GREEN TECHNOLOGY

RESEARCH REPORT

This project is funded by the European Union Useful contacts

EU- Business Network (EVBN) 15th Floor, 5B Ton Duc Thang, District 1 City, Vietnam TUseful : +84 (0) 8 contacts38 23 95 15 (Ext:105) www.evbn.org

Further reading:

Electricity Regulatory Authority of Vietnam (ERAV) www.erav.vn

Overview of energy in Vietnam, Vietnam Institute of Energy www.ievn.com.vn

The General Directorate of Energy of Vietnam www.renewables.gov.vn

Vietnam Academy of Science and Technology www.vast.ac.vn

Vietnam energy overview 2013, Asia Pacific Energy Research Centre (APERC) www.aperc.ieej.or.jp

The Landmark, 15th floor, 5B Ton Duc Thang St., District 1, , Vietnam This publication has been produced with the assistance of the European Union. Tel. +84 (0)8 3823 9515 Fax +84 (0)8 3823 9514 The content of this publication are the sole responsibility of EVBN and can in no way be www.evbn.org taken to reflect the views of the European Union TABLE OF CONTENT

0. INTRODUCTION 4

1. VIETNAM’S ENERGY SECTOR 6

1.1. Power consumption and production 6

1.2. Power development 10

1.2.1 The challenge in energy use 10

1.2.2 Renewable energy development 11

1.2.3 Supporting legal framework 13

2. VIETNAM’S WASTE SECTOR 16

2.1. Waste management 16

2.2. Waste recycling 18

2.3. Management issues 19

3. VIETNAM’S WATER SECTOR 21

3.1. Water resources 21

3.2. Wastewater treatment 24

4. OTHER MARKETS 25

4.1. Sustainable buildings and infrastructure 25

4.2. Smart Grid 27

5. THE KEY GROWTH DRIVERS AND CHALLENGES 28

5.1. Key growth drivers 28

5.2. Challenges 33

3 EVBN IT Sector 00 INTRODUCTION

The term “Green technology”, also known as “Clean technology” refers to all forms of technology that make products or processes more environmentally friendly.

The OECD defines the term “Green technology” as “Clean Technology” encompassing all technical measures taken at various industries to reduce or even eliminate at source the production of any nuisance, pollution, or waste, and to help save raw materials, naturel resources, and energy. (OECD, 1989 The Promotion and Diffusion of Clean Technologies in Industry, .)The term “green technology” will also be used in this report.

Green technology helps to reduce adverse effects on the environment as well as improving productivity, efficiency and operational performance of the technology itself.

The purpose of this paper is to provide an overview of green technology in Vietnam: the current situation, the long term and immediate issues as well as growth potential for green technology as a new industry. The three following chapters refer to the power sector, the water sector and the waste sector as the three main categories play the most important role in green technology in Vietnam. The descriptions are closely linked to the usage of renewable energy which the Vietnamese government supports through different measures. The field of renewable energy also attracts quite a number of foreign investors.

The report also highlights opportunities and barriers in the green technology sector and sheds light on some major development. To put Vietnam’s strategic approach for green technology into perspective, main features of three neighboring countries are briefly outlined as well.

4 EVBN IT Sector 's approach towards green growth is centered around the concept of sustainable consumption and production, which puts the emphasis on green technological innovation as a way to achieve green growth (Adham et al., 2013). In 2010, the country established a Green Technology Financing Scheme amounting to RM1.5 billion (about USD 350 million) (Malaysia Ministry of Energy, Green Technology and Water, 2012). The scheme issues credit guarantees of 60% for companies developing or using green technology. The Green Lane Policy for Innovative Malaysian Small and Medium Enterprises provides loans with subsidized interest rates, tax exemption and preferential government procurement to companies providing green products and services. Malaysia is also developing environmental certification and labeling schemes that match international standards.

Thailand plans to support private green research and development using loans and tax incentives and intends to create centers to encourage the application of agricultural technologies with high productivity but low natural resource intensity (Thailand National Economic and Social Development Board, 2011). In both Thailand, and Malaysia innovative technologies have been developed and used to reduce, re-use and recycle wastewater and solid waste in urban areas (Thailand National Economic and Social Development Board. 2011). Further green technology development is promoted through investment in R&D and international knowledge sharing platforms.

The Philippines National Development Plan 2011-2016 provides support for the development of environmentally-friendly and resource-efficient technologies along the agricultural value chain, in partnership with selected higher education institutions, local government units and businesses. Both countries are investing in R&D for non-food feedstock biofuels. Innovative technologies for sustainable development have also been used elsewhere in the economy.

5 EVBN IT Sector 01 VIETNAM’S ENERGY SECTOR 1.1 Power Consumption and Production

Power Consumption

Vietnam’s energy sector has been growing constantly in recent years in production, distribution and imports mirroring the country’s economic development.

The three main resources of Vietnam’s energy are crude oil, coal and electricity while hydroelectric electricity has played the most important role for a long time.

Regarding energy consumption, the total consumption of primary energy in Vietnam grew by the average of 6.54% annually from 2000 to 2009 and reached a total of 57 million TOE (Tonne of Oil Equivalent) at the end of 2009.

Regarding the consumption structure, heavy industry continued to take the biggest share and even increased its stake from 47.4 % to 52 % in total consumption in 2006 and 2010, respectively. Household consumption accounted for the second largest share but decreased relative to other sectors from 42.9% in 2006 to 38.2% in 2010 due to the fast-paced industrialization in Vietnam. The remaining part is shared between services, agriculture and other sectors with approximately 10% of electricity consumption.

Electricity consumption by sectors during 2006-2010

2006 2007 2008 2009 2010 Item (%) (%) (%) (%) (%) Agriculture 1.1 1.0 1.0 0.9 1.1

Industry 47.4 50 50.7 50.6 52.5 Services (Commerce, Hotels and Restaurant) 4.8 4.8 4.8 4.6 4.5 Household consumption 42.9 40.6 40.1 40.1 38.2

Others 3.8 3.7 3.5 3.7 3.7

Source: Summarized from information given in the Master Plan VII

6 EVBN IT Sector It is worth noticing that the growth rate of power consumption exceeds the GDP growth rate in the same period significantly. For example, during 1995-2005 the annual growth rate of power consumption was over 14.9% while GDP growth rate was only 7.2%. The highest growth of power demand was found in the industrial sector (16.1%) then followed by the residential sector (14%).

