Green Investment Climate Country Profile – Vietnam by World Bank Publications

Green Infrastructure Finance

Green Investment Climate Country Profile â&#x20AC;&#x201C; Vietnam

East Asia and Pacific Region

Copyright ÂŠ2013 International Bank for Reconstruction and Development/The World Bank East Asia and Pacific Region/Water and Energy Management Unit (EASWE) 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org

All rights reserved This volume is a joint publication of the staff of the International Bank for Reconstruction and Development/ The World Bank and the Australian Agency for International Development (AusAID). The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of The World Bank, its Board of Executive Directors, the governments they represent, or AusAID. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Moreover, the statistical database and other country-related information is time sensitive and subject to updates and/or changes. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to the work is given. For permission to reproduce any part of this work for commercial purposes, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; Telephone: 978-750-8400; Fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Task Team Leader, Aldo Baietti: The World Bank, 1818 H Street NW, Washington, DC 20433, USA; e-mail: abaietti@worldbank.org.

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Table of Contents Acknowledgements................................................................................................................................................ iii List of Abbreviations and Acronyms.......................................................................................................................iv 1. Statistical Overview........................................................................................................................................... 2 2. Energy................................................................................................................................................................ 4 3. Green Policies and Incentives............................................................................................................................ 6 4. Green Programs and Institutions...................................................................................................................... 9 5. Green Regulatory Framework........................................................................................................................ 11 6. Investment Trends and Challenges................................................................................................................. 12 7. Concluding Remarks........................................................................................................................................ 16 8. Summary of Policy Instruments...................................................................................................................... 18 9. Annex............................................................................................................................................................... 19 10. References........................................................................................................................................................ 36 List of Tables and Figures: Table 1: Electricity Generation Sources (% of total).......................................................................................... 4 Table 2: RE On-grid Capacity Targets (MW)....................................................................................................... 6 Table 3: RE Off-grid Capacity Targets................................................................................................................. 6 Table 4: Regional Wind FiTs................................................................................................................................ 7 Table 5: Averaged Tariff Rates (US$).................................................................................................................. 7 Table 6: Avoided Cost Tariff................................................................................................................................ 8 Table 7: NEEP Component, DPO Policy Actions and Expected Results............................................................. 9 Table 8: S&Pâ&#x20AC;&#x2122;s Credit Rating.............................................................................................................................. 12 Table 9: FDI (net BoP, current US$)................................................................................................................... 12 Table 10: Investments in PPI - 2002 to 2010 (current US$ millions).................................................................. 13 Table 11: Financial Mechanisms and Policies for the Clean Development Mechanism................................... 15 Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6:

Total Primary Energy Supply................................................................................................................. 4 Energy Efficiency Labeling.................................................................................................................... 8 Global Competitiveness Index............................................................................................................. 13 Corruption Perceptions Index 2011.................................................................................................... 13 Private Investment in New or Additional RE Capacity (US$ million)................................................ 14 Breakdown of RE Investments (US$ million)...................................................................................... 14

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Green Investment Climate Country Profile - Vietnam

Acknowledgements

his country profile has been prepared by the East Asia and Pacific Region of the World Bank. The work was led by Aldo Baietti, Lead Infrastructure Specialist (EASWE) under the overall guidance of John Roome, Sector Director (EASSD) and Charles Feinstein, Sector Manager (EASWE). The team and co-authors included Andrey Shlyakhtenko and Roberto La Rocca (EASWE) from the World Bank. The team wishes to acknowledge the peer reviewers and other contributors inside and outside the World Bank Group including, Franz Gerner, Lead Energy Specialist, Laura Altinger, Senior Environmental Economist (EASVS), Defne Gencer, Energy Specialist (EASWE), Lan Van Nguyen, Senior Operations Officer (CEAIC), Romel Carlos, Operations Officer (CEAAF), Towfiqua S. Hoque, Senior Investment Officer, Hang Thi Thu Tran, Investment Officer (CN1S4), Alexander Jett, Research Analyst (TWISI), John Probyn (PPIAF), Bastiaan Verink (TWISI), Banuchandar Nagarajan, Amar Causevic (EASWE), Linh Phuong Pham (Local Consultant) and 10EQS, Ltd. Edward Charles Warwick edited the report. Finally, the team wishes to acknowledge the generous support from the Australian Agency for International Development (AusAID) provided through the World Bank East Asia and Pacific Infrastructure for Growth Trust Fund (EAAIG).

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iii

Green Infrastructure Finance

List of Abbreviations and Acronyms ACT

Avoided Cost Tariff

BBOP

Business and Biodiversity Offsets Program

BoP

Balance of Payments

BOT

Build-Operate-Transfer

Build-Transfer

BTO

Build-Transfer-Operate

CDM

Clean Development Mechanism

CER

Certified Emission Reductions

CIT

Corporate Income Tax

CO2

Carbon Dioxide

Cleaner Production

CPEE

Clean Production and Energy Efficiency

CPI

Corruption Perceptions Index

DEP

Distribution Efficiency Project

DPO

Development Policy Operation

Energy Efficiency

EECP

Energy Efficiency and Cleaner Production Financing Program

ENV

Vietnam Electricity Company

EPF

Environmental Protection Fund

EPZs

Export Processing Zones

ERAV

Electricity Regulatory Authority of Vietnam

ESMAP

Energy Sector Management Assistance Program

EVN

Vietnam Electricity Group

EZs

Economic Zones

FDI

Foreign Direct Investment

FiT

Feed-in-Tariff

GDP

Gross Domestic Product

GEF

Global Environment Facility

GGS

Green Growth Strategy

GHG

Greenhouse Gas

IFC

International Finance Corporation

IPs

Industrial Parks

Kgoe

Kilogram(s) of Oil Equivalent

Kilometers

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Green Investment Climate Country Profile - Vietnam

Kilovolt

kWh

Kilowatt Hour

MARD

Ministry of Agriculture and Rural Development

MER

Ministry of Environment and Resources

MOF

Ministry of Finance

MOIT

Ministry of Industry and Trade

MONRE

Ministry of Natural Resources and Environment

MPI

Ministry of Planning and Investment

Metric Ton

Mtoe

Million Tons of Oil Equivalent

Megawatt

Not Available

NEEP

National Energy Efficiency Program

NSC

National Steering Committee

NSCC

National Strategy on Climate Change

NTP-RCC

National Target Program to Respond to Climate Change

ODA

Official Development Assistance

PCs

Power Corporations

PDP VII

National Power Development Plan

PPI

Private Participation in Infrastructure

PPPs

Public-Private Partnerships

Renewable Energy

REDP

Renewable Energy Development Program

SEDS

Socio-Economic Development Strategy

SEIER

System Efficiency Improvement, Equitization and Renewables

SIDA

Swedish International Development Cooperation Agency

SMEs

Small and Medium Size Enterprises

SP-RCC

Support Program to Respond to Climate Change

S&P’s

Standard and Poor’s

TPES

Total Primary Energy Supply

UNDP

United Nations Development Program

US$

United States Dollar

VAT

Value Added Tax

VEA

Vietnam Environmental Administration

VNCPC

Vietnam National Cleaner Production Centre

VND

Vietnamese Dong

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Green Investment Climate Country Profile - Vietnam

Vietnam

is the most eastern country on the Indochina Peninsula stretching 1,650 km in length. The country is characterized by hilly and mountainous landscape and is rich in fossil fuel and renewable natural resources.1 With high average rainfall and with a watershed system comprising more than 2,000 rivers and streams over 10 km, the country is particularly endowed with great hydropower potential.2 Located in the tropics and in the moonsoon wind zone, Vietnam has the potential to develop solar and wind energy sources. Since agriculture still plays an important role in the countryâ&#x20AC;&#x2122;s economy, Vietnam also has vast and diversified biomass potential.

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Indonesia

Philippines

Vietnam

China

Rep. of Korea

Singapore

Malaysia

1. Statistical Overview

847

225

124

7,318

1,116

240

278

242

1,344

49.9

48.7

30.4

49.2

82.9

100

5.1

4.5

6.4

9.6

3.4

5.8

4.5

24.7

50.9

48.8

16.5

34.7

108.3

51.8

5.4

4.7

18.7

5.4

4.0

5.2

3.2

Agriculture

Industry

Services

Energy production (Mtoe)10

352

2,085

0.03

Energy use (Mtoe)

202

2,257

229

Net energy exports/imports (Mtoe)11

147

(19)

(185)

(51)

100

Electric transmission and distribution losses (%)

9.4

12.1

9.6

4.9

3.7

5.2

3.8

Energy intensity (kgoe/US$1,000 2005 PPP)

230

126

274

273

184

191

Macro Indicators GDP (current US$ billion)3 Population (million)

Urban population (% of total)

Economic Indicators Constant GDP 10 Year CAGR (%)6 Public debt (% of GDP)

Inflation, consumer prices (annual %)

Sector mix (% of GDP)9

Energy Indicators 10

Electricity access (% of population)

12 13

CO2 emissions (Mt of CO2)

376

114

6,832

515

208

Electricity tariffs (US$/kWh)16

0.07

0.14

0.05

0.13

0.22

6,095

348

165

126,215

139

4.4

15,i

Fossil fuel endowment

Coal (2008, million short tons)

3.9

0.1

4.4

20.4

141.1

3.5

24.7

107

0.3

Coal and peat

15.1

15.2

19.7

67.2

28.3

15.8

Crude oil

Oil (2012, billion barrels) Natural gas (2012, trillion cubic feet) Total Primary Energy Supply (%)18

26.5

19.3

4.2

16.8

39.5

61.4

35.5

Oil products

6.7

14.3

21.2

Natural gas

17.4

8.3

11.1

3.3

13.8

38.4

43.4

0.8

16.8

Nuclear Hydro

0.5

2.2

4.0

2.4

0.1

0.9

Geothermal, solar, wind

7.9

22.9

0.5

0.1

i CO2 emissions from fuel combustion only.

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Indonesia

Philippines

Vietnam

China

Rep. of Korea

Singapore

Malaysia

Green Investment Climate Country Profile - Vietnam

26.0

17.9

39.3

1.3

0.2

4.5

0.5

Renewables

13.3

32.6

17.5

0.1

6.3

Oil

22.8

8.7

2.5

0.4

4.4

18.8

2.0

1.9

32.7

Natural Gas

22.1

32.1

43.4

1.4

15.6

81.0

60.7

Coal

41.8

26.6

78.8

46.2

30.9

S&Pâ&#x20AC;&#x2122;s Credit Rating (Foreign Currency)20

BB+

BB-

AA-

A+

AAA

A-

Doing Business Ranking

129

136

CPI Transparency Ranking

100

129

112

FDI, net (% of GDP)23

1.6

0.3

6.8

2.2

(1.9)

8.5

1.6

37,113 45,114

8,328

78,438

46,401

Energy Indicators (cont.) Combustible renewable and waste Electricity and heat Electricity Sources (%)

Nuclear

Investment Climate 21 22

PPI (US$ million)24,ii PPI renewable energy (US$ million)

Lending interest rate (%)

Lending - deposit spread (%)26 Liquid assets to deposits and short term funding (%)

3,876

3,844

1,839

8,380

198

13.2

7.7

13.1

5.9

5.4

5.6

ii Investments amounts include greenfield projects, concessions and management, and lease contracts.

