Green Investment Climate Country Profile – Vietnam

Green Infrastructure Finance
Green Investment Climate

Country Profile – Vietnam
East Asia and Pacific Region

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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$).................................................................................................................. 7
Table 6: Avoided Cost Tariff................................................................................................................................ 8
Table 7: NEEP Component, DPO Policy Actions and Expected Results............................................................. 9
Table 8: S&P’s Credit Rating.............................................................................................................................. 12
Table 9: FDI (net BoP, current US$)................................................................................................................... 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: Total Primary Energy Supply................................................................................................................. 4

Figure 2: Energy Efficiency Labeling.................................................................................................................... 8
Figure 3: Global Competitiveness Index............................................................................................................. 13
Figure 4: Corruption Perceptions Index 2011.................................................................................................... 13
Figure 5: Private Investment in New or Additional RE Capacity (US$ million)................................................ 14
Figure 6: Breakdown of RE Investments (US$ million)...................................................................................... 14
www.worldbank.org www.ausaid.gov.au
Green Investment Climate Country Profile - Vietnam
Acknowledgements
T
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 over-
all 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).
The World Bank – AusAID iii

List of Abbreviations and Acronyms

ACT Avoided Cost Tariff
BBOP Business and Biodiversity Offsets Program
BoP Balance of Payments
BOT Build-Operate-Transfer
BT Build-Transfer
BTO Build-Transfer-Operate
CDM Clean Development Mechanism
CER Certified Emission Reductions
CIT Corporate Income Tax
CO2 Carbon Dioxide
CP Cleaner Production
CPEE Clean Production and Energy Efficiency
CPI Corruption Perceptions Index
DEP Distribution Efficiency Project
DPO Development Policy Operation
EE 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
km Kilometers
iv The World Bank – AusAID

kV 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
Mt Metric Ton
Mtoe Million Tons of Oil Equivalent
MW Megawatt
NA 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
RE 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
The World Bank – AusAID v

Vietnam is the most eastern country on the

Indochina Peninsula stretching 1,650 km in length.
The country is characterized by hilly and moun-
tainous 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 country’s economy,
Vietnam also has vast and diversified biomass potential.
The World Bank – AusAID 1

1. Statistical Overview
Rep. of Korea
Philippines
Singapore
Indonesia
Malaysia
Vietnam
China
Macro Indicators
GDP (current US$ billion)3 847 225 124 7,318 1,116 240 278
Population (million) 4
242 95 88 1,344 50 5 29
Urban population (% of total) 5
49.9 48.7 30.4 49.2 82.9 100 72
Economic Indicators
Constant GDP 10 Year CAGR (%)6 5.1 4.5 6.4 9.6 3.4 5.8 4.5
Public debt (% of GDP) 7
24.7 50.9 48.8 16.5 34.7 108.3 51.8
Inflation, consumer prices (annual %) 8
5.4 4.7 18.7 5.4 4.0 5.2 3.2
Sector mix (% of GDP)9
Agriculture 15 12 21 10 3 0 11
Industry 47 33 41 47 39 28 44
Services 38 55 38 43 58 72 45
Energy Indicators
Energy production (Mtoe)10 352 24 77 2,085 44 0.03 90
Energy use (Mtoe) 10
202 39 64 2,257 229 19 67
Net energy exports/imports (Mtoe)11 147 (19) 11 (185) NA (51) 18
Electricity access (% of population) 12
71 90 98 99 100 100 99
Electric transmission and distribution losses (%) 13 9.4 12.1 9.6 4.9 3.7 5.2 3.8
Energy intensity (kgoe/US$1,000 2005 PPP) 14
230 126 274 273 184 80 191
CO2 emissions (Mt of CO2) 15,i
376 71 114 6,832 515 45 208
Electricity tariffs (US$/kWh)16 0.07 0.14 0.05 NA 0.13 0.22 NA
Fossil fuel endowment 17
Coal (2008, million short tons) 6,095 348 165 126,215 139 NA 4.4
Oil (2012, billion barrels) 3.9 0.1 4.4 20.4 0 0 4
Natural gas (2012, trillion cubic feet) 141.1 3.5 24.7 107 0.3 0 83
Total Primary Energy Supply (%)18
Coal and peat 15.1 15.2 19.7 67.2 28.3 0 15.8
Crude oil 26.5 19.3 4.2 16.8 39.5 61.4 35.5
Oil products 6.7 14.3 21.2 0 0 0 0
Natural gas 17.4 8.3 11.1 3.3 13.8 38.4 43.4
Nuclear 0 0 0 0.8 16.8 0 0
Hydro 0.5 2.2 4.0 2.4 0.1 0 0.9
Geothermal, solar, wind 7.9 22.9 0 0.5 0.1 0 0
i CO2 emissions from fuel combustion only.
2 The World Bank – AusAID