In the future, according to the National Power Development Master Plan VII, the electricity demand of the country will continue to grow by 14-16% per year in the period 2011-2015 and then slow down to 11.15% per year in the period 2016-2020 and 7.4–8.4% per year in 2021-2030.

Power Production

The below tables illustrates that Vietnam’s capacity to produce electricity ranked third after Indonesia and Malaysia.

Electricity consumption /person Country Capacity (MW) (kWh/person)

Cambodia 104 635 Indonesia 507 43,528 Laos 339 2,556 Malaysia 3,221 24,500 Philippines 524 16,223 Singapore 7,696 10,477 Thailand 1,962 31,451 Vietnam 1,104 26,475

Source: Indexmundi, IE, 2011

7 EVBN IT Sector In term of production capacity, the estimation for Vietnam’s total energy capacity until 2050 is as follows: Coal (from 95 to 100 million tons a year); Crude oil (approximately 21 million tons a year, mainly for domestic oil and gas companies); Gas (16.5 billion m3 per year); Hydroelectric (60 billion kWh a year) and recycle energy (from 3500 to 4000 MW per year). Thus, recycle energy still accounts for a very small portion of energy capacity in Vietnam. (Vietnam Academy of science and technology, 2011, http://www.vast.ac.vn)

Structure of power sources by capacity and yield for the period 2010-2020 with outlook to 2030

2020 2030

Share in Share in Power source total Share in total Installed installed total Installed installed Share in total Capacity capacity electricity Capacity capacity electricity (MW) (%) yield (%) (MW) (%) yield (%)

Coal thermal power plants 36,000 48.0 46.8 75,000 51.6 56.4

Gas turbine thermal power plants 10,400 13.9 20.0 11,300 7.7 10.5

LNG turbine thermal power plants 2,000 2.6 4.0 6,000 4.1 3.9

Integrated hydropower plants 17,400 23.1 19.6 N/A 11.8 9.3

Pumped-storage hydropower plants 1,800 2.4 5,700 3.8

Biomass power plants 500 2,000 5.6 4.5 9.4 6.0 Wind power plants 1,000 6,200

Nuclear power plants N/A N/A 2.1 10,700 6.6 10.1

Import 2,200 3.1 3.0 7,000 4.9 3.8

Total 75,000 100 100 146,800 100 100

Source: Summarized from information given in the Master Plan VII

8 EVBN IT Sector Structure of power sources by 2020

Source: Overview of energy in Vietnam, 2011, http://ievn.com.vn

Total CO2 emissions calculated for the energy sector in 2010 were: 56 024 kt-C (Measured by emissions standard of APEC and 2006 IPCC). Total CO2 emissions in 2010 calculated by sector and forms of energy are depicted in below figures.

The share of emissions by sector The share of emissions by form of energy

20% 30% 33% 30%

31% 1% 16% 9% 28%

2%

Industry Agriculture Coal Petroleum products Transportation Commercial services Gas Civil industry Generating electricity Non-commercial energy

Source: Overview of energy in Vietnam, 2011, http://ievn.com.vn

9 EVBN IT Sector 1.2 Power Development

1.2.1. The Challenge in Energy Use

Vietnam’s demand for energy has been increasing rapidly producing high emissions across all industries. The development of sustainable growth and renewable energy therefore becomes more and more important.

Energy demand forecast Unit: mil. toe

Year 2010 2015 2020 2025 2030

Base High Base High Base High Base High

Coal 9547 13607 13897 17997 18873 23608 25812 29974 34197

Electricity 7539 14605 15848 24930 27392 37055 42495 52908 63462

Petroleum 15770 23472 23904 34434 35855 48231 51939 66959 74753 products Natural gas 654 1006 1030 1419 1495 1968 2173 2593 3007

Non- 14695 14474 14719 14044 14328 13272 13600 12443 12804 commercial energy Total 48205 67163 69398 92824 97943 124134 136018 164877 188223

Period 11-15 16-20 21-25 26-30 11-30

Growth rate 6.9% 6.7% 6.0% 5.8% 6.3%

Source: Overview of energy in Vietnam, 2011, http://ievn.com.vn

Even today, Vietnam is facing limited availability of indigenous primary energy resources (e.g. gas and coal) while large hydropower sites in the South will be fully developed in the coming decades. For the time being, Vietnam still has to import coal for and dependence on the international energy price is an obvious consequence.

10 EVBN IT Sector 1.2.2. Renewable Energy Development

Vietnam has a wide range of natural resources to develop renewable energy. For example, the average of more than 2000 sunny hours per year produces around 150 Cal/cm2 which could be transformed into solar energy. In terms of wind power capacity, the average wind speed in can reach 4m/s at 12 meter of height which would be an ideal condition to install wind turbines. In terms of geothermal power, the North-West and the Centre have more than 300 sources of hot mineral water. Biomass from agricultural production is equal to ten million tons of oil. Biogas takes approximately 10 billion m3 per year from domestic waste, industrial waste and animal manure. (The General Directorate of Energy of Vietnam, www.renewables.gov.vn)

Even though renewable energy is not yet applied widely in Vietnam, there are some concerns from the power sector as well as the manufacturing sector and also the government. The number of research projects related to renewable energy has been increasing in the recent years.

Renewable energy in Vietnam

Small hydro power Biomass Biogas Potential: >7000 MW Potential: 500 MW Potential: 58 MW Current use: 1466 MW Current use: 150 MW Current use: 0.5 MW

Solar power Wind power Geothermal Potential: 4-5kWh/m2 Potential: 7000 MW Potential: 340 MW Current use: 1.5 MW Current use: 46 MW Current use: 0 MW

Municipal wastes Tidal Potential: 220 MW Potential: 100-200 MW Current use: 2.4 MW Current use: 0 MW

Source: The General Directorate of Energy of Vietnam, www.renewables.gov.vn

11 EVBN IT Sector Objectives and orientation for RE (Renewable energy) development

Source: Overview of energy in Vietnam, 2011, http://ievn.com.vn

According to Master plan VII, the plans to increase the production of wind power to 1,000 MW in 2020 (0.7% of the total electricity generation) and 6,200 MW in 2030 (2.4% of the total electricity generation). Biomass and cogeneration capacity is expected to reach 500 MW (0.6%) in 2020 and 2,000 MW (1.1%) in 2030.