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2. Energy

Figure 1: Total Primary Energy Supply ietnam‘s rich fossil fuel endowment Natural Combustible includes about 24 trillion cubic feet gas 17% renewables of gas, 4 billion barrels of crude oil and waste 42% reserves and 165 million short tons of recoverable coal.29 The country is also endowed with substantial renewable energy (RE) Renewables Oil products 46% 23% potential including hydropower and biomass. Despite the abundance of its indigenous natural resource endowment, Vietnam Coal & Peat is not energy self-sufficient and, according to 20% Hydro 4% the National Power Development Plan (PDP Crude oil 1% VII), the country’s rapidly growing energy Source: International Energy Agency, 2009.28 demand from 2011 to 2030 will continue to be met through a mix of domestic energy production and imports. The Government considers natural gas development to be crucial for the nation’s economic growth and energy independence.30 In 2008, locally-harvested natural gas was largely utilized to meet Vietnam’s domestic energy needs. On the other hand, besides some resources that are used for local consumption, substantial quantities of coal and peat and almost the entire production of the country’s crude oil are exported. Roughly half of Vietnam’s total primary energy supply (TPES) consists of oil (24 percent), coal and peat (20 percent) and natural gas (10 percent), which are often locally sourced in light of the country’s rich resource endowment. The remaining half is RE, namely biomass (42 percent) and, to a lesser extent, hydro (4 percent). Biomass has always been a mainstay of the local RE sector, as has largely fueled rural and small-scale industries. However, biomass development is typically unplanned and has declined in relative importance in recent years. Despite hydro’s modest contribution to the TPES, its share in the national electricity generation mix is considerable. As of 2002, half of the country’s electricity was provided by hydroelectric power, with substantial growth during Vietnam’s economic expansion in the 1990s. However, this has decreased to 36 percent more recently, with natural gas taking up a larger share of the total electricity generation.

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Table 1: Electricity Generation by Source (% of total) 2002

2009

Renewables

50.8

36.0

Oil

12.3

2.5

Natural gas

23.3

43.4

13.6

18.0

Coal Source: International Energy Agency, 2009.

Green Investment Climate Country Profile - Vietnam

While Vietnamâ&#x20AC;&#x2122;s CO2 emissions are relatively low in comparison to other lower middle income countries like Indonesia and to more developed countries like China, they are steadily growing. Similarly, the countryâ&#x20AC;&#x2122;s energy intensity is high by regional standards. A number of factors that affect the domestic levels of pollution and energy intensity include: (i) evolution to an industry-based economy; (ii) the increasing popularity of modern commercial fuel and electricity for household use; and (iii) the development of motorized transport.

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3. Green Policies and Incentives

ith the introduction of environmental protection in the country’s constitution in 1992, Vietnam embraced sustainable development as one the key pillars of its long-term economic growth and has supported the passage of a number of different green policies. The country’s first environmental legislation, the Vietnam Law on Environmental Protection, was introduced in 1995. Revised in 2005, the Law provides the legal basis for green fiscal and financial instruments, but does not specify any RE targets.

Table 2: RE On-grid Capacity Targets (MW) Technology Wind Small Hydro Geothermal Solar Biomass (solid) Waste Biogas Total

2011-2030 6,193 4,375 278 55 1,855 339 100 13,194

Sources: Centre International de Recherche sur l’Environnement et le Developpement, 2009; Organization for Economic Co-operation and Development, 2010; Renewable Energy Policy Network for the 21st Century, 2012; and Institute of Energy Economics – Japan, 2009.32

Approved in 2011, the Vietnam Power Development Plan VII (PDP VII) is the foundation for the development of the power sector between 2011 and 2020, with a higher-level vision to 2030. Specifically, it sets four targets: (i) meeting the country’s increasing power demand through a mix of energy production and imports; (ii) prioritizing the development of RE; (iii) reducing the average energy elasticity ratio from the current 2.0 to 1.5 by 2015 and to 1.0 by 2020 through the implementation of energy efficiency (EE) measures; and (iv) improving rural electrification so that most rural households will have access to electricity by 2020.33,iii Along with RE targets for on and off-grid RE generation, PDP VII also introduced targets for coal, which is set to remain the mainstay of the country’s power sector.iv By 2030, Vietnam’s coal-fired thermal power capacity is expected to reach 75,000 MW or roughly half of the country’s total installed power capacity. This would force Vietnam to import coal to meet its energy plans for 2015 on.

Table 3: RE Off-grid Capacity Targets (MW) Technology Solar Small Hydro Biogas Wind-Diesel Solar-Diesel Wind-Diesel-Solar Total

2011-2020 14 58 5 8 8 9 102.4

While the PDP VII has set targets for RE developSources: Renewable Energy Policy Network for the ment, it does not accompany these with commen21st Century, 2012; and International Renewable surate financial incentives that would be needed in Energy Agency, 2012.34 order to realistically accelerate investments in clean technologies. Such incentives would also be required to decrease greenhouse gas (GHG) emission by eight to 10 percent in the period from 2011 to 2020, as presented in the recently approved Green Growth Strategy (GGS).35

iii Energy elasticity is ratio between growth of energy consumption and economic growth. iv Vietnam’s first nuclear power plant is targeted to supply 10 percent of power demand by 2030.

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Green Investment Climate Country Profile - Vietnam

Through Decree 04/2009/ND-CP and Decree 69/2009/ND-CP, the Government provides a number of fiscal incentives for on and off-grid RE development, including: (i) favorable tax rate options (e.g. corporate income tax (CIT) exemption up to four years, 50 percent CIT reduction up to nine years, special CIT of 10 percent up to 30 years, etc.); (ii) exemption of import duties for equipment and machinery for RE projects; and (iii) exemption/reduction of land use fee/rental.36,v The Government does not provide direct subsidies for the development of off-grid RE energy and has not yet developed a comprehensive feed-in tariff (FiT) regime to adequately support the development of on-grid RE technologies for which targets have been set by the PDP VII. Currently, the Government has only introduced a FiT for Table 4: Regional Wind FiT (US$ wind at VND 1,614 /kWh (US$7.8 cents/kWh) along with a cents/kWh) subsidy of VND 207/kWh (US$1.0 cent/kWh) to the Vietnam Vietnam 7.8 Electricity Company (ENV).vi The FiT is substantially lower Philippines 23 than other wind FiTs regimes in the region — US$18 cents/ Thailand 18 kWh in Thailand and US$23 cents/kWh in the Philippines. Sources: Energy Regulatory Commission of As such, the FiT may not be sufficiently attractive to spur the Philippines, 2012; German Society for investment by small and medium-sized wind project develInternational Cooperation, 2011; and Asian Development Bank, 2012.37 opers. Moreover, the most attractive sites for wind development are located on Vietnam’s coastline, which is also the source of large mining reserves. According to the economist Peter Meier, any conflict between wind developers and the country’s mining community is unlikely to end in favor of wind power.38 Table 5: Averaged Tariff Rates (US$) Despite the absence of a comprehensive FiT regime, RE developers benefit from the avoided cost tariff (ACT) Nov 2009 to Apr 2010 regulation, which, together with a Standardized Power Vietnam 0.054 Purchase Agreement, was introduced in 2008.vii The ACT Indonesia 0.071 is defined as “the electricity tariff calculated by avoided Philippines 0.143 costs of the national power grid when 1 kWh is generKorea, Rep. of 0.126 ated to the distribution power grid from a small RE power Source: German Society for International plant”.40 With it, RE developers can sell their power to a Cooperation, 2011.39 utility, saving the utility from having to invest in new generation. A capacity cap of 30 MW is imposed on the applicability of the ACT. Hence the small-scale RE projects that could benefit from the ACT are mostly restricted to small hydro projects.41 Vietnam’s electricity tariff is set below the actual cost of supply and low by regional standards.32 As a result, the development of RE is at a disadvantage in comparison with cheaper, less environmental-friendly energy sources. The 2004 Electricity Law aims to reform the country’s power sector by introducing competition for the wholesale and retail market. To achieve this, the Electricity Regulatory Authority of Vietnam (ERAV) was established to properly set electricity prices and encourage market development.

v Oil and gas companies are taxed at the rate of 32 percent to 50 percent on their taxable income according to the 2009 Corporate Income Tax Law. vi Vietnamese dong (VND) exchange rate is approximately VND20,823 =US$1. vii Issued by decision 18/2008/QD-BCT dated 18 July 2008 by MOIT.

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Given the country’s industrial orientation, the Government has emphasized the development of EE measures for the manufacturing and heavy industry. Enhancing industrial EE is expected to contribute at least 50 percent of the targeted energy savings by 2015. EE is regulated by a number of decrees and policies, including:

Table 6: Avoided Cost Tariff (US$ cents/kWh) Dry Season

WET Season

Peak

Off-Peak

Peak

Off-Peak

North Region

2.8

2.7

2.5

2.3

Centre Region

2.7

2.3

2.2

South Region

3.6

2.6

2.4

2.3

Capacity Price

8.4

Sources: Energy Market Authority of Singapore, 2012; World Bank, 2011; Perusahaan Listrik Negara, 2012; Asia-Pacific Economic Cooperation, 2011; and Economic Research Institute for ASEAN and Eastern Asia, 2012.42

■■

The Decree on Energy Saving and Efficient Use of Energy (102/2003/ NDCP) issued in 2003, which, among other things, establishes mandatory annual reporting for energy-intensive enterprises; and

■■

The 2010 Law on Energy Conservation and Efficient Use (No.50/2010/QH12), which primarily focuses on imposing obligations on large energy consuming users, called “Designated Energy Users” or simply “Designated Enterprises”. In addition, the Ministry of Industry and Trade (MOIT) issued circulars on: (i) certifications of energy auditors and energy managers and on annual and five-year plans for energy-intensive users; (ii) a decree on guiding the implementation of some articles of the Law on EE and conservation; and (iii) a decree on provisions of administrative sanctions in the field of energy conservation and efficiency.44,viii

The Decision 51/2011/QD-TTg regulates the labelFigure 2: Energy Efficiency Labeling ing of fluorescent tubes, compact fluorescent lamps “Confirmative” label “Comparative” Label and electronic and electromagnetic ballasts. Vietnam relies on two main labelling programs: (i) the “confirmative” label (also known as the Viet Energy Star), which is affixed to EE equipment that meets or exceeds the high energy performance standards prescribed by the MOIT; and (ii) the “comparative” label, which provides information regarding the energy consumption level in kWh(s) per year of a given product. Vietnam Source: Ministry of Industry and Trade, 2009.43 is planning to move to minimum energy performance standards and phase out energy inefficient technologies and appliances. With donor support, a roadmap for EE standards and labeling has been developed and training institutes are being established. Capacity building of government and industry stakeholders is being increased to allow them to learn about international trends and to maximize the benefits of EE.

viii More than 1,000 tons of energy consumption per annum.

