09/09/2025
Share
Keywords: Economic Development, FDI, Financial Development, Governance Quality, Carbon Emissions, ASEAN
In recent decades, ASEAN has achieved remarkable economic growth, but this has been accompanied by increasing pressure from environmental issues. Air pollution, particularly carbon emissions, is emerging as a regional challenge. The study by the Ho Chi Minh City University of Economics student group on "Economic Development and Environmental Burden: A Comprehensive Picture in ASEAN" shed light on the complex relationship between economic growth and carbon emissions, thereby highlighting the urgent need to create sustainable development models that balance economic benefits and environmental protection in ASEAN's future.
The Path of ASEAN's Development
In studies on the relationship between economics and the environment, a frequently mentioned hypothesis is the environmental Kuznets curve, which suggests that as national income reaches a sufficiently high level, pollution tends to decrease. This hypothesis was once expected to become a universal law of development. However, findings from the UEH student group's research suggest a different perspective: for the ASEAN-5 countries, this trajectory appears to be U-shaped. Specifically, initial growth leads to increased pollution, but after reaching a certain threshold, environmental quality declines again instead of improving.
This difference stems from the distinct developmental characteristics of the economies. In the initial growth phase, the main drivers still rely on energy-intensive and high-emission industries. On the contrary, developed countries have shifted toward service and high-tech economies, thereby significantly reducing their dependence on a polluting growth model. In that context, emerging economies often lack the resources and technology to invest in clean production, leading to increased emissions alongside industrialization.
These findings reflect the complex relationship between economic growth and the environment, and also warn of the risk of reproducing an unsustainable development model without timely adjustments. The challenge is how to maintain economic growth while controlling pollution and avoiding the "dirty development trap."
To solve the problem, structural transformations are needed: prioritizing green industries, promoting investment in renewable energy, while also reshaping trade, financial, and social policies toward sustainability. This is not only a responsibility, but also opens up opportunities to create a more efficient and environmentally friendly development model. This process requires synchronized coordination between domestic agencies and close cooperation at the regional level.
The Story of FDI: Risk or Opportunity?
In the growth process, foreign direct investment (FDI) is often considered an important driver. However, research shows that FDI in ASEAN countries is positively correlated with carbon emissions, thus supporting the "pollution haven" hypothesis – the phenomenon of polluting industries from developed countries shifting to developing economies with lax environmental regulations.
The core issue lies not in the nature of the capital flow, but in how it is managed. Without screening and orientation policies, FDI can become a threat to the environment. Conversely, with the right strategic and proactive thinking, FDI can become a lever to promote clean technology and sustainable production methods. This requires ASEAN countries not only to prioritize attracting capital, but also to focus on selecting projects with green added value, linked to technology transfer and human resource development.
To turn FDI from a risk into an opportunity, it is necessary to establish an investment attraction roadmap based on strict environmental criteria, while also issuing incentive mechanisms for investors committed to adopting clean technology. Furthermore, regional cooperation in developing common environmental and labor standards is an important step that helps avoid a "race to the bottom" in attracting capital, thereby protecting the sustainable environmental interests of all ASEAN.
Financial Development and Quality of Governance: Environmental protection shield
When we talk about pollution, the image is often associated with factories or transportation, but the role of the financial system is rarely considered. Studies show that financial institutions, particularly banks, can contribute to reducing emissions by providing capital and credit for green projects, encouraging investment in renewable energy and clean technology.
However, this effectiveness only comes into play when accompanied by high-quality governance. Transparent and accountable governance not only ensures the effective implementation of environmental policies but also prevents corruption and ensures compliance with sustainability standards. The combination of development finance and strong governance creates a dual engine: attracting green investment and promoting technological innovation. These two factors have a reciprocal relationship; good governance helps attract FDI, while a developed financial system ensures that capital is used effectively for environmental goals.