12 EVBN IT Sector 1.2.3. Supporting Legal Framework

The period of 2005-2010 saw the implementation of the Politburo Resolution No.41-NQ/TW, dated November 15, 2004 on EP (*Environment Protection) in accordance with the country’s accelerated industrialization and modernization, which is considered the strategic orientation for the country’s environmental protection. The Secretariat of the Party Central Committee issued Directive No.29- CT/TW, dated January 21, 2009, is to further promote the implementation of this resolution.

The National strategy for EP to 2010 with a vision to 2020 (approved under the Prime Minister’s Decision No. 256/2003/QÐ-TTg dated December 02, 2003) has launched 36 programs, projects, and schemes of EP, to implement the elements of the strategy such as pollution prevention, control and improvement of the environment.

Close attention has also been paid to the building of a legal framework for regional and inter- sectorial management in environmental protection, which can be seen through the approval of a range of related plans, projects and programs.

Relevant ministries and sectors devised and submitted a series of documents to the government creating a legal basis for EP activities. For example, scheme regarding the control of exhaust gases from motor vehicles and motorcycles on roads in the provinces and cities was approved by the Prime Minister (Decision No. 909/QÐ-TTg dated June 17, 2010).

At the local level, many legal documents, programs and plans have been developed and implemented during 2006-2010, for example, regulations on EP in provinces and cities; annual action plans and 5-year action plans for environmental protection as well as planning of environmental monitoring networks in the provinces and cities.

13 EVBN IT Sector The National Master Plan VII

The Prime Minister has approved Decision No. 1208/QĐ - TTg dated July 21st, 2011 on the National Master Plan for Power Development for the 2011-2020 with the vision until 2030 with the following contents: a) To develop the electricity sector in conjunction with the national socio-economic development strategies, ensure adequate supply of electricity for the national economy and social life. b) Effectively utilize the national energy resources for electricity development in combination with the reasonable import of electricity, fuel, diversification of primary energy sources for electricity production, conservation of fuel and energy security for the future. c) Gradually improve the quality of electricity to provide power alongside the increasing quality and implement electricity prices in line with market mechanics, to encourage investment in power development, and electricity saving and efficiency. . d) Development of power along with protection of natural resources and the ecological environment and ensure the sustainable development of the country. e) Gradually establishing and developing a competitive electricity market, diversification of power investment and trading. The State only monopolizes the power transmission grid to ensure security of the national energy system. f) Develop the electricity sector on the basis of proper and efficient use of primary energy resources of each region; continue to promote rural electrification, ensure adequate, continuous and safe provision of electricity in all regions nationwide.

Vietnam’s renewable energy policies are driven by the need to supply sufficient energy for economic development and ensure environmental protection. Since energy demand is expected to increase four times from 2005-2030, electricity demand increase nine times from 2005-2025 and developing renewable capacity will help Vietnam reduce its reliance on foreign sources of energy and ensuring ample energy security in the future.

14 EVBN IT Sector Regulations and policies to support Renewable Energy development

The Government of Vietnam has had different policies to encourage the development of renewable energy, establish targets for renewable energy production and move toward a competitive energy market with diverse investment and business models. In Decision No. 1855/QĐ-TTg dated December 27, 2007 approving the National Energy Development Strategy of Vietnam for the period up to 2020 with outlook to 2050, the Government encourages the development and use of new and renewable energy sources; provides financial support for the investigation, research, trial manufacture and establishment of pilot locations; and exempts the import, production and circulation taxes.

Specifically, the Government set targets to increase the share of renewable energy in total commercial primary energy from 3% in 2010 to 5% in 2020 and 11% in 2050 (Decision No. 1885/2007/QD-TTg) and to increase the share of electricity generated from renewable resources such as wind and biomass from 3.5% of total electricity generation in 2010 to 4.5% in 2020 and 6% in 2030 (Decision No. 1208/QĐ-TTg dated July 21, 2011 or Master Plan VII).

For biofuels, the Government has targeted an annual output of 100,000 tons of E5 and 50,000 tons of B5 by 2010 which is equivalent to 0.4% of the country’s projected oil and gasoline demand; 1.8 million tons of ethanol and vegetable oil, or 5% of oil and gasoline demand by 2025 (Decision No. 177/ 2007/QD-TTg). E5 is gasoline with a 5% volumetric of bio-ethanol content; B5 is diesel with a 5% volumetric of biodiesel content.

In order to achieve these targets, the Government has provided various incentives to investors. Renewable energy power plants will receive incentives for investment, electricity tariffs and taxes. Investors can enjoy advantages such as import tax exemption and land fee exemption over a certain period of time. In the Joint Circular 58/2008/TTLT-BTC-BTN&MT dated 4 July 2008 the Ministry of Finance (MoF) and the Ministry of Natural Resource and Environment (MONRE) prescribed the object of subsidy, the conditions of subsidy, and the method of calculating the subsidy rate for one unit of production, the annual subsidy amount, the term of subsidy, and the application process to request the subsidy for CDM projects in Vietnam to which renewable energy is eligible.

The existing incentives however are not yet sufficient to create the appropriate conditions for planning and implementing numerous renewable projects as well as the sale of renewable energy products in Vietnam. These incentives are beneficial to small hydropower projects only and not to other forms of renewable energy.

In practice, it remains to be seen to what extent the initiatives and targets will impact actual industry developments.

15 EVBN IT Sector 02 VIETNAM’S WASTE SECTOR 2.1 Waste Management

According to the Department of Waste Management and Environmental Improvement, 35 of 63 provinces have hazardous waste. The amount of hazardous waste generated nationwide was about 800 thousand tons, while the amount of hazardous waste collected and processed by the hazardous waste management practice units licensed by the Vietnam Environment Administration was only about 190 thousand tons (according to the report of the 39/55 hazardous waste management practice units).