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Green Investment Climate Country Profile - Vietnam

4. Green Programs and Institutions

n 2006, the Government established the Vietnam National Energy Efficiency Program (NEEP), with the support of the Government of the Netherlands, the European Union, the Swedish International Development Cooperation Agency (SIDA) and the United Nations Development Program (UNDP).ix The 2006-2010 phase of the Program involved research (notably, an energy use survey of 500 largescale industrial enterprises), capacity building and awareness raising. NEEP Phase 1 (2006-2010) was successful in achieving three percent energy savings against the original three to five percent target. Based on the results obtained in Phase 1, the NEEP Phase 2 (2011-2015) target has been set slightly above five percent (five to eight percent when NEEP was approved). Table 7: NEEP Component, DPO Policy Actions and Expected Results NEEP

Expected Impacts

Indicators and Results

Regulatory/Legal - Energy Conservation and Efficient Use - Regulations to implement law (Circulars) Law regulatory framework established adopted Framework for and enforced Implementation, - 100 energy auditors complete training Capacity - Energy managers and energy auditors courses, of which 50 are fully certified and Building and are adequately trained, and certified 50 are training on the job to become fully Dissemination certified - National energy database and M&E framework designed and implemented - 1,000 certified energy managers for industries Energy Conservation in the Industrial Sector

- Energy savings in the industrial sector - Four percent energy savings achieved by are achieved (these are consistent with heavy industries compared to 2010 (end of NEEP Phase 2, National Energy Saving NEEP Phase 1) 2015 targets) - 1,000 EE plans implementation reports of - Energy Conservation and Efficient large energy industrial users are received Use management best practices and reviewed by MOIT or Provincial implemented in the industrial sector, Departments of Industry and Technology, especially in designated enterprises of which 600 have been prepared by certified energy managers

Source: World Bank, 2012.45

The MOIT and donors both agree that the Law on Energy Conservation and Efficient Use needs to be implemented more effectively in order to achieve these targets. This could be achieved by improving the implementation and monitoring of new EE regulations, and introducing financing mechanisms, industrial EE action plans, as well as innovative EE programs.46 The World Bank is implementing a Climate Change Development Policy Operation (DPO) in Vietnam that has a strong focus on addressing barriers to EE. This DPO series supports the implementation and monitoring of an effective regulatory framework to successfully implement the mandates and measures defined in the Law and to strengthen the results of the NEEP. ix In 2007, VND30 billion (about US$2 million) in state budget funds was allocated for some 28 projects registered under the NEEP. About a third of these funds were allocated to support two EE lighting manufacturers. The rest of the budget was used for capacity building on Law on Energy Conservation and Efficient Use management of provincial agencies and for energy conservation projects proposed by energy utilities. In 2008, VND36 billion (about US$2.25 million) was allocated for some 48 projects, many of which were projects initiated in 2007. Of this, about a third was used to set up an EE laboratory for air conditioners and refrigerators.

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The World Bank Clean Production and Energy Efficiency (CPEE) project is another initiative which supports the country’s EE agenda. The project is funded by a US$2.37 million grant from the Global Environment Facility (GEF). The project proposed to strengthen the capacity of the Government and other key stakeholders and improve the effective delivery of the national EE program in the country’s key industrial sectors. Other initiatives promoting EE include: (i) the Distribution Efficiency Project (DEP), which, with an International Development Association contribution of US$448.9 million, seeks to improve the performance of Vietnam’s power corporations (PCs) in providing quality and reliable electricity services while reducing GHG emissions; (ii) the System Efficiency Improvement, Equitization and Renewables (SEIER) project, which aimed to improve the overall system efficiency and reduce investment needs; and (iii) the International Finance Corporation (IFC) Vietnam Energy Efficiency and Cleaner Production Financing Program (EECP), which works with selected banks to build their sustainable energy portfolios and tailored financing products.47, x The Renewable Energy Development Program (REDP) has three main components: (i) an investment project implementation component; (ii) a regulatory development component; and (iii) a pipeline development component.48 It also provides a refinancing facility to commercial banks for loans to eligible projects up to 30 MW. The state-run Vietnam Electricity Group (EVN) has prepared a plan for the construction of a Wind Power Area in the southern province of Ninh Thuan. However, the capacity and the investment needed for the project have not yet been finalized. The Government is planning to use official development aid provided by the Government of Denmark to fund the project. Currently, only one wind power project with installed capacity of 30 MW (namely the Tuy Phonng 1 in Binh Thuan province) has been commissioned. Other projects including the Bac Lieu (16 MW), the Phuong Mai 1 (30 MW), and the Cau Dat (30 MW) are under preparation. The Government also lists a number of programs with priority in climate financing under the National Strategy on Climate Change (NSCC) for the period 2011-2015. Such programs include: (i) water resource management and response to climate change in the Mekong river delta and the Red river delta; (ii) a program to respond to climate change in Vietnam’s large urban areas; (iii) a GHG inventory and management of GHG mitigation activities; (iv) socio-economic development for islands to respond to climate change; (iv) a sea and river dykes upgrade program; and (v) a community-based climate adaptation program. Although the NSCC lays the foundation for the development of the above-mentioned programs, it is a generic framework that will need to be developed in greater detail.

x SEIER was closed on December 31, 2012.

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Green Investment Climate Country Profile - Vietnam

5. Green Regulatory Framework

he ERAV is responsible for the power sector regulatory functions. ERAV’s responsibilities include: (i) establishing design and regulations for competitive power markets and monitoring implementation; (ii) assessing solutions concerning overall sector supply and demand; (iii) approving, overseeing and canceling electricity licenses; (iv) establishing the electricity tariff regulatory framework, reviewing EVN tariff proposals and submitting recommended electricity charges and electricity retail tariffs to MOIT; (v) preparing and monitoring technical codes and performance standards; and (vi) providing dispute resolution in the power market.49

After the promulgation of the Law on Environmental Protection, the Ministry of Natural Resources and Environment (MONRE) took a number of significant actions to control pollution. These include efforts to: (i) control air, water and soil pollution; (ii) manage and treat solid and hazardous waste; (iii) deal with serious polluters; and (iv) respond in a timely manner to environmental disasters and serious occurrences such as, oil spillage in the sea. Every three months, a national network managed by MONRE monitors and measures basic air, water, land, solid waste and noise parameters.xi GHG emissions are not yet included in the existing impact assessment programs. In addition, while the Law on Environmental Protection provides for the sanctioning of polluters, the Vietnam Environmental Protection Agency has not yet taken action against polluting companies.50 According to Nguyen Van Phuong from the Hanoi Law University, the problem stems from the law’s ambiguity which often overlaps with provisions of other laws. The policy of promoting public-private partnerships (PPPs) is not new in Vietnam. As early as in 1992, the Government amended the law on foreign investment to make way for BOT projects. In 2010, the Ministry of Planning and Investment (MPI) issued Decree No. 108, which regulates investment in infrastructure projects built under build-operate-transfer (BOT), build-transfer-operate (BTO), and build-transfer (BT) contracts. A year later, the Regulations on Pilot Investment Under the form of Public Private Partnerships were issued to provide an updated framework to address legal, regulatory, institutional, and financial constraints for the procurement of PPP projects.

xi Despite rigorous monitoring efforts, reporting, verifications and enforcement remains a major challenge in Vietnam.

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Green Infrastructure Finance

6. Investment Trends and Challenges

ietnam’s speculative-grade rating (BB- by S&P) stems from the country’s standing as a lower middle-income economy, a developing financial market and an evolving policy environment. Typical of an emerging economy, such weaknesses are partially mitigated by the country’s growth prospects and openness to foreign direct investment (FDI). During the past four years, Vietnam’s FDI inflows have averaged above eight percent of GDP.51 As a percentage of GDP, Vietnam’s FDI inflows rank second best in the region, just below Singapore.

Table 8: S&P’s Credit Rating Country China Indonesia Philippines Singapore Korea, Rep. of Vietnam

Rating AABB+ BB+ AAA A+ BB-

Source: Standard & Poor’s, 2012.20

As of May 2012, more than 13,000 FDI projTable 9: FDI (net BoP, current US$) ects were licensed with registered investAs % of ments of about US$200 billion.53 According Country 2002-2010 2010 GDP to the MPI, intraregional FDI flows play a China 815.95 124.93 0.80 key role in the country’s economic growth. Indonesia 24.90 11.10 1.57 With more than US$20 billion of registered Malaysia -31.06 -4.35 3.29 capital each, regional developed countries Philippines 9.21 0.68 0.34 Korea, Rep. of -74.50 -19.38 -1.46 such as Japan, South Korea and Singapore Singapore 67.21 18.90 12.31 are among Vietnam’s main FDI partners. Vietnam 38.46 7.10 6.83 Manufacturing is Vietnam’s leading FDI52 Source: World Bank, 2010. targeted sector, accounting for about half of the total number of projects and registered investment deals. Despite Vietnam’s recent quick expansion of FDI inflows, MPI’s Foreign Investment Agency is currently working on a new FDI strategy in order to limit investments in labor and energy-intensive industries and to create new incentives in the service sector, high-tech industries and low-emission projects. This could potentially result in a contraction of FDI inflows in the short-term as investors might relocate their labor and energy-intensive projects to other countries such as, Cambodia and Myanmar. However, the Government is positive about the long-term prospects linked to the implementation of the new FDI strategy for sustainable development.54 In addition to buoyant FDI inflows, Vietnam’s economy benefits from a relatively efficient labor market with low labor costs and a large domestic market with a growing consumer base.56 Moreover, the country’s economic development has greatly benefitted from the establishment of industrial parks (IPs), export processing zones (EPZs) and economic zones (EZs). With above average infrastructure quality, expedited licensing processes and favorable fiscal treatment, Vietnam’s IPs, EPZs and EZs continue to attract a large number of intraregional and international private investors. However, the country’s overall transition to a market-oriented economy is slowed by

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Green Investment Climate Country Profile - Vietnam

a number of factors. According to the Global Competitiveness Report 2012-2013, Vietnam’s fell from the 65th to 75th place, largely due to the country’s macroeconomic instability.55 In August 2011, inflation peaked to an all-time high of 23 percent, before retreating to 6.5 percent in September 2012. In order to cope with high inflation levels, Vietnam’s State Bank tightened its monetary policy, thereby making access to credit more difficult.55 Vietnam ranks even lower at 95th place (down five positions) in terms of infrastructure development and this remains one of the country’s main challenges.55 Compared to regional low-middle income economies such as the Philippines and Indonesia, Vietnam’s performance in PPPs has been weak. The country continues to experience delays in developing a comprehensive and workable framework for PPP investments.

Figure 3: Global Competitiveness Index Stage of development Transition 1-2

1 Factor driven

Transition 2-3

2 Efficiency driven

3 Innovation driven

Institutions 7 Innovation

Infrastructure

6 5

Business sophistication

Macroeconomic environments

4 3 2

Health and primary education

Market size

Higher education and training

Technological readiness

Goods market efficiency

Financial market development Low market efficiency Vietnam

Efficiency-driven economies

Source: World Economic Forum, 2012.55

Table 10: Investments in PPI - 2002 to 2010 (current US$ millions) Indonesia

Philippines

Vietnam

US$ Mil

Energy

16,262

17,558

4,508

Telecom

16,288

44 115

15,886

35 115

2,280

Transport

3,669

3,931

1,235

Water and sewerage

1,020

8,098

305

Total

37,239

207

45,473

208

8,328

Source: World Bank, 2010.