Rep. of Korea
Philippines
Singapore
Indonesia
Malaysia
Vietnam
China
Energy Indicators (cont.)
Combustible renewable and waste 26.0 17.9 39.3 9 1.3 0.2 4.5
Electricity and heat 0 0 0.5 0 0 0 0
Electricity Sources (%) 19
Renewables 13.3 32.6 36 17.5 1 0.1 6.3

Oil 22.8 8.7 2.5 0.4 4.4 18.8 2.0
Nuclear 0 0 0 1.9 32.7 0 0
Natural Gas 22.1 32.1 43.4 1.4 15.6 81.0 60.7
Coal 41.8 26.6 18 78.8 46.2 0 30.9
Investment Climate
S&P’s Credit Rating (Foreign Currency)20 BB+ BB+ BB- AA- A+ AAA A-
Doing Business Ranking 21
129 136 98 91 8 1 18
CPI Transparency Ranking 22
100 129 112 75 43 5 60
FDI, net (% of GDP)23 1.6 0.3 6.8 2.2 (1.9) 8.5 1.6
PPI (US$ million)24,ii 37,113 45,114 8,328 78,438 NA NA 46,401
PPI renewable energy (US$ million) 24
3,876 3,844 1,839 8,380 NA NA 198
Lending interest rate (%) 25
13.2 7.7 13.1 5.9 5.4 5.6 5
Lending - deposit spread (%)26 6 4 2 3 2 5 3
Liquid assets to deposits and short term funding (%)
27
30 29 35 20 8 37 27
ii Investments amounts include greenfield projects, concessions and management, and lease contracts.

2. Energy
V
ietnam‘s rich fossil fuel endowment Figure 1: Total Primary Energy Supply
includes about 24 trillion cubic feet Natural Combustible
gas 17% renewables
of gas, 4 billion barrels of crude oil
and waste 42%
reserves and 165 million short tons of recov-
erable coal.29 The country is also endowed
with substantial renewable energy (RE) Oil products Renewables
potential including hydropower and bio- 23% 46%
mass. Despite the abundance of its indige-

nous 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 nat-
ural 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 quanti-
ties 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 Table 1: Electricity Generation by Source

TPES, its share in the national electricity gener- (% of total)
ation mix is considerable. As of 2002, half of
2002 2009
the country’s electricity was provided by hydro-
Renewables 50.8 36.0
electric power, with substantial growth during
Vietnam’s economic expansion in the 1990s. Oil 12.3 2.5
However, this has decreased to 36 percent more Natural gas 23.3 43.4
recently, with natural gas taking up a larger Coal 13.6 18.0
share of the total electricity generation. Source: International Energy Agency, 2009.
31

While Vietnam’s CO2 emissions are relatively low in comparison to other lower middle income coun-
tries like Indonesia and to more developed countries like China, they are steadily growing. Similarly,
the country’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 econ-
omy; (ii) the increasing popularity of modern commercial fuel and electricity for household use; and
(iii) the development of motorized transport.

3. Green Policies and Incentives
W
ith the introduction of environmental pro- Table 2: RE On-grid Capacity Targets (MW)
tection in the country’s constitution in 1992,
Technology 2011-2030
Vietnam embraced sustainable develop-
Wind 6,193
ment as one the key pillars of its long-term economic
Small Hydro 4,375
growth and has supported the passage of a number
Geothermal 278
of different green policies. The country’s first environ-
Solar 55
mental legislation, the Vietnam Law on Environmental
Biomass (solid) 1,855
Protection, was introduced in 1995. Revised in 2005,
Waste 339
the Law provides the legal basis for green fiscal and
Biogas 100
financial instruments, but does not specify any RE Total 13,194
targets.
Sources: Centre International de Recherche sur l’Envi-
ronnement et le Developpement, 2009; Organization
Approved in 2011, the Vietnam Power Development for Economic Co-operation and Development, 2010;
Plan VII (PDP VII) is the foundation for the develop- Renewable Energy Policy Network for the 21st
Century, 2012; and Institute of Energy Economics –
ment of the power sector between 2011 and 2020,
Japan, 2009.32
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 implementa-
tion 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 gener- Table 3: RE Off-grid Capacity Targets (MW)
ation, PDP VII also introduced targets for coal, which
Technology 2011-2020
is set to remain the mainstay of the country’s power
Solar 14
sector.iv By 2030, Vietnam’s coal-fired thermal power
Small Hydro 58
capacity is expected to reach 75,000 MW or roughly
Biogas 5
half of the country’s total installed power capacity.
Wind-Diesel 8
This would force Vietnam to import coal to meet its
Solar-Diesel 8
energy plans for 2015 on.
Wind-Diesel-Solar 9
Total 102.4
While the PDP VII has set targets for RE develop-
Sources: Renewable Energy Policy Network for the
ment, it does not accompany these with commen- 21st 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.