The draft Decree No.02 on waste and scrap management consists of 09 chapters, 61 articles and focuses on guiding some contents in the Law on Environmental Protection and other contents serving the state management of waste and scrap management, including provisions on normal waste management, hazardous waste; wastewater management; management and control of dust and gases; import of scrap management and pollution control of soil.

Industrial waste is concentrated in focused economic zones, industrial parks, and urban areas. About 80 percent of the 2.6 million tons of industrial waste generated each year is from the industrial centers in the North and South. Ho Chi Minh City and surrounding provinces generate nearly 50 percent of the country’s industrial waste; 30 percent is generated in the North Coast– Red River Delta region. Additionally, the nearly 1,500 craft villages—predominantly found in rural areas in the North—produce a fair share of non-hazardous waste.

The largest sources of hazardous waste are industries (130,000 tons/yr) and hospitals (21,000 tons/yr of hazardous healthcare waste). Additionally, agricultural sources produce approximately 8,600 tons of pesticides and contaminated pesticide containers each year and past pesticide use has resulted in the accumulation of an estimated 37,000-ton stockpile of confiscated agricultural chemicals. Regional differences in hazardous waste generation are significant; in the case of industrial hazardous waste generation, the Southern Focus Economic Zone accounts for 75 percent of the industrial hazardous waste in the country.

Most hazardous healthcare waste is found in HCMC, , and Thanh Hoa (27% in total), while most hazardous agricultural waste is found in the agricultural areas of the Mekong River Delta.

16 EVBN IT Sector Generally speaking, considerable improvements in waste generation are necessary to improve the overall situation.. By 2010, Vietnam will have a projected 10 million more urban dwellers. Furthermore, it is foreseen that consumption will increase and manufacturing will grow also resulting in an increase in hazardous waste intensive industries. Moreover, the healthcare system is expected to undergo continued modernization. These changes are estimated to result in a 60 percent increase in municipal waste generation; a 50 percent increase in industrial waste generation and an over threefold increase in hazardous waste generation, mostly attributable to industrial sources. Considering the high cost of safe collection and disposal, initiatives to reduce waste—such as promoting public awareness and cleaner production, and introducing economic incentives based on the Polluters Pay Principle—could result in significant savings. For example, a 10 percent reduction in waste generation could result in an annual disposal savings of approximately VND 200 billion and VND 130 billion for municipal and hazardous healthcare waste, respectively.

In general terms, cities are collecting more municipal waste than rural areas as of today. Waste collection in cities is improving, but is limited in rural and poor areas. Urban areas collect an average of 71 percent of the waste, a number that has increased steadily since 2000. In general, larger cities in Vietnam collect a higher percentage of their waste (76 percent) than smaller cities (70 percent), while in rural areas collection rates are typically less than 20 percent. The poor areas are by and large not served by collection services; nine out of ten of the poorest urban households do not receive solid waste collection service. New initiatives are being promoted to fill the gaps in municipal waste collection service. For example, community-based and private sector organizations are collecting waste in rural villages and in urban areas without municipal coverage.

Municipal waste disposal practices are improving but still represent a threat to public health and the environment. The dominant form of disposal of municipal waste remains open dumping; 49 sites have been identified on a national list as hotspots with high environmental and human health risks. Of the 91 disposal sites in the country, only 17 are sanitary landfills. In many areas, self- disposal methods—such as burning or burying waste, or dumping in rivers, canals, and open fields—is common.

The handling of waste—including reuse and recycling, collection, treatment and disposal—is crucial to providing a cost-effective waste management system that is able to reduce public health and environmental risks. Most of the municipal waste in Vietnam is not safely disposed. However, there have been significant improvements by the public urban environmental companies (URENCOs) that are responsible for municipal waste collection and disposal. Proper handling of hazardous waste, which is the responsibility of the industries and hospitals that produce it, remains severely limited. Recycling and reuse in Vietnam is an active industry driven by an informal network of waste pickers at landfills, informal waste collectors, and waste buyers.

17 EVBN IT Sector 2.2 Waste Recycling

Recycling is common practice in Vietnam. Households routinely separate recyclable wastes such as metals and paper for sale to itinerant buyers, or sell it directly to local depots. Waste pickers are also separating reusable and recyclable wastes. This dynamic recycling market is largely led by the informal sector; in Hanoi, for example, the informal sector recycles 22 percent of all waste produced. In the industrial sector, several types of industries can recycle as much as 80 percent of their waste. Artisans and workers at many craft villages have been particularly successful in capitalizing on this opportunity, recycling over 90 percent of their potentially recyclable waste. Annual cost savings on disposal waste could be substantial. For example if each of the six key industries could recycle 50 percent of its potentially recyclable waste they would save VND 54 billion on disposal costs. Similarly, a 10 percent decrease in municipal waste could save VND 200 billion annually on disposal.

The market for recyclables has a large potential for expansion. Thirty-two percent of the municipal waste currently placed in disposal sites in urban areas in Vietnam, or 2.1 million tons per year, consists of commercially recyclable materials such as paper, plastic, metal, and glass. This additional recycling could result in a substantial reduction in disposal costs and allow the largely poor informal sector to capture an estimated VND 135 billion per year in additional recycling revenues in HCMC alone.

The composition of Vietnamese waste makes composting potentially attractive. The high proportion of organic matter in municipal waste provides potential for composting, which can reduce disposal costs while producing a marketable soil conditioner for uses in agriculture and for the public. However, this practice is not widespread in Vietnam for many reasons, including inadequate separation of organic waste, poor product quality, and poor marketing. With the development of a strong market for composting fertilizers and successful source separation, the effectiveness of centralized composting facilities could increase considerably.

The poor involved in the informal recycling sector remain at risk. In terms of the ratio of waste pickers to total urban population, the size of the informal sector in Hanoi compares to that of Jakarta and Bangalore and is two times higher than in Manila. These groups tend to be socially marginalized. They frequently live on or near garbage disposal sites, and thus are exposed to environmental and safety hazards. A few efforts have been carried out to provide micro-credit to female waste pickers, and to reduce the number of children working at waste dumps. However, there is much to be done to support the informal waste sector and to organize it in a professional manner.