Figure 4: Corruption Perceptions Index 2011

112

100

129

s ne pp i

Ph ili

tn am

Vi e

ne s

a In do

Ch in

of p. Re

or e

The new PPP Regulations enacted in 2010 and 2011 do not provide for a dedicated PPP oversight body. A recent assessment of PPPs in Vietnam carried out by the Asian Development Bank found MPI as the only governmental organization in charge of promoting the country’s PPP agenda; however, MPI faces institutional and capacity issues due to its limits on budget and qualified personnel.58 Corruption is still a serious problem, as Vietnam ranks 112th on the CPI Transparency

Source: Transparency International, 2011.22

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Green Infrastructure Finance

Index. Private sector investors doubt the transparency and efficiency of competitive bidding, particularly when state-owned enterprises are also involved. Risk perceptions are exacerbated when RE technologies are part of the equation. Moreover, the new PPP regulations provide for neither a robust risk-allocation framework nor a dispute resolution mechanism that is based on international best-practice. The country’s financial sector has low capacity and is generally not equipped with the instruments and maturities to make PPP projects bankable. The most reliable source of long-term financing is foreign-denominated debt and the Government does not provide any guarantee instruments on commercial loans and other capital raised by private sector investors. PPPs in RE are also disadvantaged given the current low tariffs in Vietnam, as they impede the full recovery of operation and maintenance costs and capital formation.30

US$ million

Figure 5: Private Investment in New or From a financing perspective, low-emission Additional RE Capacity (US$ million) projects have much in common with conventional infrastructure projects. As such, the 800 development of comprehensive regulations 700 for private-participation in infrastructure 600 (PPI) is key to attract private sector investors 500 in RE-based PPPs. Notably, private participa400 tion in RE infrastructure is a relatively recent 300 phenomenon in Vietnam. The passage of the 200 2004 Electricity Law, which stipulates “func100 tions, duties, and rights in electricity opera0 tion, anti-monopoly and allows competition in 2003 2004 2005 2006 2007 2008 2009 electricity generation, ensuring equality and Source: World Bank, 2011.59 fairness in energy supply and consumption”, has played a central role in sparking the interest of RE investors in recent years. After the passage of the 2004 Electricity Law, only two private wind projects were developed: the Cau Dat (30 MW) and the Phuong Mai wind farms (21 MW). Both of these projects were sponsored by local private investors and financed through loans from state banks. From 2005 to 2011, private RE development in Vietnam was concentrated in hydro facilities, with slightly more than half going to projects over 50 MW. Hydro projects benefitted from the Chinese imports of low-cost equipment, which have reduced capital costs and placed a downward pressure on the levelized-cost-of-electricity.60

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2010 2011

Figure 6: Breakdown of RE Investments (US$ million) 84.3, 4.5%

n Hydro, Large (>50MW) n Hydro, Small (<50MW) n Wind, Onshore 739.5, 40.2%

1,051.1, 55.2%

Note: Total of 39 projects consisting of 11 large hydro, 25 small hydro, 2 wind and 1 bioenergy. Source: World Bank, 2012.59

Green Investment Climate Country Profile - Vietnam

Vietnam has also made use of the Clean Development Mechanism (CDM) mechanism, with the majority of these projects targeting small-scale hydropower plants. Vietnam’s CDM activities consisted of 27 and 58 registered projects in 2010 and 2011, respectively. In the past, the availability of incentives linked to CDM financing was also considered an important factor for hydro development. However, according to Vietnam’s Chamber of Commerce and Industry, CDM administrative procedures are bureaucratic, complex and unspecific. Moreover, potential project investors have experienced difficulties in proving a project’s additionality.62

Table 11: Financial Mechanisms and Policies for the Clean Development Mechanism ■■

Exemption from land use rents and levies

■■

Accelerated depreciation

■■

Access to state investment credit

■■

Subsidies for CDM project outputs

■■

Priority consumption of CDM project outputs over similar outputs produced by non-CDM activities

Source: Prime Minister, 2007.61

In summary, the ongoing reform of the country’s energy pricing system, the institutionalization of a comprehensive set of financial and fiscal incentives for the development of RE and the establishment of a robust framework for PPPs are key elements for attracting investments and improving the bankability of low-emission projects. Further deepening of the country’s financial sector is also required in order to provide investors with adequate options for project implementation. Similarly, transparency of government operations should be enhanced in order to facilitate Vietnam’s transition from a centralized to a market-oriented economy.

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7. Concluding Remarks

ietnam embraced sustainability as one of the key pillars of its long-term economic development in the early 1990s, with the Government initiating a “greening” expansion strategy. Recently, the Government has increased its focus on the development of RE through the establishment of ambitious targets for on and off-grid clean power generation. However, due to Vietnam’s low energy prices, the development of RE is at a disadvantage in comparison with cheaper, less environmental-friendly energy sources. Moreover, the country lacks a comprehensive set of incentives for the development of RE. Only wind power is offered a FiT, which is low by regional standards, and while the Vietnamese Government has put forward an ACT regulation for RE development, a capacity cap of 30 MW prevents large-scale projects from benefitting from the law’s provisions. Vietnam’s rapid industrialization pace combined with its relatively high fossil fuel endowment poses a difficult dilemma on how to balance these possibly conflicting objectives. For example, energy prices have been kept below market levels in order to foster competitive industries and this has undermined the competitiveness of cleaner forms of energy. The country is also seeking to develop its own petroleum refining capacity, which could create an even greater push towards oil consumption. These and other trends, which favor fossil fuel use, put the country in a difficult position when it comes to implementing its greening strategy. Below are possible considerations on how this strategy could be enhanced: First, there is merit in reviewing the country’s overall incentive framework for RE development in order to make clean technologies more competitive against polluting alternatives. For example, wind power is the only technology that has been granted a FiT, while the country still has significant large hydro power potential. The Government could review how a more strategic incentive framework can be developed for these investments. Such a strategy should keep RE technologies at least as attractive as their polluting alternatives in order to foster new investment. Second, given Vietnam’s ongoing reform of the power sector, there is an opportunity to develop a strategy for the Government’s future role, particularly for capital intensive and complex low-emission projects. In particular, there is a need to understand how to best involve private participation in this sector and how risks and financing responsibilities can be shared equitably. International experience has shown that these projects will require continuing financial public support and sharing committment between project developers and the Government. Within this context, PPPs can play an increasing role in the development of all renewable technologies. Third, many rural and semi-urban areas are still heavily reliant on the use of biomass for heating and cooking purposes. However, as incomes rise, consumers’ habits will inevitably change to electricity for these purposes. Since biomass currently represents nearly half of the country’s total energy supply, the Government can develop a coherent strategy in order to ensure that reductions

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Green Investment Climate Country Profile - Vietnam

in biomass use are effectively balanced by increases in cleaner energy. Fourth, Vietnam has one of the highest energy intensity levels in the region, which calls for aggressive EE initiatives, which can also enhance industrial competitiveness. Artificially low electricity rates not only send the wrong signals to industrial users, but also undermine the development of clean energy sources. While the Government has been successful in achieving three percent energy savings during 2006 to 2010, the national policy framework for EE can be strengthened further to achieve better results.

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8. Summary of Policy Instruments Below is a summary table of renewable energy, energy efficiency and market-based instruments for seven selected East Asia and Pacific countries. China

Korea, Rep. of

Indonesia

Philippines

Tax Incentives

●

Carbon Tax

●

Capital Subsidy/Grants - RE

●

Policy Distortions

●

Feed-in Tariff

●

Domestic

●

Foreign

●

Renewable Energy

Concessional Financing

Partial Risk Guarantee Renewable Portfolio Standard

Energy Efficiency & Green Tech

Market Based

Malaysia

●

● ●

●

● ●

●

Capital subsidy/Grants - EE

●

Domestic

●

Foreign

●

Concessional Financing

Partial Risk Guarantee

●

Green Labeling

●

Awareness Campaigns

●

CDM

●

Carbon market

●

Cap-and-trade scheme

●

● Full implementation ● Limited scale and/or early stage implementation ● Existing barriers

Vietnam

Tax Incentives

Singapore

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●

Green Investment Climate Country Profile - Vietnam

9. Annex Table of Contents 9.1 Policies, Objectives, and Targets...................................................................................................... 20 9.2 Financial and Economic Instruments............................................................................................... 26 9.3 Programs and Institutions................................................................................................................ 30 9.4 Regulatory Environment.................................................................................................................. 34 9.5 Supplementary Materials................................................................................................................. 35

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9.1 Policies, Objectives and Targets Overarching Policies • Socio-Economic Development Strategy (SEDS) • Environmental Law • National Target Program to Respond to Climate Change (NTP-RCC) • National Strategy on Climate Change (NSCC) • Green Growth Strategy (GGS) • Cleaner Production Strategy 2020 • Action Plan Framework on Adaptation to Climate Change for the Agriculture and Rural Development Sector • Action Plan to Response to Climate Change

Socio-Economic Development Strategy (SEDS) expresses a strong commitment to sustainable growth, poverty reduction and social equity. The SEDS for 2001-2010 specified that socio-economic development was to be closely associated with environmental protection, and that environmental protection is the responsibility of society as a whole. The Government has agreed to proactively incorporate environmental improvements into every socio-economic development scheme, plan, program and project.

Environmental Law is a cornerstone of Vietnam’s environmental legislation. The law was first introduced in 1995 and revised in 2005.xii The law provides the legal basis for many green financial instruments including taxes, fees, fines, eco-labeling, and investment incentives.

National Target Program to Respond to Climate Change (NTP-RCC) was discussed as a concept since mid-2000s. However, the NTP-RCC was issued in 2009. This five-year program, covering 20092014, assesses climate change impacts on sectors and regions in specific periods and list actions to respond to climate change in the short and long-term. Within this program, a number of activities in research, training, policy development have been implemented and several projects for climate adaptation and mitigation have been piloted in several provinces. An important outcome of the NTP-RCC is the establishment of the Support Program to Respond to Climate Change (SP-RCC). This program was started by the Japanese International Cooperation Agency and the French Development Agency to coordinate support for the NTP-RCC, but has since been joined by other donors and developed into a national financing platform for coordinated donor climate change investments in Vietnam. With over US$300 million committed to date, SP-RCC serves as a platform for aid harmonization, policy dialogue, and project formulation.

xii For more details see Supplementary Materials 9.5.

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Another outcome of the NTP-RCC is the National Steering Committee (NSC) headed by the Prime Minister and five ministers representing the Ministry of Environment and Resources (MER), the Ministry of Agriculture and Rural Development (MARD), the Ministry of Finance (MOF), the MIP, and the Ministry of Foreign Affairs. The NSC meets every six months to update the progress of the NTP-RCC and to discuss future activities. These top level meetings have raised the need for more overarching frameworks for climate change and green growth, subsequently leading to the development of the NSCC and the GGS.

National Strategy on Climate Change (NSCC) was established in 2012 by the Prime Minister. This strategy recognizes climate change not only as a challenge, but also as an opportunity for Vietnam to change development mentality, to find development models and approaches towards a sustainable, low-carbon economy, and to access new mechanisms of financing and technology transfer from developed countries. The NSCC lists priority projects and programs to be implemented from 2011-2015, plans for 20162025, objectives for 2050 and a long-range vision to 2100. Priority programs and projects for 20112015 include: (i) water resource management and response to climate change in the Mekong River delta and the Red River delta; (ii) a program to respond to climate change in Vietnam’s large urban areas; (iii) a GHG inventory and mitigation activities; (iv) socio-economic development for islands to respond to climate change; (iv) a sea and river dykes upgrade program; and (v) a community-based climate adaptation program. Although the strategy is a generic framework, it lays the foundation and schedule for further action. Following the strategy, an extension of the NTP-RCC beyond 2014 will be developed with more detailed activities and mandates for different sectors.

Green Growth Strategy (GGS) was approved by the Prime Minister in 2012. The document represents an effort (coordinated by the Government and various ministries, spearheaded by the MPI) to promote green development in Vietnam. The strategy is emphasized as key to the country’s sustainable growth and an important step to restructure the country’s economy. The most recent draft of the strategy proposes that Vietnam decrease energy use per unit of GDP three percent per year and reduce GHG emissions by 15 percent by 2020 (base year 2010). The GGS provides a clear indication of the country’s preferences for low carbon development options. The three tasks of the strategy are: (i) greening production (including industrial production and agriculture); (ii) reducing GHG emissions, increasing low-carbon technologies (new and RE), and saving energy; and (iii) greening lifestyles and sustainable consumption. The draft strategy identifies the following immediate action for 2011-2020: (i) promote research and development of appropriate green technologies; and (ii) selective purchase of green technology patents with anticipated broad applicability and high effectiveness in Vietnam. In addition, the GGS provides 17 specific green growth policy directions for sectors and provinces and outlines 10 priority actions to initiate immediate green growth action.63 The strategy is supervised by the National Committee on Climate Change which is headed by the Prime Minister.

