Project

Enhanced Policy for Increased Green Finance in Viet Nam

At a Glance

Start Date Q1 2017
Funding Source Core
Approved Budget USD 677 000
Status Active
Thematic Area
  • Cross Cutting

Project Rationale

Viet Nam has identified the importance of shifting away from traditional models of growth in order to sustain the development gains of recent decades. The country has adopted a National Green Growth Strategy (VGGS) and developed a corresponding Green Growth Action Plan. However, the cost to implement the VGGS is estimated to be at least $30 billion, requiring a significant increase to current financing levels. Further, Viet Nam’s MIC status means that ODA grants and highly concessional loans will cease in 2017. Funding for sustainability projects is already precarious. According to a recent study, investment in renewable energy fell by over half between 2013 and 2014.

To move toward a low-carbon pathway by 2030, Viet Nam will face an incremental cost of 1% of GDP; however current expenditure is only about 0.1% of GDP. To overcome this and to enable green growth, Viet Nam will need to increase the effectiveness of each dollar of climate finance and diversify funding sources. However, the lack of effective domestic funding sources for targeted investments inhibits the leveraging of external funds.

Viet Nam’s five-year plan, the Socio-Economic Development Plan (SEDP) 2016-2020, targets the long-term restructuring of the economy toward sustainable development. Increased coordination and investment is also needed to meet green energy and urbanization targets in the SEDP. Additionally, the VGGS calls for increased investment across sectors, including through Public Private Partnerships (PPPs) and international sources, and specifically calls for a scaled up domestic financing for green growth.

Building on 2015-16 Work

This project will build on GGGI’s work with the MPI to develop and institutionalize Investment Guidelines for Green Growth (IGGG), which provides an analytical framework to assist the government in screening and prioritizing investment options in line with the VGGS. GGGI and MPI also worked closely together to develop a five-year CPF that aligns GGGI green growth work to the VGGS, and identifies the need for public and private finance for energy, transportation, and industrial infrastructure that is environmentally sound.

Mobilizing finance to support VGGS and CPF implementation will necessitate technical support to further the application of the IGGG in order to strengthen green growth financing policies and institutions.

Delivery Strategy

PROJECT OUTPUTS FOR 2017-18:

  • Develop a handbook and deliver training on the use of the Investment Guidelines for Green Growth in the appraisal of public investments
  • Establish coordination mechanism for financing and implementation of Viet Nam Green Growth Strategy
  • Develop policy recommendations for a SME guarantee scheme for green businesses and submit to the government for approval

PROJECT OUTCOMES FOR 2017-18:

  • Government incorporates Investment Guidelines for Green Growth into public investment appraisal processes
  • National coordination mechanism for implementation of the Viet Nam Green Growth Strategy is operational
  • Government adopts green criteria into the SME guarantee scheme to improve access to finance for green businesses

Planned Results

The overall outcome of the project is to support the GoV to achieve targeted poverty reduction, social inclusion, environmental sustainability and economic growth through increased capacities on access to finance. This will be done by delivering the following outputs:

A handbook is developed and training delivered on use of the Investment Guidelines for Green Growth in public investment appraisal processes. Based on consultations with MPI’s Department of Investment Services (DISA), GGGI will develop the IGGG as a handbook and investment appraisal tool. GGGI will incorporate the IGGG into public investment appraisal process by providing training to DISA staff on its application across priority sectors and/or provinces.

A coordination mechanism is established for financing and implementation of Viet Nam Green Growth Strategy. To enhance the environment for green growth investment in Viet Nam, greater engagement and collaboration is needed between stakeholders. GGGI will establish and coordinate a mechanism at the national level that will engage government partners, CSOs, and the private sector for stronger green growth investment coherence at the national level.

Policy recommendations for the SME guarantee scheme for green businesses are developed and submitted to the government for approval. To address the identified need to strengthen domestic financing sources and mechanisms for green growth, GGGI will conduct an analysis of the Viet Nam Development Bank (VDB) SME Guarantee Scheme to identify ways to improve lending for green businesses. This assessment will include an appraisal of VDB processes and resources, consultations with loan recipients from the private sector, and a review of international best practices for SME guarantee schemes. GGGI will also consult with ongoing initiatives in the area of green finance to avoid duplicative efforts and explore opportunities for synergy. Based on the results of this exercise, GGGI will develop recommendations to mainstream green growth into the SME scheme and conduct validation activities to facilitate approval in the VDB.

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