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 devel-
oped 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$23 cents/kWh in the Philippines.
Sources: Energy Regulatory Commission of
As such, the FiT may not be sufficiently attractive to spur the Philippines, 2012; German Society for
investment by small and medium-sized wind project devel- International Cooperation, 2011; and Asian
opers. Moreover, the most attractive sites for wind devel- Development Bank, 2012.37
opment are located on Vietnam’s coastline, which is also
the source of large mining reserves. According to the economist Peter Meier, any conflict between
wind developers and the country’s mining community is unlikely to end in favor of wind power.38
Despite the absence of a comprehensive FiT regime, RE Table 5: Averaged Tariff Rates (US$)
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 gener-
Korea, 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 gen-
eration. 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 environ-
mental-friendly energy sources. The 2004 Electricity Law aims to reform the country’s power sec-
tor 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.

Given the country’s industrial orienta- Table 6: Avoided Cost Tariff (US$ cents/kWh)
tion, the Government has emphasized
Dry Season WET Season
the development of EE measures for
the manufacturing and heavy indus- Peak Off-Peak Peak Off-Peak
try. Enhancing industrial EE is expected North Region 2.8 2.7 2.5 2.3
to contribute at least 50 percent of the Centre Region 2.7 2.7 2.3 2.2
targeted energy savings by 2015. EE is South Region 3.6 2.6 2.4 2.3
regulated by a number of decrees and Capacity Price 8.4
policies, including:
Sources: Energy Market Authority of Singapore, 2012; World
Bank, 2011; Perusahaan Listrik Negara, 2012; Asia-Pacific Economic
■■ The Decree on Energy Saving and Cooperation, 2011; and Economic Research Institute for ASEAN
and Eastern Asia, 2012.42
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 Ener-
gy 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 an-
nual 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 adminis-
trative sanctions in the field of energy conservation and efficiency.44,viii
The Decision 51/2011/QD-TTg regulates the label- Figure 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 “con-
firmative” 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 pro-
vides 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 estab-
lished. 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.

4. Green Programs and Institutions
I
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 large-
scale 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)
Framework for Law regulatory framework established adopted
Implementation, and enforced - 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 - Energy savings in the industrial sector - Four percent energy savings achieved by
Conservation in are achieved (these are consistent with heavy industries compared to 2010 (end of
the Industrial NEEP Phase 2, National Energy Saving NEEP Phase 1)
Sector 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 un-
der 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.

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 invest-
ment 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 commu-
nity-based climate adaptation program. Although the NSCC lays the foundation for the develop-
ment 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.

5. Green Regulatory Framework
T
he ERAV is responsible for the power sector regulatory functions. ERAV’s responsibilities
include: (i) establishing design and regulations for competitive power markets and monitor-
ing implementation; (ii) assessing solutions concerning overall sector supply and demand; (iii)
approving, overseeing and canceling electricity licenses; (iv) establishing the electricity tariff regu-
latory 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 man-
aged 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 compa-
nies.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 invest-
ment 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.

6. Investment Trends and Challenges
V
ietnam’s speculative-grade rating (BB- by S&P) stems Table 8: S&P’s Credit Rating
from the country’s standing as a lower middle-in- Country Rating
come economy, a developing financial market and China AA-
an evolving policy environment. Typical of an emerging Indonesia BB+
economy, such weaknesses are partially mitigated by the Philippines BB+
country’s growth prospects and openness to foreign direct Singapore AAA
investment (FDI). During the past four years, Vietnam’s FDI Korea, Rep. of A+
Vietnam BB-
inflows have averaged above eight percent of GDP.51 As
Source: Standard & Poor’s, 2012.20
a percentage of GDP, Vietnam’s FDI inflows rank second
best in the region, just below Singapore.
As of May 2012, more than 13,000 FDI proj- Table 9: FDI (net BoP, current US$)
ects were licensed with registered invest-
As % 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
such as Japan, South Korea and Singapore Korea, Rep. of -74.50 -19.38 -1.46
are among Vietnam’s main FDI partners. Singapore 67.21 18.90 12.31
Manufacturing is Vietnam’s leading FDI- Vietnam 38.46 7.10 6.83
targeted sector, accounting for about half Source: World Bank, 2010.52
of the total number of projects and regis-