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Cleaner Production Strategy 2020 aims to attain the following goals until 2015: (i) make 50 percent of industrial businesses aware of the benefits derived from applying cleaner production (CP) Initiative methods; (ii) make 25 percent of industrial production facilities apply CP Initiative methods and reduce energy and material consumption by five to eight percent; and (iii) make 70 percent of Industry and Trade Departments have cleaner production-specialized officials. From 2016 to 2020, the strategy’s target is to make 90 percent of industrial production facilities aware of the benefits of CP. It is projected that by 2020, 50 percent of industrial production facilities will apply CP methods, reducing energy and material consumption by 8 to 13 percent. Ninety percent of medium and large-sized companies are expected to have specialized departments in charge of CP. Also in this period, 90 percent of Industry and Trade Departments are expected to have CP specialists capable of providing instructions. The strategy aims to disseminate the CP concept to 63 provinces and cities nationwide via mass media, technical assistance, CP networking and financing mechanisms.

Action Plan Framework on Adaptation to Climate Change for the Agriculture and Rural Development Sector (2008–2020) was issued by MARD in 2008. The framework sets out preparatory steps for a more concrete action plan, including research, raising communication awareness, strengthening international support, allocating human resources and developing a policy system to integrate climate change in all development programs for the sector. In March 2011, the MARD announced its Action Plan on Climate Change Response of Agriculture and Rural Development Sector (2011-2015) and Vision to 2050, which outlines the activities and expected output for each sub-sector (agriculture, forestry, fishery, water resource management, salt production and rural development) to adapt and mitigate climate change. Each sub-sector will develop further programs along these outlines.

Action Plan to Response to Climate Change (2010-2015) was approved by MOIT in 2010. This action plan sets the general direction for the ministry as well as the state corporations under the ministry to prioritize EE, biofuel, CP, sustainable consumption and RE.

Renewable Energy Policies • National Power Development Plan 2011-2020 with Outlook to 2030 (PDP VII) • National Strategy for Development of Electricity Sector and Vision towards 2020 • National Strategy for Energy Development until 2020

National Power Development Plan 2011-2020 with Outlook to 2030 (PDP VII) sets the basis for development of the electricity sector between 2011 and 2020, with a higher level vision to 2030. The master plan estimates that power demand in Vietnam (generated and imported) will be between 194 and 210 billion kWh by 2012, 330 to 362 billion kWh by 2020 and 695 to 834 billion kWh by 2030. The investment needed to meet this demand is estimated at US$48.8 billion by 2020 and US$123.8 billion by 2030. The Master Plan is expected to increase the power tariffs to attract investment.

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RE from wind, solar and biomass is targeted to increase from 3.5 percent of the electricity mix in 2010 to 4.5 percent in 2020 and 6 percent in 2030. Wind power is planned to reach 1,000 MW of installed energy by 2020 and 6,200 MW by 2030 (or 2.4 percent of the electricity mix). Hydropower is planned to increase from 9,200 MW in 2010 to 17,400 MW by 2020. By 2020, the electricity mix would account for 23.1 percent from hydropower, 2.4 percent from pumped storage hydropower, 48 percent from coal-fired power, and 16.5 percent from gas-fired power plants. Vietnamâ&#x20AC;&#x2122;s first nuclear power plant will commence operation in 2020 and nuclear power is targeted to supply 10 percent of power demand by 2030. The Master Plan also set targets for 100 percent of communes in the country to have electricity by 2015, and 98.6 percent of rural households to have access to electricity. To achieve this target, the Government will encourage the development of off-grid RE.

National Strategy for Development of Electricity Sector 2004-2010 and Vision towards 2020 was issued in 2004. It provides direction for the development of the electricity sector in 20042010, including the development of hydro, nuclear, and thermal electricity. The strategy also calls for improved electricity quality, competitive pricing, as well as electricity saving from improved transmission, distribution and use. Finally, it promotes research and deployment of new and RE to meet the demand for electricity, especially in islands and remote areas.

National Strategy for Energy Development until 2020 was approved by the Prime Minister in 2007. The overall goals of the strategy are: (i) exploiting and using domestic energy resources in a rational and efficient manner; (ii) diversifying forms of investment and business in the energy sector; (iii) developing an energy market conducive to fair competition; and (iv) boosting the development of new and RE, biofuel and nuclear power to meet the requirements of socio-economic development.

Energy Efficiency Policies â&#x20AC;˘ Law on Energy Conservation and Efficient Use

Law on Energy Conservation and Efficient Use was adopted by the 12th National Assembly in 2010. The law requires intensive energy consumers (energy intensive enterprises, public constructions, transportation establishments, and groups that use governmental funds including government office buildings, road lighting, and public lighting) to conduct energy audits and prepare specific action plans to increase EE. Residential entities and SMEs are encouraged but not required to implement these practices.

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Environmental Laws Liability Rules • Environmental Protection Fee • Environmental Fines

Environmental Protection Fee directly affects dischargers of industrial waste water and domestic waste water that are charged an environmental protection fee according to Government Decree 67/2003/ND-CP of June 13, 2003. A domestic waste water fee is included in addition to the clean water sale price (not to exceed 10 percent of the non-VAT clean water sale price). An industrial waste water fee is charged based on the pollutant load of the waste water. The agencies or units that directly collect the charges retain a portion to cover the expenses of collection and analysis. The remainder is divided equally between the Government budget and local government budget.xiii Local provinces use this revenue for environmental protection, investment in water infrastructure such as sewerage dredging, and the regular repair and maintenance of local water drainage systems. The revenue collected by the Government goes into the operation capital of the central Vietnam Environmental Protection Fund (EPF). Solid waste is charged an environmental protection fee. This can reach VND 40,000/ton for ordinary waste and VND 6,000,000/ton for hazardous waste according to Decree 174/2007 ND-CP. After the collection expenses, the remainder of the fee goes to the local provincial budget to finance solid waste disposal, handling and treatment. The mining of minerals is also charged an environmental protection fee according to Decree 74/2011/ND-CP. The fee for crude oil extraction is VND 100,000/ton; for natural gas and coal gas is VND 50/m3, and for associated gas is VND 35/m3. Fees for the extraction of other mineral ores are between VDN 40,000 to 270,000 /ton. These fees, minus collection expenses, are retained by local governments to pay for environmental protection and restoration of mining projects.

Environmental Fines for polluting or failing to comply with environmental regulations are regulated in Government Decree 117/2009/ND-CP. Entities failing to comply with environmental impact assessment requirements can be fined up to VND170 million. Water polluters can be fined up to VND300 million, while violators of hazardous waste regulations can be penalized VND500 million. The maximum environmental administrative fine for one violation is VND500 million. In addition to fines, violators can be required to upgrade their operation, clean up and restore the site, compensate for the damage caused, or be required to relocate their operations. If an entity fails to pay fines and to comply with other requests, their business license may be revoked, their bank accounts frozen, their water and power supply cut off, or their operation forcefully closed.

xiii

For more details see Supplementary Materials 9.5.

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The investigation and enforcement of environmental violations come under the jurisdiction of a special agency within the police force, the Environmental Police Agency. The collected fines are managed by the MOF and MER to pay for environmental regulation enforcement and to add to the central and local EPFs.

Information Availability â&#x20AC;˘ Eco-labeling Programs

Eco-labeling Programs include: (i) Vietnam Green Label; and (ii) the Law on Energy Conservation and Efficient Use product labeling. Vietnam Green Label was adopted by Decision 253 QD-BTNMT in 2009 by the MER. The program will award a Green Label for products and services that are greener, cleaner, and more sustainable. From 2009 to 2012, criteria and favorable treatment mechanisms for labeled products will be developed, and some pilot products and services will be awarded this label. The program aims to have the Vietnam Green Label widely used after 2015. Hotels are expected to be one of the first pilots and the Hotel Department under the Ministry of Culture, Sports and Tourisms has submitted a proposal to the Ministry to award labels to hotels in Vietnam. In addition, the MER recently issued Circular 07/2012/TT-BTNMT regarding registration procedures and criteria for environmentally friendly plastic bags. The Law on Energy Conservation and Efficient Use requires product labeling of EE to educate consumers, to encourage consumption of energy efficient products, and to gradually eliminate energy intensive products. The deadline for industrial equipment (such as electric motors, small and medium-sized boilers, and three-phase transformers) was January 1, 2012 while for construction materials such as insulation, glass, windows, roofing, sheeting materials, will be January 1, 2015.

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9.2 Financial and Economic Instruments Fiscal Incentives and Direct Subsidies • Corporate Income Tax Incentives for Renewable Energy • Environmental Tax for Polluting Commodities • Law on Resources Tax

Corporate Income Tax Incentives for Renewable Energy were adopted in 2009 by Government Decree 04/2009/ND-CP. These incentives represent major document granting fiscal incentives and other support for environmental investment and operations. Another important document is Government Decree 69/2009/ND-CP, which covers policies to encourage education, vocational training, health, culture, sport and environment. According to Decree 69/2009/ND-CP, the Government encourages non-state entities to participate in environmental activities in the following fields: waste (including hazardous waste) collection, transport and treatment, waste water treatment, public toilets, cremation, fresh water supply, environmental monitoring and analysis, RE generation from wind power, solar power, tidal power, geothermal power, bio-energy and waste energy. Enterprises engaged in these environmental activities will be eligible for a favorable income tax rate of 10 percent (compared to the normal rate of 25 percent). For these enterprises, tax is exempted in the first four years from the first year of taxable income, after which tax would be reduced to 50 percent for the following five years. The tax is then reduced for five more years (making a total of nine years of 50 percent tax reduction) if these companies are classified by the Government as operating in areas that are remote and economically disadvantaged. All environmental enterprises in this list are granted land or can rent land from the Government for free or at reduced rate, if the Government has land available according to local land planning. Government Decree 04/2009/ND-CP grants a number of fiscal, land and investment subsidies for green businesses. There are three categories of businesses (A, B, and C), and each receives different support. For example, businesses in list A receive land grants or can rent land for free. Some businesses in list A and B can borrow from the Vietnam Development Bank at favorable interest rates. Others can receive the same favorable tax rate as granted in Decree 69/2009/ND-CP. Import tax is exempted for equipment imported to collect, handle and treat solid waste, to monitor and analyze environmental indicators, and to generate clean energy and RE. Products in List C are exempted from export tax including products from recyclables, eco-labeled products recognized by the Government, and biodegradable products. Some products in list C are given priority in government purchasing decision and can apply for government price support. Consolidated municipal waste treatment can buy power at half the commercial rate.

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Green Investment Climate Country Profile - Vietnam

Environmental Tax for Polluting Commodities states that commodities which cause environmental pollution will incur environmental taxes under the landmark Law on Environmental Protection Tax approved by the National Assembly in November 2011.64 Taxed commodities include petroleum products, coal, hydrochlorofluorocarbons solutions, plastic bags, herbicide, termite pesticide, forest products preservatives, and warehouse disinfectant. The law came into effect January 1, 2012.

Law on Resources Tax encompasses the exploitation of natural resources under the Law on Resources Tax, approved by the National Assembly in 2009. Individuals or organizations extracting mineral oil, crude oil, coal, natural gas, natural forest products, natural marine products, surface water, and ground water for commercial purposes (including using water for hydropower production but excluding the use of water for agriculture) are charged a tax between one and 40 percent of the product sale price, depending on the product. Financial Measuress • Wind Fixed Feed-in Tariff • Small Hydro Power Avoided Cost Tariff • Environmental Projection Fund Loans • Green Credit Trust Fund Guarantees • Mekong Brahmaputra Clean Development Fund • Mekong Renewable Resources Fund • VinaCapital

Wind Fixed Feed-in Tariff was adopted in 2011. The Prime Minister’s Decision 37/2011/QD-TTg on Support Mechanisms for Wind Power Projects in Vietnam set the FiT for wind power at US$7.8 cents/kWh. Under this tariff, the state monopoly power company EVN is obligated to buy electricity from wind power projects at US$6.8 cents/kWh. The remaining US$1 cent of the tariff will be paid by the EPF.

