A sugar tax has been on the cards for Vietnam for some time now and may be drawing closer to becoming a reality. It has, however, been met with broad pushback from industry and industry groups. This article looks at the public debate around a possible sugar tax in Vietnam, the impact it might have, and what foreign-owned businesses should be mindful of in this context.
Back in the 40s, or so the story goes, a local bartender working at the Metropole Hotel in Hanoi got creative and decided to make coffee using frothy egg whites as a substitute for cow’s milk which was very scarce at the time. But whereas egg coffee has since become very popular among locals and tourists alike–now available all over the city–said scarcity has become a thing of the past.
In fact, as Vietnam has moved to become ever-more integrated into the global economy through foreign investment and free trade agreements, the availability of all manner of food and drinks, from all over the world has soared.
Furthermore, wages and disposable incomes have also climbed dramatically and this has translated to more money to consume more food and drink.
But more money has not equated to better quality. On the contrary, there has been an explosion of fast food restaurants all over Vietnam and all manner of junk foods, including a wide range of sugary beverages, now fill whole aisles at major supermarkets.
But where this might be a good thing for the economy, this change of diet has also led to some pretty damning health outcomes.
For example, whereas just 5.6 percent of children under five years old were overweight in 2010 by 2019 that number had jumped to 7.4 percent. Furthermore, the number of overweight kids between the ages of 5 to 19 more than doubled between 2010 and 2020, with the number of obese kids in the same age bracket over the same period tripling from 2.5 to 8.1 percent–Hefty figures for a country historically known as being among the skinniest in the world.
And it’s in this context that the idea of a sugar tax has been floated with the latest pitch from the Ministry of Finance suggesting a 10 percent tax on drinks containing more than 5 grams of sugar per 100 millilitres.
As is to be expected, this has not been welcomed by sugary beverage makers and industry groups which have pushed back against the tax.
The Vietnam Beer Wine Beverage Association, in particular, has been among the most vocal. It has looked to water down the connection between sugary drinks and weight gain, arguing that there are more factors than just the one driving rising rates of obesity and essentially that sugary beverages should not be singled out.
Furthermore, it has been argued that a sugar tax would have a negative impact on the economy. An argument supported by the Central Institute for Economic Management with the head of its Business Environment and Competitiveness Research Department, Nguyen Minh Thao, suggesting a 10 percent sugar tax could wipe half a percentage point, about US$2.2 billion, off Vietnam’s GDP.
That aside, soft drink consumption is increasing rapidly in Vietnam, with at least one analysis finding the market is expected to grow between now and 2030 at a compounded annual growth rate of 4.8 percent. Pulling these sorts of numbers, a tax might reduce consumption and slow said growth but it’s unlikely to stop the market from growing altogether.
Furthermore, that reduced consumer spending on soft drinks just means increased consumer spending somewhere else. On that note, most of the big soft drink makers have a range of low-sugar options already, Coke Zero and Pepsi Max, for example.
But probably the most pivotal argument, which goes to the very heart of the proposal, is that sugar taxes elsewhere have reduced soft drink consumption but haven’t led to a reduction in obesity.
And this might be true on the face of it, however, undeniably less consumption equates to less calories which equates to less weight gain. In this context, a sugar tax may not reduce obesity rates overall but it may produce a reduction in the rate of obesity relative to if a tax had not been implemented at all.
Notably, research into the impacts of the UK’s sugar tax found a relative reduction of obesity rates among year six girls of 8 percent, 19 months after the tax came into effect.
But, where debate rages over a sugar tax, there does seem to be a general consensus that obesity growth will still persist. This then beggars the question, if not a sugar tax, then what?
With a sugar tax off the table, public health officials may look elsewhere to tackle rising rates of obesity. Public health campaigns, for example, can be very effective means of changing consumer behaviour, likewise for advertising bans, and product labelling regulations. With this in mind, and taking into account that there are already at least 50 countries with some form of sugar tax in place, for sugary beverage makers, a sugar tax in Vietnam could be a case of better the devil you know.
All of that said, a sugar tax has been on the table since at least 2018 and six years on there has still been no definitive outcome. With this in mind, it could still be a while longer before any concrete moves are made. That being the case, foreign firms that might be impacted can best keep abreast of developments with respect to a sugar tax in Vietnam by subscribing to the-shiv.