Why is Vietnam cracking down on alcohol? – DW

Report on Vietnam’s Legislative Measures on Alcohol and Sugary Drinks in Alignment with Sustainable Development Goals

Executive Summary

In a significant policy move, Vietnam’s National Assembly has approved a series of tax increases on alcohol and sugary beverages, aimed at addressing public health challenges and strengthening the nation’s fiscal capacity. These measures are directly aligned with the United Nations’ Sustainable Development Goals (SDGs), particularly SDG 3 (Good Health and Well-being). The legislation involves a phased increase in the Special Consumption Tax (SCT) on alcohol and the introduction of a new tax on sugary drinks. While lauded by public health advocates, the policy has raised concerns within the alcohol industry regarding its economic viability and potential impact on market dynamics.

Promoting Public Health and Well-being (SDG 3)

The primary driver for the new tax laws is the government’s commitment to improving public health outcomes and curbing the harmful use of alcohol, a key target under SDG 3. The legislation reflects a direct response to alarming public health data.

• Rising Consumption: According to the Ministry of Health, per capita alcohol consumption rose from 2.9 liters in 2005 to 7.9 liters in 2019.
• Health Impact: Alcohol consumption is cited as the second-highest cause of death in Vietnam.
• WHO Endorsement: The World Health Organization (WHO) representative in Vietnam praised the legislation as a “win-win” policy that reduces consumption of unhealthy products, thereby improving population health, workforce productivity, and generating revenue for government priorities.

The specific tax adjustments are designed to make these products less affordable and discourage excessive consumption.

1. Alcohol Tax: The SCT on alcohol will increase from the current 65% to 70% by 2027, reaching 90% by 2031.
2. Sugary Drink Tax: A new tax of 8% will be applied to sugary drinks with more than 5g of sugar per 100ml, effective in 2027, rising to 10% in 2028.

These measures are integral to Vietnam’s strategy to reduce premature mortality from non-communicable diseases and strengthen preventative healthcare, directly contributing to the achievement of SDG 3.

Strengthening Fiscal Policy for Universal Health Coverage (SDG 3 & SDG 1)

The revenue generated from these “sin taxes” is crucial for funding Vietnam’s ambitious healthcare reforms, which are essential for long-term sustainable development. The government is facing significant demographic shifts, including a rapidly aging population, which will place unprecedented strain on state coffers. The new fiscal measures support the following national health objectives:

• Achieving universal health insurance coverage, with a target of 90% of the population by 2030.
• Progressing towards free hospital care for all citizens.
• Reducing out-of-pocket healthcare expenditures from the current 45% to approximately 20% within a decade.

By securing a dedicated funding stream, the government aims to build a more resilient and equitable healthcare system. This initiative not only supports SDG 3 but also contributes to SDG 1 (No Poverty) by preventing households from falling into debt due to catastrophic health expenditures.

Economic Implications and Industry Concerns (SDG 8)

The alcohol industry has voiced significant opposition to the tax hikes, citing potential negative impacts on economic growth and employment, which are central to SDG 8 (Decent Work and Economic Growth). The Asia Pacific International Spirits and Wines Alliance and the Vietnam Beer Alcohol Beverage Association have highlighted several key concerns:

• Declining Sales: The industry is already facing economic headwinds, with beer sales falling 23% year-on-year in 2023. The tax increases are expected to further depress the market.
• Risk to Investment: Industry representatives have called on the government to avoid layering additional taxes, such as a proposed health levy, to allow compliant businesses with long-term investments to recover and grow.
• Growth of Illicit Market: A major concern is that higher prices for legal products will push consumers toward the unregulated alcohol sector. An estimated 70% of alcohol consumption in Vietnam is already unrecorded. This shift could undermine public health goals (SDG 3) by increasing exposure to potentially harmful products and challenge the rule of law (SDG 16).

Policy Rationale and Forward Outlook

The Vietnamese government has clearly prioritized long-term public health and fiscal sustainability over the short-term economic concerns of the alcohol industry. The policy is a continuation of earlier public health efforts, including the 2019 zero-tolerance law on drink-driving. Analysts note that since many major alcohol producers have been privatized, the state no longer profits directly from sales, making it politically easier to implement such taxes. The government’s decision sends a clear signal about its commitment to achieving the Sustainable Development Goals, positioning preventative health measures as a cornerstone of its national development strategy.