Small Hydro Power Avoided Cost Tariff has been under MOIT monitoring framework since 2008. The MOIT regulates small hydropower projects (under 30 MW) and can sell electricity to the EVN at a price set each year by the MOIT using avoided-cost methodology, which is generally higher than the price from large hydropower plants. The tariff for 2011 was set at an average of VND 916/ kWh (approximately US$4.5 cents).xiv

Environmental Projection Fund Loans facilitate investments in environmental protection from the private sector. The Government established the central EPF in 2003 to provide favorable loans to environmental projects invested by organizations and individuals. The fund’s chartered capital is VND500 billion (US$25 million). Each year, additional money from the state budget is allocated

xiv Small hydropower can also benefit from price discrimination for peak, normal and off-peak hours.

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to the fund to maintain the capital at the level of VND500 billion. The fund receives additional income from environmental fees (fees for waste water discharge, solid waste discharge, and mining) as well as environmental fines and carbon credit (CER – Certified Emission Reductions) sale fees. The fund has the following functions: ■■

Provide loans to environmental projects at an interest rate not exceeding 50 percent of the commercial rate;

■■

Provide interest subsidy, credit support, co-financing, and grants for environmental projects;

■■

Raise additional financing from organizations and individuals, as well as from domestic and international sources for environmental projects;

■■

Receive fees for the sales of carbon credit by CDM projects in Vietnam; and

■■

Receive deposits from mining projects for environmental restoration after mining projects have been completed.

By the end of 2011, the Vietnam EPF had lent VND789 billion to 133 environmental projects and granted VND23 billion to 111 projects. Though limited in capital and small in size of loan, the fund has been the primary source of green lending to small scale green investments from the private sector in the last 10 years. In 2005, the Goverment commenced local EPFs at provincial level for similar purposes providing loan financing to environmental businesses and other functions stipulated by each province. Currently, 19 local EPFs have been established in 19 different provinces with varied levels of funding, ranging from VND5 billion in Hai Duong province to VND300 billion in Hanoi. Ho Chi Minh City set up a Waste Recycling Fund in 2006 to promote recycling activities and to provide favorable loans to recycling businesses. The recently started loan program has a fund chartered capital of VND50 billion.

Green Credit Trust Fund Guarantees program is a US$5 million financial support initiative of the Swiss Secretariat for Economic Affair to provide SMEs in Vietnam with loan guarantees for CP investments. The fund provides a guarantee through local banks (Techcombank, Vietnam International Bank and Asia Commercial Bank) for 50 percent of the principal of the green credit (loan sizes are between US$250,000 to US$1 million). The fund also reimburses the loan portion of the investment after successful installation of the CP technology, if the borrower can demonstrate a reduction of the negative impact on the environment. For example, if a project achieves >30 percent environmental improvement, 15 percent of the loan is reimbursed, or awarded to the business; with a 50 percent environmental improvement, 25 percent of the loan is reimbursed.

Mekong Brahmaputra Clean Development Fund is a US$45 million fund under the private equity fund Dragon Capital to invest in projects in the Mekong River Region that have positive impact on the environment and contribute to sustainable development.

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Green Investment Climate Country Profile - Vietnam

Mekong Renewable Resources Fund under Indochina Capital, received US$50 million fund from the Overseas Private Investment Corporation to invest in renewable resource opportunities in the Lower Mekong region. Indochina Capital needs to raise matching funds to release this proto-fund (two dollars raised to one dollar released). Targeted projects are RE generation, EE, environmental infrastructure and natural resources preservation in Vietnam, Cambodia, and Laos.

VinaCapital is another large private equity fund that invests in early and growth-stage technology businesses, focusing investment in four sectors: internet, telecommunications, media, and clean energy. Market-based Mechanisms • Business and Biodiversity Offsets Program (BBOP) • Tradable Green Certificate Schemes

Business and Biodiversity Offsets Program (BBOP) was established in 2010. At the same year, the Government, through the MARD and the MONRE, held an initial workshop with BBOP, a program of Ecosystem Marketplace publisher Forest Trends, to discuss the potential for biodiversity offsets to help Vietnam achieve its conservation and development goals. BBOP and MARD have initiated discussions on the objectives and activities of this collaboration, and are seeking donor support.

Tradable Green Certificate Schemes (more precisely the CDM) represents the main carbon financing mechanism in Vietnam. However, the vast majority of projects are in the energy sector, with only one proposed project dealing with forestry. Nevertheless, it is envisaged that more forestry, agriculture and land use-related CDM projects will be initiated in the next four to five years, as there is increased focus on conservation and protection of climate-sensitive habitats, including mangrove and coastal plantations, plantations on slopes, and watershed areas.

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9.3 Programs and Institutions Programs • National Energy Efficiency Program (NEEP) • Energy Efficiency and Cleaner Production Financing Program (EECP) • Natural Gas Expansion • International Initiative on Green Economy for Sustainable Development • Green Tech City • Wind Power Area • Green Mekong Initiative • Vietnam Cleaner Production in Industry Strategy towards 2020 • System Efficiency Improvement, Equitization and Renewables (SEIER) • Renewable Energy Development Program (REDP) • GEF – World Bank Clean Production and Energy Efficiency (CPEE) Project • Vietnam Distribution Efficiency Project (DEP) • World Bank Development Policy Operation (DPO) Program

National Energy Efficiency Program (NEEP) was adopted in 2006. The Government established the first comprehensive national program for EE, NEEP, with the support of the Government of the Netherlands, the European Union, SIDA and the UNDP. The 2006-2010 phase of the program has undertaken considerable research (notably, an energy use survey of 500 large-scale industrial enterprises), capacity building, awareness raising, and formulating the Law on Energy Conservation and Efficient Use.

Energy Efficiency and Cleaner Production Financing Program (EECP) works with selected banks to build their sustainable energy portfolios and tailored financing products. EECP targets enterprises that are seeking to upgrade inefficient production systems and introduce new and clean technologies that will help them reduce costs, raise productivity and improve environmental performance. In 2010, with a US$25 million loan and technical support from IFC, Techcombank became the first bank to launch EECP. IFC is working with Vietinbank and Sacombank to develop EECP financing products for local small and medium-sized enterprises SMEs. The World Bank is in final approval process for a US$20 million financing package to the central Vietnam EPF to lend to industrial wastewater treatment projects. Natural Gas Expansion was initiated in 2008. Malaysia-based Nacap Asia Pacific is constructed a natural gas pipeline through southern Vietnam on behalf of state-owned PetroVietnam. The project helped Vietnam meet an increasing energy demand, which is forecasted to rise by 15 percent a year through 2010. In addition, the project enabled the Government to convert an older oil-powered plant to one that relies on cleaner natural gas. Prior to this project, Vietnam had only a single

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gas pipeline, operated by British Petroleum. The lack of transport options has curtailed expansion of the sector, despite the country’s substantial natural gas reserves. The Malaysian firm’s investment helped ensure that cleaner energy is central to upcoming plans to increase capacity in the sector.

International Initiative on Green Economy for Sustainable Development in Vietnam was launched in 2010. The initiative, which will be conducted in collaboration with the Government of the Netherlands, will focus on the role of the market and sustainable forest management. The initiative is expected to boost dialogue and cooperation to accelerate sustainable forest management and land use, which will help the development of small and medium enterprises and improve the quality of life in rural areas.

Green Tech City initiative was launched in 2009. The three-phase construction of a high tech green city in Hanoi is expected to finish in 2020. The master plan will create a completely new district, embracing sustainable principles. The plan incorporates advanced city design methods to reduce the demand for non-renewable resources and typical civil infrastructure. Covering an area of 145 hectares, the plan integrates two existing villages and provides necessary community amenities to serve a future urban population of over 20,000 people. The plan reinforces the local traditions and green urban character of Hanoi. It also engages the strategic green landscape corridor envisioned at the city scale along the adjoining river. The plan envisages developing state-of-the-art technology and smart infrastructure in reducing carbon emissions and overall energy needs.

Wind Power Area is an important RE development program. The EVN has prepared a plan for the construction of wind power plants in the southern province of Ninh Thuan. However, the capacity and the investment needed for the project have not yet been finalized. The Government is planning to use official development aid provided by the Government of Denmark to fund the project. Currently, only one wind power project with installed capacity of 30 MW (namely the Tuy Phonng 1 in Binh Thuan province) has been commissioned. Other projects including the Bac Lieu (16 MW), the Phuong Mai 1 (30 MW), and the Cau Dat (30 MW) are under preparation. With a coastline stretching more than 3,000 km, the plan expects to use 8.6 percent of Vietnam’s total land area to generate wind power. In Vietnam, local, private and foreign companies are already developing wind power plants with capacities of between 6 and 150 MW.

Green Mekong Initiative is an active program since 2009. Japan and the Mekong region countries launched a number of projects and cooperative actions relating to the environment and climate change under the Green Mekong Initiative. Japan is providing assistance to Vietnam and other countries in the region for: ■■

Forest conservation and sustainable utilization of forest resources;

■■

Water resource management of the Mekong River (Vietnam is also receiving assistance for development of irrigation systems and capacity building);

■■

Assistance to build recycle-oriented societies for cleaner urban environments; and

■■

Conservation of biodiversity in the Mekong River.

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Vietnam Cleaner Production in Industry Strategy towards 2020 is implemented by MOIT. To successfully implement the Vietnam Cleaner Production in Industry Strategy Towards 2020, the MOIT is creating public awareness enhancement, designing a CP website and database, providing technical assistance, developing CP models, and issuing legal and financial incentives.

System Efficiency Improvement, Equitization and Renewables (SEIER) project’s objectives were: (i) to enhance the efficiency of the electricity system; (ii) to provide electric power in selected rural areas; and (iii) to sustain reform and institutional development of the energy sector.65 In addition, SEIER’s global objective was to reduce GHG emissions by promoting the use of RE-based electricity. The project consisted of three components: (i) improving the efficiency of the transmission system, focusing particularly on the upgrading of the 500 kV and 220 kV transmission systems and a demand-side management activity; (ii) improving rural energy access, which includes upgrading of the 110 kV sub-transmission systems, rehabilitation of small hydro and development of off-grid or mini-grid supply using RE; and (iii) reforming the power sector through training, equitization and improvement of EVN’s management information system and support to MOIT and ERAV.

Renewable Energy Development Program (REDP) main objective is to increase the supply of electricity to the national grid from RE sources on a commercially, environmentally and socially sustainable basis.48 The project has three main components: (i) an investment project implementation component; (ii) a regulatory development component; and (iii) a pipeline development component. The project provides a refinancing facility to participating commercial banks for loans to eligible renewables-based projects up to 30 MW developed by private sponsors. It also provides technical assistance for application review and project management by MOIT and for building the capacity of participating banks and project sponsors to prepare, appraise, finance, and implement renewables-based projects according to international best practices. Technical assistance is moreover provided for developing the regulatory infrastructure and building the requisite capacities of MOIT, the ERAV and other relevant governmental agencies for RE development, particularly for grid-connected electricity generation projects below 30 MW.

GEF – World Bank Clean Production and Energy Efficiency (CPEE) Project is coordinated by the Department of Science, Technology and Energy Savings under MOIT’s General Department of Energy.66 The project aims to strengthen the capacity of the Government and other key stakeholders to effectively deliver the national EE program. This will help to improve EE and reduce associated GHG emissions.

Vietnam Distribution Efficiency Project (DEP) objectives are: (i) to improve the performance of Vietnam’s PCs in providing quality and reliable electricity services; and (ii) to reduce GHG emissions through demand side response and efficiency gains.67 DEP is comprised of three components: (i) System Expansion and Reinforcement; (ii) Introduction of Smart Grid Technologies in Distribution; and (iii) Technical Assistance and Capacity Building. The project provides for the construction and reinforcement of 110 kV, medium voltage and low voltage electricity distribution networks of the PCs. The project also focuses on: (i) automation, through introduction of supervisory control and

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data acquisition systems; and (ii) introduction of Advance Meter Technology systems, including twoway communication systems. Finally, the project provides for technical assistance to ERAV and PCs.