tered 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 indus-
tries 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 pros-
pects 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 aver-
age 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

a number of factors. According to the Global Figure 3: Global Competitiveness Index

Competitiveness Report 2012-2013, Vietnam’s
fell from the 65th to 75th place, largely due to Stage of development
the country’s macroeconomic instability.55 In 1 Transition 2 Transition 3
1-2 2-3
August 2011, inflation peaked to an all-time
high of 23 percent, before retreating to 6.5 Factor driven Efficiency driven Innovation driven
percent in September 2012. In order to cope Institutions

7
with high inflation levels, Vietnam’s State Bank Innovation 6 Infrastructure
tightened its monetary policy, thereby making Business

5
Macroeconomic
4
access to credit more difficult.55 Vietnam ranks sophistication environments
3
even lower at 95th place (down five positions) 2
Health and
in terms of infrastructure development and this Market size 1 primary
education
remains one of the country’s main challenges.55
Technological Higher education

Compared to regional low-middle income econ- readiness and training
omies such as the Philippines and Indonesia,

Financial market Goods market
Vietnam’s performance in PPPs has been weak. development efficiency
Low market efficiency
The country continues to experience delays in
developing a comprehensive and workable Vietnam Efficiency-driven economies
framework for PPP investments.
Source: World Economic Forum, 2012.55
Table 10: Investments in PPI - 2002 to 2010 (current US$ millions)

Indonesia Philippines Vietnam
US$ Mil % No % US$ Mil % No % US$ Mil % No %
Energy 16,262 43 41 20 17,558 38 64 31 4,508 54 45 57
Telecom 16,288 44 115 56 15,886 35 115 55 2,280 27 19 24
Transport 3,669 10 30 14 3,931 9 19 9 1,235 15 11 14
Water and sewerage 1,020 3 21 10 8,098 18 10 5 305 4 4 5
Total 37,239 207 45,473 208 8,328 79
Source: World Bank, 2010.
57
The new PPP Regulations enacted in 2010 and Figure 4: Corruption Perceptions Index 2011
2011 do not provide for a dedicated PPP oversight 129
100 112
body. A recent assessment of PPPs in Vietnam car-
75
ried out by the Asian Development Bank found 43
MPI as the only governmental organization in 5
charge of promoting the country’s PPP agenda;
e
ia
am
s
of
ne
or
in
s
ne
however, MPI faces institutional and capacity

Ch
tn
ap
i
p.
pp
do
e
Re
ng
Vi
ili
issues due to its limits on budget and qualified

In
Ph
a,
Si
re
personnel.58 Corruption is still a serious problem,

Ko
as Vietnam ranks 112th on the CPI Transparency Source: Transparency International, 2011.22

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 technolo-
gies are part of the equation. Moreover, the new PPP regulations provide for neither a robust risk-al-
location 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 disadvan-
taged given the current low tariffs in Vietnam, as they impede the full recovery of operation and
maintenance costs and capital formation.30
From a financing perspective, low-emission Figure 5: Private Investment in New or

projects have much in common with conven- Additional RE Capacity (US$ million)
tional infrastructure projects. As such, the 800
development of comprehensive regulations 700
for private-participation in infrastructure 600
US$ million
(PPI) is key to attract private sector investors 500

in RE-based PPPs. Notably, private participa-
400
tion in RE infrastructure is a relatively recent
300
phenomenon in Vietnam. The passage of the
200
2004 Electricity Law, which stipulates “func-
tions, duties, and rights in electricity opera- 100
tion, anti-monopoly and allows competition in 0
2003 2004 2005 2006 2007 2008 2009 2010 2011
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, Figure 6: Breakdown of RE Investments
only two private wind projects were devel- (US$ million)
84.3,
oped: the Cau Dat (30 MW) and the Phuong 4.5%
Mai wind farms (21 MW). Both of these proj-
ects were sponsored by local private inves- n Hydro, Large (>50MW)
n Hydro, Small (<50MW)
tors and financed through loans from state
n Wind, Onshore
banks. From 2005 to 2011, private RE devel-
opment in Vietnam was concentrated in hydro 739.5,
40.2%
facilities, with slightly more than half going 1,051.1,
55.2%
to projects over 50 MW. Hydro projects ben-
efitted from the Chinese imports of low-cost Note: Total of 39 projects consisting of 11 large
equipment, which have reduced capital costs hydro, 25 small hydro, 2 wind and 1 bioenergy.
and placed a downward pressure on the Source: World Bank, 2012.59
levelized-cost-of-electricity.60