18 EVBN IT Sector 2.3 Management Issues

While there are many barriers to effective implementation, Vietnam has put in place a sound legal framework for environmental protection and waste management. The institutional framework includes URENCOs as service providers for municipal waste management at the local level. Led by MONRE, regulatory agencies at both central and local levels oversee and monitor the management of solid waste from industries, hospitals, and URENCOs. Several new strategies have resulted in a major increase in investment, especially in municipal waste. Nevertheless, several weaknesses remain.

Local institutions are limited by staff skills. While URENCOs allocate sufficient staff to undertake their duties, they suffer from a lack of equipment and capital, staff trained specifically for solid waste management, and an institutional mandate for cost-effective waste management. As they have focused much of their efforts on services for municipal waste management, URENCOs also have limited skills and equipment to provide potentially valuable hazardous waste collection and disposal services for hospitals and industries.

Regulations are not effectively enforced. Resources and institutional capability to implement Vietnam’s policy framework are lacking at the operational level, and regulations are not effectively enforced. The regulation of waste management operators, industries, and hospitals— by MoNRE and other line agencies and authorities, including MOH, MOI, and IZMB—suffers from major gaps in enforcement and insufficient supervision of waste management practices, largely due to limited human resources, unclear mandates, fragmented and overlapping roles of various government agencies, and limited interagency coordination. This has resulted in limited incentives for proper operation of landfills or investments by industries in waste treatment, and has allowed inexpensive, unsafe methods of disposal—such as open dumping—to proliferate.

19 EVBN IT Sector Lack of financing for operations threatens the sustainability of investments. Investments have increased nearly six fold, from VND 195 billion in 1998 to VND 1,083 billion in 2003, and are expected to continue. Between now and 2020, planned landfill development, closure of unsafe open dumps, and further investment in incinerators for hazardous healthcare waste are expected to cost between VND 30 trillion and 40 trillion. However, the sustainability of these investments is questionable under current conditions, since there is limited spending on operation and maintenance of solid waste collection and disposal systems (0.18 percent of GNP, or VND 160,000 per ton), and fees only cover about 50 percent of the expenditure for operation and maintenance of solid waste collection and disposal. While large subsidies from central and local governments (VND 400 billion in 2003) are provided, the resources are not adequate, especially in the case of disposal, where overall poor operation and maintenance has resulted in unsafe disposal sites. In many cities, improved cost recovery can be achieved through more effective fee collection and service agreements with the city’s departments. In other cities, it may be necessary to increase fees, a measure that has met with resistance in many localities.

Civil society plays a limited role in waste management. Public communities and private groups currently play a limited role in solid waste management systems. To respond, the government has developed a number of policies and programs to promote public participation and carry out more public awareness programs, which has helped improve waste collection and other services such a street sweeping. Volunteer clean-up programs and public hygiene awareness campaigns have also started to gain momentum in Vietnam.

20 EVBN IT Sector 03 VIETNAM’S WATER SECTOR 3.1 Water Resources

In recent years Vietnam has been experiencing a fast period of socio-economic development due to rapid urbanization and industrialization. As a result, the traditional water resources for rural and urban inhabitants have been under intense pressure. The demand for water for domestic and industrial use is increasing at an alarming rate.

Surface water resources such as rivers, lakes and streams, have been polluted due to the discharge of industrial, agricultural, aqua-cultural and domestic waste into bodies of water without treatment. During the last few decades ground water resources were affected by excessive exploitation or inadequate protection of aquifers due to the millions of poorly constructed and maintained tube wells. In other words, the competition for water resources between water users and ensuing the conflicts of interest are on the rise.

At the same time, due to global warming and climatic changes, the country faces numerous water related problems such as typhoons and drought. Also, the deforestation that has occurred over the past 20 years along with the challenging geo-physical conditions aggravates the management of water resources. Vietnam is a sub-tropical country with a relatively high average if uneven rainfall: during the rainy season, floods are abundant whereas portable water for cooking and drinking still may be scarce, while during the dry season most traditional water resources in rural areas, such as dug wells and streams dry up and, again, cause portable water scarcity.

Surface Water Resources

Vietnam has high rainfall and a dense river-stream system; therefore surface water resources are very abundant. There are nine basins which are over 10,000 sq. km in area. These nine basins contribute more than 80% of the total area of basins in the whole country. The total annual average volume of surface water is 880 bio cbm, of which 75% is from the Red River and the Mekong River basins, while the water volume generated within Vietnam is 325 bio cbm.

Rainfall in Vietnam is irregularly distributed during the year and over different regions in the country. There are frequent droughts in the provinces of northern midlands and central highlands (particularly in south of central highlands) and also in the highlands plateau.

As non-treated industrial and urban wastewater is discharged into the waterways, organic water pollution is a serious problem in rivers such as the Cau and Nhue rivers (in the North), and the Sai Gon and Dong Nai rivers (in the South).

21 EVBN IT Sector Ground Water Resources

Ground water resources are mainly present in loose, disconnected sediment layers generated from the Fourth Period or layers embracing carbonate stones. Carbonate stones alternate with young basalt or with other mixed components. It has been estimated that the potential reserve of ground water could be up to 48 billion cbm per year (17-20 million cbm per day). About 1 billion cbm (app. 2.3 million cmpd) of ground water is annually exploited.

Water Supply Status

During the last 10 years, the urban water supply systems of Vietnam have been developed without proper management. There are 68 urban water supply companies with a designed capacity of 5.5 million m3 per day in the whole country. Exploitation capacity is about 3.9 million m3 per day.

The 2008 surveys carried out by the Vietnam Water & Sanitation Association (VWSA), revealed a mixed performance in 66 out of the 68 provincial/municipal water supply companies (WSCs), which are mostly “state owned one member limited companies”. In many provinces, the existing water production capacity even exceeded the demand, but the service coverage is still very low. The percentage of connections in small towns is very low, with about one third of 727 district towns having some form of piped water supply. Even where there is piped water, it typically supplies only a small proportion of the population mainly in the town centers.