World Bank Development Policy Operation (DPO) Program is supervised by the MOIT and donors. Both parties agreed that the Law on Energy Conservation and Efficient Use needs to be implemented more effectively in order to achieve project’s targets. This could be achieved by improving the implementation and monitoring of new EE regulations, and introducing financing mechanisms, industrial EE action plans, as well as innovative EE programs.68 With a strong focus on addressing barriers to EE, the World Bank is implementing a Climate Change DPO programmatic series in Vietnam. Such DPO series supports the implementation and monitoring of an effective regulatory framework to successfully implement the mandates and measures defined in the Law on EE and Conservation and to strengthen the results of NEEP.

Institutions • Sustainable Development Office • Vietnam National Cleaner Production Centre (VNCPC) • Ministry of Natural Resources and Environment (MONRE)

Sustainable Development Office acts as a starting point for “green economy” development programs. However, the capacity of environmental management institutions in Vietnam has been insufficient. In particular, the environmental managers and regulators employed in the system have been deficient in both their number and qualification.

Vietnam National Cleaner Production Centre (VNCPC) was established to disseminate CP concepts and promote its application in industrial activities to improve the competitive position of industries in Vietnam. The vision of VNCPC is to become a self-financed knowledge-based organization that delivers a wide range of high quality CP solutions to industries, consulting companies, research institutions, academia, and governmental organizations.

Ministry of Natural Resources and Environment (MONRE) houses the United Nations Framework Convention on Climate Change Focal Point and the Designated National Authority for the CDM. Moreover, a Climate Change Country Team and a National Technical Expert Team have been established, making Vietnam one of the few countries geared to deploying CDM projects rapidly.

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9.4 Regulatory Environment Procedures and Mechanisms • Corrective Action Plans for Ensuring Compliance with Regulation • Emission Monitoring, Reporting and Verification

Corrective Action Plans for Ensuring Compliance with Regulation was effective after the promulgation of the Law on Environmental Protection. A number of significant efforts have been made by the MER to: (i) control air, water and soil pollution; (ii) manage and treat solid and hazardous waste; (iii) deal with serious polluters; and (iv) respond in a timely manner to environmental disasters and serious occurrences. For example, after the Environment Law was adopted in 1994, the Government declared its intention to prosecute all cases of environment violation. In 1995, the Office of Science, Technology and Environment made an inventory and inspected all industrial pollution operations in cities that had serious environmental impacts on air, water and noise. Further, in 2000, the Government promulgated a number of legal documents aimed at strengthening water pollution control (on licensing, inventory, exploiting and using water resources and discharging wastewater into water sources). In 2003, the Prime Minister approved the National Action Plan for dealing strictly with organizations that cause serious environmental pollution. Emission Monitoring, Reporting and Verification procedure is operating within the National Network of Environmental Monitoring system managed by the Ministry of Science, Technology and Environment, which monitors and measures basic parameters of air, water, land, solid waste and noise every three months.xv Environmental impact assessments have been carefully carried out for all the socio-economic development projects at the national and local level.69 However, GHG emissions are not yet included in the existing impact assessment programs.

xv Despite rigorous monitoring efforts, reporting, verifications and enforcement remains a major challenge in Vietnam.

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9.5 Supplementary Materials Vietnam Environmental Law: Clauses Related to Green Finance Article 112: Organizations, individuals and households producing and trading in products that exert long-term adverse impacts on the environment and human health shall be liable to environment tax. Article 113: Organizations and individuals discharging waste into the environment or engaged in activities causing adverse impacts on the environment shall have to pay environmental protection charges. Article 33: Organizations and individuals investing in the development and use of clean energy, RE, and production of environment-friendly products shall be granted preferential treatment on tax, funding support and land for building production establishments. Article 34: The State encourages organizations and individuals to consume products recycled from waste, organic products, easily decomposable packages, eco-certified products and other environment-friendly products.

Budget Line for Environmental Protection has been in existence since 2006. The Government has set a separate budget line for environmental protection of no less than one percent of the annual government budget. In 2010, this budget line was VND6,590 billion (approximately US$330 million). The current level is not sufficient to meet local and the Government needs and should be increased to at least to one percent of the GDP. According to the Vietnam Environmental Administration (VEA), about 30,000 tons of solid waste is generated in urban areas each day, but only 83 percent of this amount is collected, treated or landfilled. The percentage for rural areas is considerably less, with 60 percent collected out of a total of 30,000 tons generated daily. The VEA estimates that 16 industrial sectors require US$7.6 billion investments in environmental protection and pollution control. The sectors most in need of investment are fish farming, seafood processing and waste water treatment in industrial zones. At the end of 2011, only 65 percent of 180 operating industrial zones in the country have a waste water treatment system. In addition to the state budget, Official Development Assistance (ODA) represents a significant source of investment for environmental activities. During 2006-2011, ODA for environmental related projects reached US$2,914 million (of which US$2,856 million is loan finance and US$58 million is grant finance).

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10. References 1

Consulate General of Vietnam - Houston. “Vietnam: Natural Condition.” Accessed August 7, 2013. http://vietnamconsulateinhouston.org/en/general-information/natural-condition.

Hong Kong and Shanghai Banking Corporation P.L.C. “Importance of river basins in driving global growth to rocket: top ten basins’.” Accessed August 7, 2013. http://www.hsbc.com.vn/1/ PA_ES_Content_Mgmt/content/vietnam/abouthsbc/newsroom/attached_files/HSBC_Water_Programme_EN.pdf.

World Bank Data Bank. “GDP (current US$).” Accessed July 21, 2013. http://data.worldbank.org/ indicator/NY.GDP.MKTP.CD.

World Bank Data Bank. “Population, total.” Accessed July 21, 2013. http://data.worldbank.org/ indicator/SP.POP.TOTL.

World Bank Data Bank. “Urban population (% of total).” Accessed July 21, 2013. http://data. worldbank.org/indicator/SP.URB.TOTL.IN.ZS.

International Monetary Fund. “World Economic Outlook Database 2011.” Accessed July 21, 2013. https://www.imf.org/external/pubs/ft/weo/2011/01/weodata/weoselco.aspx?g=2001&sg=All+countries.

Economist Intelligence Unit. “EIU Country Data.” Accessed July 21, 2013. http://www.eiu.com/ site_info.asp?info_name=EIUcountryData&=entr.

World Bank Data Bank. “Inflation, consumer prices (annual %).” Accessed July 21, 2013. http:// data.worldbank.org/indicator/FP.CPI.TOTL.ZG.

Central Intelligence Agency. “GDP Composition by Sector.” Accessed July 21, 2013. https://www. cia.gov/library/publications/the-world-factbook/fields/2012.html#rp.

International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/.

Adapted from:

International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/. U.S. Energy Information Administration. “Countries Data.” Accessed July 21, 2013. http://www. eia.gov/countries/data.cfm. World Bank. “Winds of Change: East Asia’s Sustainable Energy Future.” Accessed July 23, 2013. http://siteresources.worldbank.org/INTEASTASIAPACIFIC/Resources/226262-1271320774648/windsofchange_fullreport.pdf. World Bank Data Bank. “Energy imports, net (% of energy use).” Accessed July 23, 2013. http:// data.worldbank.org/indicator/EG.IMP.CONS.ZS.

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Adapted from:

Indriyanto, Asclepias R., Nasrullah Salim, Fabby Tumiwa, Tri Mumpuni et al. “Electricity Governance in Indonesia: Assessment Report.” World Resources Institute, 2007. Accessed July 23, 2013. http://pdf.wri.org/egi_report_indonesia.pdf. International Energy Agency. “Access to Electricity 2011.” Accessed July 21, 2013. http://www. worldenergyoutlook.org/resources/energydevelopment/accesstoelectricity/. World Bank Data Bank. “Access to electricity (% of population).” Accessed July 23, 2013. http:// data.worldbank.org/indicator/EG.ELC.ACCS.ZS. World Bank Data Bank. “Electric power transmission and distribution losses (% of output).” Accessed July 21, 2013. http://data.worldbank.org/indicator/EG.ELC.LOSS.ZS.

Adapted from:

Asia-Pacific Economic Cooperation. “Energy Overview 2012.” Accessed July 23, 2013. http://publications.apec.org/publication-detail.php?pub_id=1432. Energdata. “Energy intensity of GDP at constant purchasing power parities.” Accessed July 21, 2013. http://yearbook.enerdata.net/energy-intensity-GDP-by-region.html. Adapted from:

International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/. Intergovernmental Panel on Climate Change. “Revised 1996 Intergovernmental Panel on Climate Change’s National Guidelines.” Accessed August 1, 2013. http://www.ipcc-nggip.iges.or.jp/ public/gl/invs1.html. Adapted from:

Energy Market Authority of Singapore. “Singapore Energy Statistics, 2012.” Accessed July 21, 2013. http://www.ema.gov.sg/media/files/publications/EMA_SES_2012_Final.pdf. Maurer, Luiz T., and Luiz A. Barroso. Electricity Auctions: An Overview of Efficient Practices. Washington D.C.: International Bank for Reconstruction and Development/ World Bank, 2011. Accessed July 23, 2013. http://www.ifc.org/wps/wcm/connect/8a92fa004aabaa73977bd79e0dc67fc6/Electricity+and+Demand+Side+Auctions.pdf?MOD=AJPERES. Perusahaan Listrik Negara. “Indonesian Electricity Tariff.” Accessed July 23, 2013. http://www. pln.co.id/eng/?p=534. Lee, Seung-Hoon. “Electricity in Korea.” Asia-Pacific Economic Cooperation, 2011. Accessed July 23, 2013. http://mddb.apec.org/Documents/2011/SOM/SYM/11_som_sym1_009.pdf. Wu, Yanrui, Xunpeng Shi, Fukunari Kimura et al. Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies. Jakarta: Economic Research Institute for ASEAN and Eastern Asia, 2012. Accessed July 23, 2013. http://www.eria.org/RPR-2011-17.pdf.

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Adapted from:

Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statisticsof-non-oecd-countries_19962851-en. U.S. Energy Information Administration. “Countries Data.” Accessed July 21, 2013. http://www. eia.gov/countries/data.cfm. Adapted from:

International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https:// www.iea.org/stats/. Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statisticsof-non-oecd-countries_19962851-en. Adapted from:

World Bank. “Doing Business Economy Rankings.” Accessed July 21, 2013. http://www.doingbusiness.org/rankings.

Transparency International. “Corruption Perceptions Index 2011.” Accessed July 21, 2013. http:// www.transparency.org/cpi2011/results.

Adapted from:

World Bank Data Bank. “Foreign direct investment, net inflows (% of GDP).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS. World Bank Data Bank. “Foreign direct investment, net outflows (% of GDP).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BM.KLT.DINV.GD.ZS. World Bank. “Private Participation in Infrastructure Database - Sector Data Snapshot.” Accessed July 21, 2013. http://ppi.worldbank.org/explore/ppi_exploreSector.aspx?sectorID=2.

World Bank Data Bank. “Lending interest rate (%).” Accessed July 23, 2013. http://data.worldbank.org/indicator/FR.INR.LEND.

World Bank Data Bank. “Interest rate spread (lending rate minus deposit rate, %).” Accessed

July 23, 2013. http://data.worldbank.org/indicator/FR.INR.LNDP.

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World Bank Data Bank. “Liquid assets to deposits and short term funding (%).” Accessed July 23, 2013. http://data.worldbank.org/indicator/GFDD.SI.06.

International Energy Agency. “Share of total primary energy supply (2009): Vietnam.” Accessed August 30, 2013. http://www.iea.org/stats/pdf_graphs/VNTPESPI.pdf.