Vietnam has also made use of the Clean Table 11: Financial Mechanisms and Policies for
Development Mechanism (CDM) mechanism, the Clean Development Mechanism
with the majority of these projects target-
ing small-scale hydropower plants. Vietnam’s ■■ Exemption from land use rents and levies
CDM activities consisted of 27 and 58 regis- ■■ Accelerated depreciation
tered projects in 2010 and 2011, respectively. In
■■ Access to state investment credit
the past, the availability of incentives linked to
■■ Subsidies for CDM project outputs
CDM financing was also considered an import-
ant factor for hydro development. However, ■■ Priority consumption of CDM project outputs
over similar outputs produced by non-CDM
according to Vietnam’s Chamber of Commerce
activities
and Industry, CDM administrative procedures
are bureaucratic, complex and unspecific. Source: Prime Minister, 2007.61
Moreover, potential project investors have
experienced difficulties in proving a project’s
additionality.62
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 establish-
ment 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 transi-
tion from a centralized to a market-oriented economy.

7. Concluding Remarks
V
ietnam embraced sustainability as one of the key pillars of its long-term economic devel-
opment in the early 1990s, with the Government initiating a “greening” expansion strat-
egy. 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 comprehen-
sive 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 signifi-
cant 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-emis-
sion 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 shar-
ing 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 heat-
ing 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

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 aggres-
sive 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.

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.
Korea,
China Indonesia Philippines Singapore Vietnam Malaysia
Rep. of
Tax Incentives ● ● ● ● ● ●
Carbon Tax ●
Capital Subsidy/Grants - RE ● ● ● ● ● ●
Renewable Energy
Policy Distortions ● ● ● ● ●
Feed-in Tariff ● ● ● ● ● ●
Domestic ● ● ●
Concessional
Financing
Foreign ● ● ● ●
Partial Risk Guarantee ● ● ●

Renewable Portfolio
Standard
● ● ●
Tax Incentives ● ● ● ● ● ●
Energy Efficiency & Green
Capital subsidy/Grants - EE ● ● ● ● ● ●
Domestic ● ● ● ● ● ● ●
Concessional
Financing
Tech
Foreign ● ● ● ●
Partial Risk Guarantee ● ● ●
Green Labeling ●
Awareness Campaigns ● ●
CDM ● ● ● ● ● ● ●
Market
Based
Carbon market ● ● ●
Cap-and-trade scheme ● ●
● Full implementation
● Limited scale and/or early stage implementation
● Existing barriers

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

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 2009-
2014, 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.

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 devel-
opment 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 2016-
2025, objectives for 2050 and a long-range vision to 2100. Priority programs and projects for 2011-
2015 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 rep-
resents 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) reduc-
ing 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 imme-
diate action for 2011-2020: (i) promote research and development of appropriate green technol-
ogies; 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.

Cleaner Production Strategy 2020 aims to attain the following goals until 2015: (i) make 50 per-
cent 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 meth-
ods 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 facili-
ties 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 con-
cept 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 prepara-
tory 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 pro-
grams 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.

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. Vietnam’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 2004-
2010, 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 sec-
tor; (iii) developing an energy market conducive to fair competition; and (iv) boosting the devel-
opment of new and RE, biofuel and nuclear power to meet the requirements of socio-economic
development.
Energy Efficiency Policies

• 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 construc-
tions, transportation establishments, and groups that use governmental funds including govern-
ment 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.

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 col-
lection 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 ordi-
nary 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 regu-
lated 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, com-
pensate 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.

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
• 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 con-
sumers, 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 medi-
um-sized boilers, and three-phase transformers) was January 1, 2012 while for construction materi-
als such as insulation, glass, windows, roofing, sheeting materials, will be January 1, 2015.
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 train-
ing, 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, envi-
ronmental 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 reduc-
tion) 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 differ-
ent 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 gov-
ernment purchasing decision and can apply for government price support. Consolidated municipal
waste treatment can buy power at half the commercial rate.