The existing water resources for urban and rural water supply systems are being polluted due to the discharging of domestic and industrial wastewater directly into the water sources without treatment. It has been shown that if the government does not take urgent measures to address this problem, the quality of water resources for water supply plants will be affected and the treatment process will be more complicated.

22 EVBN IT Sector The need for investment in just the urban water supply sector, in order to achieve the government’s target of 100% in 2020 for urban water supply coverage is 284% higher or 341 million USD annually, compared to the investment level that was needed during the last decade, while the ODA sources will likely decrease as Vietnam becomes a middle income country in the near future.

There are also possibilities of financing sources from the domestic capital markets with private sector participation. However, most of the domestic and international investors are more interested in building up the water production facilities and not in financing distribution systems.

Currently, there are 708 urban areas including: five central cities - Hai Phong, , Can Tho, , Ho Chi Minh (Hanoi is the capital) - 86 provincial cities, 617 towns with 21.59 million people (accounting for 26.3% of the population nation-wide). There are over 240 water supply utilities with the total capacity of 3.42 million m3 per day, of which 92 utilities use surface water sources with a total capacity of 1.95 million m3 per day and 148 utilities use underground water sources with a total capacity of 1.47 million m3 per day.

The existing capacity of water supply utilities can supply 150 liters per capita on a daily basis. However, due to the outdated and incomplete water supply infrastructure, the water supply systems are not working at full capacity in many places and the water loss rate is high (up to 40% in some areas) and as a result, in some areas only 40-50 liters per capita is supplied.

For suburban areas, 36.7 million out of 60.44 million people are supplied water. There are 7,257 centralized water supply systems for 6.13 million people and another 2.6 million small-scale water supply systems. The rate of suburban populations who can access water for living in the south is the highest, at 66.7%, Red River Delta at 65.1%, and at 62.1%.

According to the environmental sanitation and water source management workshop that was held on 6th June 2009, 50% of suburban populations have access to clean water, 40% have access to sanitation services and 70% of urban populations have access to running water. However, according to a recent survey by VWSA, just 31% of suburban households have used water from drilled wells, 32% use water from dug wells, 1.8% use rainfall, 11.7% use running water, 1.7% use water from ponds and lakes, 11.6% drink natural water (untreated sources). Great deals of those who use running water have not met the standards stipulated by WHO.

23 EVBN IT Sector 3.2 Wastewater Treatment

Along with the rise in investment sources from the state budget for construction and rehabilitation of sewage and drainage systems and capacity building for companies engaged in management of operation and maintenance of the systems, the salient feature after five years of implementing the country’s orientation for development of urban sewerage and drainage to the year 2020 (OUSD), is the significant increase in the number of urban sewerage and drainage projects funded by the ODA.

The first was Hanoi Sewage and Drainage project phase I, whose construction commenced in 1998 with ODA funding mainly from Japan and with a total budget of USD 200 million. Since then, there have been about 32 out of 64 cities and provincial towns of Vietnam, namely Hanoi, Ho Chi Minh City, Hai Phong, Ha Long, Da Nang, Hue, Thai Nguyen, Vung Tau, Buon Ma Thuot, Da Lat, Viet Tri, and Nam Dinh, that have received ODA funded sewage and drainage projects from the Government of Japan, France, Denmark, Belgium, Switzerland and international Financial Institutions like World Bank, Asian Development Bank.

As for wastewater treatment systems, the government has made great efforts to invest in installing new systems and upgrading older ones. Moreover it has called for the support of the private sector and the international community because of budget constraints. However, it is difficult to get the sufficient investment capital in place to narrow the huge gap, even though the ODA contribution has significantly increased in recent years. Very few private investor show interest in this area because they are inexperienced in this field and the government and private sectors have no common voice in policy as well as implementation.

24 EVBN IT Sector 04 OTHER MARKETS 4.1 Sustainable Buildings and Infrastructure

The green building sector in Vietnam is still at an early stage of development. As Vietnam's government is heavily focusing on economic development, the green agenda is still not yet adequately sought after. A lack of proper knowledge about actual costs and benefits of green buildings in the market also serves as an additional hindrance contributing to the sector's slow development.

A few efforts to promote green building have, however, been initiated by different stakeholders. After a series of laws passed to promote energy efficiency with inconsistent regulatory enforcement during the 2005-2012 period, Vietnam's Ministry of Planning and Investment along with the participation of various relevant line ministries including the Ministry of Construction, are now targeting to reduce annual energy consumption and GHG emission by 2.5-3% (per unit GDP) until 2020 and 2-3% from 2020-2030, respectively, through their Green Growth Strategy. On the other hand, VGBC developed a local certification called the LOTUS rating tool, in which relevant training programs are initiated and financed by multilaterals through Vietnam's NGO network. The endeavors being carried out resulted in the increase of LOTUS registrations this outnumbered LEED, due to LOTUS’ stronger relevance to the Vietnamese market and its locally customized conditions.

As the manufacturing sector is a major destination for FDI inflows - reaching nearly US$8 billion in 2011 - Vietnam's green building market is currently dominated by factories which account for nearly half (42%) of all certified green buildings, followed by offices (22%) and hospitalities (19%) which segments with the existing buildings achieving renowned certifications such as LEED, LOTUS, Earthcheck, GreenMark, and GreenStar.. The reason behind this domination by the factory segment is associated with multinational corporations' prowess in the green sector. Multinational corporations are leading the green building adoption in Vietnam due to the increasing global guidelines for their overseas factories by headquarters, which are typically based in countries with mature environmental laws.

25 EVBN IT Sector In its current stage, opportunities in the industry exist in the insulation and lighting sectors where only limited players are currently operating in the market. Consulting, surfacing and architectural service industries are however, showing signs of saturation as they are already seeing high growth in the market.

As the market outlook of Vietnam's green building industry, Heiko Bugs ,the Partner Asia of Solidiance remarks: "While there are uncertainties about the speed of economic recovery, foreign investment is returning and companies are once again looking for growth opportunities. Buildings consume up to 40% of energy and more sustainable ways to develop and construct buildings will drive future change in Vietnam."