U.S. Energy Information Administration. “Country: Vietnam.” Accessed August 7, 2013. http:// www.eia.gov/countries/country-data.cfm?fips=VM&trk=m.

U.S. Commercial Service. “Doing Business in Vietnam: 2011 Country Commercial Guide for U.S. Companies.” Accessed August 7, 2013. http://www.buyusainfo.net/docs/x_4477205.pdf.

International Energy Agency. “Vietnam: Electricity generation by fuel.” Accessed August 7, 2013. http://www.iea.org/stats/countryresults.asp?COUNTRY_CODE=VN&Submit=Submit.

Adapted from:

Nguyen, Thanh-Nhan, and Minh-Ha Duong. “Economic Potential of Renewable Energy in Vietnam’s Power Sector.” Centre International de Recherche sur l’Environnement et le Developpement 37, no. 5 (February 2009): 1601 -1613. Accessed August 8, 2013. http://mpra.ub.unimuenchen.de/21173/1/MPRA_paper_21173.pdf. Organization for Economic Co-operation and Development. “Deploying Renewables in Southeast Asia: Trends and Potentials, 2010.” Accessed August 8, 2013. http://www.oecd-ilibrary.org/ docserver/download/5kmd4xs1jtmr.pdf?expires=1375977213&id=id&accname=guest&checksum=E41CE63D67C66E163B41CDE1A954CCA1. Renewable Energy Policy Network for the 21st Century. “Country Profile: Vietnam.” Accessed August 8, 2013. http://www.map.ren21.net/PDF/ProfilePDF.aspx?idcountry=194. The Institute of Energy Economics - Japan. “Energy Balance of Vietnam by 2020.” Accessed August 8, 2013. http://eneken.ieej.or.jp/data/2592.pdf. Prime Minister of Vietnam. “Approval of the National Power Development Plan VII.” Accessed August 8, 2013. http://www.nti.org/media/pdfs/VietnamPowerDevelopmentPlan2030. pdf?_=1333146022.

Adapted from:

International Renewable Energy Agency. “Country Profile: Vietnam.” Accessed August 12, 2013. http://www.irena.org/REmaps/countryprofiles/asia/Vietnam.pdf. Renewable Energy Policy Network for the 21st Century. “Country Profile: Vietnam.” Accessed August 8, 2013. http://www.map.ren21.net/PDF/ProfilePDF.aspx?idcountry=194. Socialist Republic of Vietnam Prime Minister. “National Green Growth Strategy.” Accessed August 13, 2013. http://www.greengrowth-elearning.org/pdf/VietNam-GreenGrowth-Strategy.pdf.

Ernst and Young. “Oil Gas Tax Guide 2012.” Accessed August 12, 2013. http://www.ey.com/Publication/vwLUAssets/2012-global-oil-and-gas-tax-guide/$FILE/EY_Oil_Gas_Tax_Guide_2012.pdf.

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Adapted from:

Energy Regulatory Commission of the Philippines. “Feed-in Tariff Collection and Disbursement Guidelines.” Accessed July 31, 2013. http://www.erc.gov.ph/Home/Index. German Society for International Cooperation. “Renewable Energy in Vietnam: Status of Wind Power Development (Rounded Values.” Accessed August 12, 2013. http://www.renewableenergy.org.vn/index.php?page=wind-energy-2. Shah, Jitendra. “Effective Government Policies and Incentives to Support Wind Power.” Asian Development Bank, 2012. Accessed August 12, 2013. http://www.irena.org/DocumentDownloads/events/CopenhagenApril2012/10_Jitendra_Shah.pdf. Meier, Peter. “Sri Lanka and Vietnam: Lessons of the Renewable Energy Tariff Experience.” Eidgenössische Technische Hochschule Zürich, 2012. Accessed August 12, 2013. http://siteresources. worldbank.org/INTENERGY2/Resources/4114191-1328286035673/D1_Peter_Meier.pdf.

German Society for International Cooperation. “Renewable Energy in Vietnam: Status of Wind Power Development (Rounded Values.” Accessed August 12, 2013. http://www.renewableenergy.org.vn/index.php?page=wind-energy-2.

REEEP Policy Database. “Vietnam (2012) - Policy and Regulatory Overviews .” Accessed August 12, 2013. http://www.renewableenergy.org.vn/index.php?page=wind-energy-2.

REEEP Policy Database. “Energy Profile: Vietnam.” Accessed August 12, 2013. http://www.reegle. info/countries/vietnam-energy-profile/VN.

Adapted from:

Socialist Republic of Vietnam Ministry of Industry and Trade. “2009 National Energy Efficiency Programme.” Accessed August 12, 2013. http://tietkiemnangluong.com.vn/en/to-label/introduce-energy-labels-36002-12051.html.

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United States Agency for International Development. “Vietnam Country Report- From Ideas to Action.” Accessed August 12, 2013. https://cdm.unfccc.int/filestorage/N/T/B/NTBX1HALRSVW8Q3D95Y2KOF47ZJGM6/Viet%20Nam%20Country%20Report%2C%20USAID%20June%202007. pdf?t=d0l8bXJmOHFtfDCqpZiVf-cnJVosktEtPzsP.

World Bank. “Vietnam Climate Change Development Policy.” Accessed August 12, 2013. http:// www.worldbank.org/projects/P122667/vietnam-climate-change-development-policy?lang=en.

World Bank. “ESMAP: Vietnam.” Accessed August 12, 2013. https://www.esmap.org/taxonomy/ term/239.

Socialist Republic of Vietnam Ministry of Industry and Technology. “Cleaner Production.” Accessed August 13, 2013. http://www.sxsh.vn/en-US/Home/Environment-5.aspx.

World Bank. “Vietnam Renewable Energy Development Project.” Accessed August 12, 2013. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/12/29/000104 615_20090105153919/Rendered/PDF/121291080Proje1t0110Appraisal0Stage.pdf

World Bank. “Vietnam’s Infrastructure Challenge: Power Strategy.” Accessed August 12, 2013. http://siteresources.worldbank.org/INTEAPINFRASTRUCT/Resources/powereng.pdf.

Vietnam Net. “2005 environment protection law not respected.” Accessed August 12, 2013. http://english.vietnamnet.vn/fms/environment/13224/2005-environment-protection-law-not-respected.html

Standard & Poor’s. “BICRA On Vietnam Revised To Group ‘9’ From Group ‘10’.” Accessed August 13, 2013. http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245341103180.

Adapted from:

World Bank Data Bank. “Foreign direct investment, net inflows (BoP, current US$).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD. World Bank Data Bank. “GDP (current US$).” Accessed July 21, 2013. http://data.worldbank.org/ indicator/NY.GDP.MKTP.CD. Van Cong, Pham. “Vietnam Investment Environment 1998-2012.” Federation of Hong Kong Industries, 2012. Accessed August 12, 2013. http://www.industryhk.org/fhki_share/bdd/VIETNAM_ INVESTMENT_ENVIRONMENT_from_1988-2012.pdf.

Socialist Republic of Vietnam Ministry of Planning and Investment. “FDI Scheme and Planning .” Accessed August 12, 2013. http://www.industryhk.org/fhki_share/bdd/VIETNAM_INVESTMENT_ ENVIRONMENT_from_1988-2012.pdf.

Schwab, Klaus. “Global Competitiveness Index.” World Economic Forum, 2012. Accessed July 23, 2013. http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf.

PricewaterhouseCoopers. “Doing Business in Vietnam.” Accessed August 12, 2013. http://www. pwc.com/en_VN/vn/publications/2012/assets/PwC-HSBC_Guide_to_doing_business_in_Vietnam. pdf.

The World Bank – AusAID

Green Infrastructure Finance

World Bank. “Private Participation in Infrastructure Project Database.” Accessed July 23, 2013. http://ppi.worldbank.org/explore/ppi_exploreRegion.aspx?regionID=2.

Asian Development Bank. “Assessment of Public-Private Partnerships in Viet Nam: Constraints and Opportunities.” Accessed August 13, 2013. http://www.adb.org/publications/assessment-public-private-partnerships-viet-nam-constraints-and-opportunities.

World Bank. “Private Participation in Infrastructure Database: Vietnam.” Accessed August 12, 2013. http://ppi.worldbank.org/explore/ppi_exploreCountry.aspx?countryId=67.

Public-Private Infrastructure Advisory Faculty. “Vietnam.” Accessed August 12, 2013. http:// www.ppiaf.org/category/publication-keyword/vietnam.

Socialist Republic of Vietnam Prime Minister. “Decision No. 130/2007/QD-TTg.” Accessed August 12, 2013. http://businesslawconsultant.com/legal-documents/140-decision-no-1302007qd-ttg-dated-august-02-2007-.

Federal Republic of Germany’s Joint Implementation and Clean Development Mechanism Program. “CDM Market Brief: Vietnam.” Accessed August 12, 2013. http://www.jiko-bmu.de/files/ basisinformationen/application/pdf/cdm-markt-vietnam-english.pdf.

Dieu Trinh, Nguyen Thi, and Ngo Thi Nhung. “Progress on the Vietnam Green Growth Strategy.” Socialist Republic of Vietnam Ministry of Planning and Investment, 2012. Accessed October 15, 2013. http://webcache.googleusercontent.com/search?q=cache:4akiVxbj9o4J:www.oecd.org/media/oecdorg/directorates/developmentco-operationdirectoratedcd-dac/environmentanddevelopment/Session%2520II%2520-%25201.

Vietnam Briefing. “Environmental Tax law May Raise Production Costs in Vietnam.” Accessed August 13, 2013. http://www.vietnam-briefing.com/news/environment-tax-law-raise-production-costs-vietnam.html/.

World Bank. “Proposed Additional Credit Document.” Accessed August 12, 2013. http://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/06/04/000334955_201006 04014732/Rendered/PDF/541690PJPR0P06101Official0use0only1.pdf

Global Environment Facility. “GEF – World Bank Clean Production and Energy Efficiency.” Accessed August 13, 2013. http://www.thegef.org/gef/node/4286.

World Bank. “Vietnam: Proposed Loan from a Green technology Fund.” Accessed August 13, 2013. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/08/23/0 00386194_20120823005043/Rendered/PDF/716220PAD0P1250Official0Use0Only090.pdf

World Bank. “ESMAP: Vietnam.” Accessed August 12, 2013. https://www.esmap.org/taxonomy/ term/239.

Regional Resources Center for Asia and Pacific. “Ministry of Science, Technology and Environment .” Accessed August 13, 2013. http://www.rrcap.ait.asia/pub/soe/vietnam/overview/environmental_management_and_legislation.htm.

The World Bank – AusAID

n July 2012, the Green Infrastructure Finance Framework Report was published to address the constraints in financing green infrastructure and to develop a new PPP-based approach to accelerate investments in lowemission technologies. The approach calls for assessing the â&#x20AC;&#x153;Green Investment Climateâ&#x20AC;? of a given country in order to develop country-specific recommendations for policy and incentive programs as well as other measures which can be introduced in order to further promote green growth in an economy. This report includes one of the first Green Investment Country Profiles completed for the East Asia and Pacific Region as part of bringing the approach closer to operational status. The initial countries include China, Philippines, Vietnam, Malaysia, Indonesia, Singapore and South Korea. The assessment involves not only the green policy and incentives environment, but also the countryâ&#x20AC;&#x2122;s overall natural resource endowment of fossil and renewable energy, its industrial development strategy in addition to general business indicators and other considerations, such as electricity prices, the capacity of the financial sector to mobilize long-term domestic financing, as well as their overall regulatory and legal capacity to implement PPPs. The country profiles provide a general understanding of the attractiveness, prevailing trends, strengths, and other aspects affecting the ability of the country to leverage its green growth potential.