Environmental Tax for Polluting Commodities states that commodities which cause environmen-
tal 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, for-
est 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 produc-
tion 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 electric-
ity 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.

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 min-
ing) 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 sec-
tor 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 invest-
ments. 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 environ-
mental 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.

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 technol-
ogy 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 pro-
gram 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 for-
estry, 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.

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 enter-
prises), 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 environmen-
tal 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 proj-
ect 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-pow-
ered plant to one that relies on cleaner natural gas. Prior to this project, Vietnam had only a single

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 ini-
tiative 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 technol-
ogy 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 plan-
ning 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.

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 addi-
tion, SEIER’s global objective was to reduce GHG emissions by promoting the use of RE-based elec-
tricity. 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 implementa-
tion component; (ii) a regulatory development component; and (iii) a pipeline development com-
ponent. 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 more-
over 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 stakehold-
ers to effectively deliver the national EE program. This will help to improve EE and reduce associ-
ated 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

data acquisition systems; and (ii) introduction of Advance Meter Technology systems, including two-
way 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 con-
cepts 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 organi-
zation 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 estab-
lished, making Vietnam one of the few countries geared to deploying CDM projects rapidly.

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 haz-
ardous 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 pol-
lution 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 emis-
sions 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.

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 environ-
ment-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 con-
trol. 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 mil-
lion is grant finance).

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cation/vwLUAssets/2012-global-oil-and-gas-tax-guide/$FILE/EY_Oil_Gas_Tax_Guide_2012.pdf.

37
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39
German Society for International Cooperation. “Renewable Energy in Vietnam: Status of Wind
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gy.org.vn/index.php?page=wind-energy-2.
40
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Adapted from:
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duce-energy-labels-36002-12051.html.

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mental_management_and_legislation.htm.

I
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 low-
emission technologies. The approach calls for assessing the “Green Investment Climate” 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 country’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 abil-
ity of the country to leverage its green growth potential.
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List of Tables and Figures:

Figure 1: Total Primary Energy Supply................................................................................................................. 4

The World Bank – AusAID iii

List of Abbreviations and Acronyms

iv The World Bank – AusAID

The World Bank – AusAID v

Vietnam is the most eastern country on the

The World Bank – AusAID 1

i CO2 emissions from fuel combustion only.

2 The World Bank – AusAID

Renewables 13.3 32.6 36 17.5 1 0.1 6.3

The World Bank – AusAID 3

mass. Despite the abundance of its indige-

Despite hydro’s modest contribution to the Table 1: Electricity Generation by Source

4 The World Bank – AusAID

The World Bank – AusAID 5

3. Green Policies and Incentives

6 The World Bank – AusAID

The World Bank – AusAID 7

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

8 The World Bank – AusAID

4. Green Programs and Institutions

Table 7: NEEP Component, DPO Policy Actions and Expected Results

The World Bank – AusAID 9

x SEIER was closed on December 31, 2012.

10 The World Bank – AusAID

5. Green Regulatory Framework

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6. Investment Trends and Challenges

of the total number of projects and regis-

12 The World Bank – AusAID

a number of factors. According to the Global Figure 3: Global Competitiveness Index

percent in September 2012. In order to cope Institutions

tightened its monetary policy, thereby making Business

Technological Higher education

omies such as the Philippines and Indonesia,

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

however, MPI faces institutional and capacity

issues due to its limits on budget and qualified

personnel.58 Corruption is still a serious problem,

The World Bank – AusAID 13

From a financing perspective, low-emission Figure 5: Private Investment in New or

(PPI) is key to attract private sector investors 500

14 The World Bank – AusAID

The World Bank – AusAID 15

16 The World Bank – AusAID

in biomass use are effectively balanced by increases in cleaner energy.

The World Bank – AusAID 17

8. Summary of Policy Instruments

Partial Risk Guarantee ● ● ●

Partial Risk Guarantee ● ● ●

18 The World Bank – AusAID

9.1 Policies, Objectives, and Targets...................................................................................................... 20

The World Bank – AusAID 19

9.1 Policies, Objectives and Targets

Socio-Economic Development Strategy (SEDS) expresses a strong commitment to sustainable

xii For more details see Supplementary Materials 9.5.

20 The World Bank – AusAID

The World Bank – AusAID 21

Renewable Energy Policies