SDGs Addressed in the Article

1. SDG 3: Good Health and Well-being

   • The article’s central theme is Vietnam’s effort to improve public health by curbing the harmful use of alcohol and sugary drinks. The government’s actions, such as hiking taxes on these products, are explicitly framed as measures to “address public health concerns” and reduce “harm and health costs.” The text highlights that alcohol is the “second-highest cause of death in Vietnam” and that reducing consumption will “improve population health.” Furthermore, the article details plans for achieving universal health coverage, providing free hospital care, and reducing out-of-pocket health expenditures, all of which are core components of SDG 3.

2. SDG 16: Peace, Justice and Strong Institutions

   • The article describes the functioning of a state institution, the National Assembly, in creating and passing legislation (“approved plans to hike taxes”). It details the development of effective policies, such as the Special Consumption Tax (SCT) law and the zero-tolerance drink-driving policy, aimed at achieving sustainable development goals (in this case, public health). The discussion of new laws being drafted, like the “Law on Health Insurance” and the “Law on Disease Prevention,” further demonstrates the development of institutional frameworks to address societal challenges.

Specific Targets Identified

1. SDG 3: Good Health and Well-being

   • Target 3.4: By 2030, reduce by one third premature mortality from non-communicable diseases through prevention and treatment. The article connects directly to this target by describing the tax hike as a preventative measure. The policy aims to reduce consumption of alcohol and sugary drinks, which are major contributors to non-communicable diseases. The article notes that “alcohol is the second-highest cause of death in Vietnam,” and the policy is a “win-win” for “reducing harm and health costs for decades to come.”
   • Target 3.5: Strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol. The entire article is centered on this target. The government’s primary goal is to “curb harmful consumption habits” and address “excessive drinking” through policy measures like tax increases.
   • Target 3.6: By 2020, halve the number of global deaths and injuries from road traffic accidents. The article mentions the government’s ongoing struggle to “enforce a zero-tolerance policy on drink-driving that was brought in in 2019,” showing a continued effort to address this specific public health and safety issue related to alcohol consumption.
   • Target 3.8: Achieve universal health coverage, including financial risk protection. This target is explicitly addressed when the article discusses the government’s policy of “providing free hospital care to every citizen,” its aim to “provide free coverage to 90% of the population by 2030,” and the goal to “eventually introduce universal health insurance coverage and reduce out-of-pocket expenditures to around 20%.”

2. SDG 16: Peace, Justice and Strong Institutions

   • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article illustrates this by describing the legislative process where “Vietnam’s National Assembly last month approved plans,” and the Deputy Prime Minister “has steered this law through parliament.” The creation of specific funds like the proposed “Disease Prevention Fund” is another example of building effective institutional mechanisms.
   • Target 16.b: Promote and enforce non-discriminatory laws and policies for sustainable development. The tax hike on alcohol and sugary drinks is a clear example of a policy designed to promote sustainable development by improving public health outcomes for the entire population.

Indicators for Measuring Progress

1. Indicators for SDG 3

   • Alcohol per capita consumption: The article explicitly provides this indicator, stating that “Alcohol consumption rates have steadily increased, from 2.9 liters of alcohol per person in 2005 to 7.9 liters in 2019.” This serves as a baseline to measure the policy’s effectiveness.
   • Mortality from alcohol-related causes: The article implies this indicator by stating that “alcohol is the second-highest cause of death in Vietnam.” A reduction in this ranking or the associated mortality rate would indicate progress.
   • Health insurance coverage: A direct indicator is mentioned with the goal to “provide free coverage to 90% of the population by 2030.” Progress can be measured against this specific percentage.
   • Out-of-pocket health expenditure: The article provides a clear indicator and target: reducing out-of-pocket spending from the current “45% of all health expenditure” to “around 20% of all health care costs within a decade.”
   • Tax rates on unhealthy products: The specific tax rates serve as a policy indicator. The article states the tax on alcohol will rise “from the current 65% to… 90% by 2031,” and a new tax on sugary drinks will be implemented.

2. Indicators for SDG 16

   • Existence of new legislation: The approval of the “Special Consumption Tax (SCT) on alcohol and beer” and the drafting of the “Law on Health Insurance” and “Law on Disease Prevention” are tangible indicators of institutional action.
   • Enforcement of laws: The article mentions the “zero-tolerance policy on drink-driving,” and the struggle to enforce it, which is an indicator of institutional effectiveness and challenges.

SDGs, Targets, and Indicators Analysis

Source: dw.com