recycling approaches that are suitable to the current situation in Vietnam. The article can be found here:
https://vietq.vn/chat-thai-xay-dung-can-co-quy-dinh-tieu-chuan-ky-thuat-san-pham-tai-che-d189803.html【外部サイトに接続します】(in Vietnamese).

Research Grant

This research was supported by the project of the Japan Science and Technology Agency (JST) - Japan International Cooperation Agency (JICA) on Science and Technology Research Partnership for Sustainable Development (SATREPS) (No. JPMJSA1701).

The study

Hoang N.H.*1, Ishigaki T.*1, Kubota R.*1, Tong T.K.*3, Nguyen T.T.*4, Nguyen H.G.*3, Yamada M.*1, Kawamoto K.*2 (2021) Financial and economic evaluation of construction and demolition waste recycling in Hanoi, Vietnam. Waste Management 15, 131, 294-304. doi: 10.1016/j.wasman.2021.06.014.

Affiliations of the authors:
*1 National Institute for Environmental Studies (Japan)
*2 Saitama University (Japan)
*3 Hanoi University of Civil Engineering (Vietnam)
*4 Institute of Strategy and Policy on Natural Resources and Environment (Vietnam)

Contacts

National Institute for Environmental Studies
Material Cycles Division
Waste Management Engineering Research Section
Chief Senior Researcher, Tomonori Ishigaki

International Waste Management Research Administration Office
Officer, Risako Nogami
Expert, Kae Inaba