26 EVBN IT Sector 4.2 Smart Grid

The stress to reduce import energy and increase the stability, quality and price of electricity lead to the need of smart grid. The applications are now applied by the National Load Dispatch Center, the National Transmission Company and distribution companies such as SCADA/EMS/DMS at NLDC, PCs, and grid automation; TOU (Time Of Usage); AMR and load research and Billing and Customer Service Center.

However, the grid in Vietnam is not considered neither modern nor synchronized and stands at a low automation level. Information and Communication Infrastructure is not complete (SCADA/EMS is working now, but has some substantial flaws).

The lack of infrastructure and legal framework to implement smart grid applications for end-user is also an issue along with the lack of technical standards.

Some milestones:

• 21st July, 2011. In Master Plan VII, PM had assigned MOIT to develop Smart Grid Program. • March 2012. ERAV (subsidiary of MOIT) developed the Smart Grid Project and Implementation Roadmap. • 8th November, 2012. The Prime Minister approved Smart Grid Program - 3 phases Roadmap • 17th June, 2013. The Minister of MOIT established the SG development Steering Committee in Vietnam. • 19th March, 2013. The Committee Regulation and the Operation plan of 2013 was released.

Smart Grid development roadmap

Source: the Electricity Regulatory Authority of Vietnam (ERAV)

27 EVBN IT Sector THE KEY GROWTH DRIVERS 05 AND CHALLENGES 5.1 Key Growth Drivers

Power Sector

The electric power sector is dominated by public ownership; however, market forces are being brought to bear, with private sector participation expanding.

Since 1995, energy sector operations have been organized into three general companies which are among the largest firms in Vietnam: Petro Vietnam, Vinacomin (former Vinacoal) and Electricity of Vietnam (EVN). Vietnam produced almost 87 billion kWh of electricity in 2009. To ease power shortages in the North, in 2004 Vietnam started purchasing electricity from China, over one TWh in 2006, transported through 110kV lines linking the country to China’s Yunnan and Guangxi provinces.

Vietnam also started buying electric power from Laos in 2008, where it already had hydropower plant projects, and conducted feasibility studies for other hydro projects. To boost its own capacity, Vietnam has been constructing a series of new plants, ranging from the 2400 MW Son La hydro project and a number of other medium-size hydro plants in the Central Highlands, some large-scale coal-fired plants in the North and the Central highlands, and additional gas- fired plants in the South. In total, the country imported 4 billion kWh and exported 535 million kWh of electric power.

Opportunities exist for investment in Vietnam’s power generation as Vietnam electricity demand continues growing robustly. Consequently, the biggest objective of the electric power sector of Vietnam remains basic: providing sufficient electricity for both business and consumer needs. In total, over 11,000 MW in additional capacity were planned to come on-stream in 2010. Issued in 2007, EVN’s master plan included the developing of 135 power plants by 2015. Vietnam’s plan to have electricity in every rural area, up from the current 91%, by 2020 is fueling strong energy demand.

The government plans to construct its first nuclear plant in central Ninh Thuan province, and it could go into service between 2017 and 2020. In the long term, the government is considering developing national nuclear capacity ranging from 2000 MW to 8000 MW.

28 EVBN IT Sector 80% of Vietnam’s rural population relies on non-commercial biomass, such as wood and rice husks, as an important fuel source for cooking and other purposes. There is no significant commercial production from other renewable energy sources, e.g. geothermal, solar, wind, tidal, wood and waste, but some potential for future development does exist. . Wind power is underdeveloped, mainly because of a lack of appropriate policies for wind energy. However, Decision 130 issued by the Prime Minister in 2007 sets forth some economic incentives for CDM projects, including wind power plants.

Solar energy is expensive in Vietnam, and is best suited for use in rural and remote areas. Therefore renewable energy sources are largely untapped in Vietnam, but will be increasingly important in the government’s upcoming energy initiatives.

Investment in power is a long-term investment. Time and endurance are required to develop a power generation project from the beginning. Under the current context, joint development with Vietnamese partner(s) might be a better option and better time-saving than the stand-alone development.

29 EVBN IT Sector IT Sector

In the current context as environmental issues have become key global subjects, the application of green technology, including green Information Technology (IT) has become a vital trend in striving to ensure stable, sustainable development and improved international competitiveness.

Lam Nguyen Hai Long, the Deputy Director of Quang Trung Software City Development Company Ltd (QTSC) said that the company has increasingly attached importance to green Information Technology (IT), including green natural environment and green technology in its development process. QTSC has ensured a naturally green environment and landscape to create clean atmosphere for applications programmers and scientists working in the park. It is also deploying to provide cloud computing services for customers that help to reduce gas emissions and make green technology more appealing to investors. Now there are green trees in the software park and apartments are equipped with an appropriate waste water treatment system using environment-friendly materials. In the future, QTSC will build and develop a green international data center (IDC) that will apply for LEED (Leadership in Energy and Environmental Design)-gold certification.

Sharing the same view, Tran Phuc Hong, the Vice Chairman of TMA Solution stressed Green Tech or Green IT is now the global trend and the IT sector has huge potential to contribute its part in such activities as energy saving and IT applications in management. Since 2008, many Green IT projects have been carried out such as a project by Viettel to measure water quality, the forest fire risk warning project in Phu Tho Province, the natural disaster warning project in Can Tho and Da Nang Provinces and the pilot project to improve lighting and air-conditioning systems in FPT University buildings.

30 EVBN IT Sector Green IT undoubtedly leads to higher efficiency. By installing blanking panel plates in the FPT Telecom International's Data Center, FPT could reduce electricity consumption by 255,000 kWh and 140 tons of Carbon dioxide (CO2) every year, equivalent to VND300 million. Similarly, FPT University could reduce electricity consumption by 341,000 kWh and 192.2 tons of CO2 a year, equivalent to VND500 million. These are nice success stories which need to be expanded in Vietnam's Green IT development strategy.