To maximize this role, it is necessary to develop green financial policies such as green investment funds, green bonds, and mandatory environmental disclosure mechanisms. Simultaneously, improving governance quality requires transparency and accountability from both the public and private sectors. The government needs to establish a strong legal framework, while businesses must integrate governance standards into their operations. Only with synchronized coordination can finance and management become a sustainable foundation for economic growth linked to environmental protection.
The importance of data and science in guiding policy
Beside macroeconomic factors, the study also emphasizes the crucial role of data and scientific methodology. The application of advanced analytical techniques has yielded highly reliable results, demonstrating the importance of using modern tools to explain the complex relationships between the economy and the environment.
In the context of increasing globalization and climate change, accurate data and scientific analysis are not only a necessary foundation but also crucial for policy planning. Decisions lacking a scientific basis can lead to unforeseen consequences, waste resources, and even exacerbate environmental problems.
Therefore, investment in scientific research, especially interdisciplinary research, should be considered a long-term strategy. Promoting cooperation among scientists, experts, and research institutions will generate reliable knowledge and data, serving as a guide to accurately identify the root causes of environmental issues and propose effective and sustainable solutions.
Necessary steps
It's time for humanity to act, not just as current citizens, but also with the responsibility of future builders. The Earth is not just a gift, but also a common heritage that demands preservation and protection. We are at a historic crossroads where every decision made today will shape the destiny of future generations. This is no longer a problem for a single country or a group of experts, but a global challenge that requires everyone's participation.
Every individual, business, and nation is a piece of the larger environmental puzzle. Governments need to work together to build a strong policy framework to control emissions, while every small action by individuals – from choosing green consumption to raising awareness – contributes to a wave of sustainable change. Along with that, the approach to foreign capital also needs to shift: from chasing quantity to prioritizing quality, encouraging projects that bring clean technology and breakthrough ideas.
The greatest transformative power lies with the younger generation – dynamic global citizens with open connectivity – who will pioneer green lifestyles and drive businesses and governments to take action. The road ahead is full of challenges, but it is not impossible. What is needed is the courage to make difficult decisions, cooperation across borders, and the commitment of each individual.
This study not only contributes scientifically but also serves as a reminder: economic growth and environmental protection must go hand in hand. Only then can we realize a sustainable future worthy of passing on to future generations.
The research paper has indirectly contributed to SDGs 9, 13, and 17. View the full research paper “The carbon disclosure due to the growth economy, inward FDI, financial development: Do governance quality matter?” HERE.
Authors: Truong Trung Tai, Vu Minh Chien, Pham Xuan Mai - University of Economics Ho Chi Minh City.
This article is part of the Green Research Community series with the message "Research Contribution for UEH Living Lab Green Campus" UEH sincerely invites the community to follow the next Green Research Community newsletter.
*To create maximum conditions for the development of the "UEH Green Researcher Community," members of the community will be able to attend scientific research methods classes related to the topics of Living Lab and Green Campus. Additionally, upon meeting the standards, the research team will receive a certificate from the UEH Sustainable University Project Board and financial support for a standard-compliant project.
More Information:
SDG 9 – Industry, Innovation, and Infrastructure aims to build a strong economy by creating sustainable infrastructure, promoting inclusive industrialization, and fostering innovation. The goal is to support economic growth, technological development, and environmental protection, while ensuring everyone has access to opportunities.
SDG 13 – Climate Action calls for working together to combat climate change and its impacts. This goal encourages countries to integrate climate change measures into national policies and strategies. It also emphasizes the importance of raising awareness and adaptive capacity among all people regarding climate-related risks.
SDG 17 – Partnerships for the Goals strengthens the means of implementation and revitalizes the global partnership for sustainable development. It emphasizes the importance of international cooperation, including financial, technological, and trade, to achieve all Sustainable Development Goals.
News, Photos: UEH Green Campus Project, UEH Youth Union - Student Association, UEH Communications and Partnership Development Department
Voiceover: Thanh Kieu