Currently, many big-name corporations in the IT sector such as Toshiba, Intel, HP and Samsung are enhancing investment in Vietnam with pledges to produce green IT products. In response to the Green IT trend for sustainable development, Lam Nguyen Hai Long said that in the 2011- 2015 period, QTSC will consider a more flexible investment portfolio so that investors are allowed to extend their operations to clean technology sections to produce software, digital content and IT services.

Vietnam’s Green Building Market

The green buildings market in Vietnam is in the infant stages of development but the foundation for future growth is being established, according to a recently published White Paper by Solidiance, a B2B consulting firm active in advising green building suppliers throughout Asia. A simple statistic illuminates where the market is today – there are just over 40 buildings in a country of 90 million people that have so far achieved a green building certification. This number factors in all green building certifications, including locally-developed LOTUS standards, international standards such as LEED (U.S.) or Building Construction Authority (BCA) Green Mark (Singapore), and industry standards such as EarthCheck (Hospitality). To put that into perspective, in Singapore, a green buildings leader in Asia, the country certified its 1,000th building under BCA Green Mark standards in 2012.

31 EVBN IT Sector The Development of LOTUS Standards

In Vietnam, a local green building certification wasn’t even in place until 2010 when the Vietnam Green Building Council unveiled LOTUS standards, which are based on international standards such as LEED but adapted to meet local conditions. The advent of LOTUS was an important step in laying the groundwork for future adoption of green building practices in Vietnam. Results from a survey of green building industry players conducted by Solidiance, showed that LOTUS is perceived to be both easier to obtain as well as more cost effective to implement than international certifications like LEED, paving the way to accelerate green building development in Vietnam.

The following diagram compares each criteria between LOTUS and LEED (5 is best – 0 is worst)

Source: Slolidiance, 2013

Now that LOTUS standards are in place, the primary barriers to further green building market growth include low awareness, cost sensitivities, and below market-price electricity tariffs. Overcoming these barriers requires the combined efforts of civil society, industry, and government policymakers, to both market the standards to industry decision-makers as well as to establish a regulatory framework in which the industry can thrive.

32 EVBN IT Sector 5.2 Challenges

The Need to Lower Cost

Focusing on these short-term investment costs to long-term operational costs, utilizing green materials and technologies offers return both in terms of reaping the financial benefits of lower electricity bills but also increased productivity, as public health research has shown that natural light and clean air boosts employee morale and lowers absentee rates. However, in cases where the property developer is not also the building user, long-term cost savings to building users are unlikely to be prioritized during the construction phase, requiring that the market demands the development of green buildings and the proper regulatory framework including green building codes and incentives is in place in order to spur action.

A key operational saving from implementing green building standards is a lower electricity bill. However, the need to lower electricity costs is somewhat dampened in Vietnam, given that the country’s electricity tariffs are lower than many of its ASEAN peers. Though the government is transitioning towards market-based pricing of power, this will take time so as to ease inflationary pressures as well as the impact that doing so might have on low-income consumers and industry production costs. Over time though, as electricity costs increase, a wider base of building users will feel the pinch and seek out ways to increase energy efficiency. According to Heiko Bugs, Partner Asia for Solidiance, “Buildings consume up to 40% of energy and more sustainable ways to develop and construct buildings will drive future change in Vietnam.” reputation

With electricity prices relatively low, it is not surprising that the early adopters of green certifications in Vietnam have been the energy-intensive industrial sector, where electricity demand and bills are highest.

33 EVBN IT Sector Electricity cost – All industries 3%

6% 8%

42% 19%

22%

Factory Office Hospitality Supermarket School Residential

Source: APEC, 2013, Vietnam energy overview

Driven by a desire to lower operating costs, as well adhering to global corporate guidelines, the industrial sector accounts take more than 40% of certified green buildings in Vietnam. Hospitality and commercial office buildings have seen the next highest rates of adoption with the former seeking out lower operating costs and an eco-friendly image, while new office buildings are going green in an attempt to attract premium rental fees as well as differentiate themselves in a market that currently has excess supply of office space in the country’s urban centers of Ho Chi Minh City and Hanoi.

The demand to expand beyond these industry segments will require not only awareness but an accurate understanding of the costs and benefits of green buildings, as well as the government to move towards market-based pricing of electricity while encouraging green building development through incentives and green building codes. With the advent of LOTUS and rising interest among local architects and contractors, the ingredients are moving into place for the industry to grow but the pace of development is still to be seen.

34 EVBN IT Sector Huge Initial Investment

Speaking about the challenges for all corporations investing in green technology in general and the foreign companies in particular, one of the biggest issues is that initial investment for green technology is huge with too little support from Vietnamese government in term of policy. Taking loans is considered too risky for the foreign investor in this sector since the price of output/final products is too cheap which does not guarantee the return on investment.

At the Green Biz 2013 conference, which took place in Hanoi, European representatives raised this issue and recommended that the Vietnamese Government should not only rely on the ODA but needs to build their own legal system and policies to support green technology for the long term as well as to attract the foreign investment.

For developing countries including Vietnam, the challenges lie in the short run. Choosing not to bring more land under cultivation because of the high environmental costs will be difficult for a country with high level of rural poverty. In the short term, green growth policies are most likely to deliver local benefits in improving management through sustainable waste treatment, better access to water and energy and more desirable health outcomes from controlled pollution. In the longer run, the recognized infrastructure deficits to support economic activities are considerable, but there is potential for technology leapfrogging and climate-resilient implementation. Severe shortages of electricity supply and high urbanization rates demand more efficient energy and public transportation systems in cities. There may be potential job creation, for instance, through sustainable management of natural resources which could on the one hand release the tension of urban migration given most of these opportunities are available in rural areas; on the other hand to preserve local livelihoods from environmental impacts, in particular from climate change.

The obstacles to realizing green growth include the difficulty in changing behavior, government and market failures, and limited access to capital. Overcoming these obstacles requires the right sort of knowledge, the right prioritization, interaction between policy and political realities, engagement of the private sector, and taking advantage of technology and innovations. Many developing countries are not yet fully equipped to introduce new “greener” policies or to tap into the benefits of a green future. Institutional and capacity development efforts are needed to help them get ready (OECD, 2012).

35 EVBN IT Sector EVBN CONSORTIUM PARTNERS

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