vietnam climate innovation center: cic · 2010. 6. 17. · vietnam cic business plan 3 about...

Vietnam Climate Innovation

Center: CIC

A Business Plan for the financing and implementation of a CIC in

Vietnam.

Vietnam CIC Business Plan 2

Copyright

©2012 Information for Development Program (infoDev)/The World Bank

1818 H Street NW

Washington DC 20433

Internet: www.infoDev.org

Email: [email protected]

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Disclaimers

infoDev/The World Bank: The findings, interpretations and conclusions expressed herein are

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To cite this publication:

Climate Innovation Center Business Plan: Vietnam. An infoDev publication, April 2012. Available

at: www.infoDev.org/climate

Cover photo:

Anthony Lambkin

http://www.infodev.org/climate


About infoDev

infoDev is a global partnership program in the Financial and Private Sector Development

Network of the World Bank Group. Its mission is to enable innovative entrepreneurship for

sustainable, inclusive growth and employment. infoDev manages a global network which

includes over 400 business incubators in more than 107 developing countries. This network has

assisted more than 25,000 companies and helped create close to 250,000 jobs worldwide.

infoDev‟s value-add is building global entrepreneurial and SME communities of practice, sharing

best practices and facilitating collaboration.

About AusAID

The Australian Agency for International Development (AusAID) is an Executive Agency within the

Foreign Affairs and Trade portfolio and reports to the Minister for Foreign Affairs.

AusAID supports developing countries in adapting to climate change, including the poor in least

developed states and small island developing states. It also assists developing countries with

high carbon emissions to pursue cleaner development.

About the Ministry for Foreign Affairs of Finland

In its development policy, Finland emphasizes the rule of law, democracy, human rights and

sustainable development. Poverty reduction and the achievement of the UN Millennium

Development Goals (MDGs), placing an emphasis on partner countries‟ needs and ownership,

are the first priorities of the development policy.

Finland builds on its strengths in the educational sector, health promotion, communications and

environmental technology, and good governance to promote education, decent work,

reducing youth unemployment and improving the status of women and children.


Contents

1.0 Executive Summary ................................................................................................ 6

1.1 Context ..................................................................................................................................................... 6

1.2 Barriers to Climate Innovation in Vietnam ......................................................................................... 7

1.3 Climate Innovation Center (CIC) ........................................................................................................ 7

1.4 CIC Programs ........................................................................................................................................... 8

1.5 Operational Plan ..................................................................................................................................... 9

1.6 Indicative Impact and Results ............................................................................................................ 10

1.7 Financial Plan ........................................................................................................................................ 10

2.0 Climate Innovation Centers ................................................................................. 11

2.1 infoDev Goals ........................................................................................................................................ 11

2.2 The Climate Innovation Challenge ................................................................................................... 11

2.3 Gaps in Existing Initiatives and Institutions ........................................................................................ 11

2.4 Incubators, Accelerators and Innovation Centers ........................................................................ 12

2.5 Climate Innovation Centers ............................................................................................................... 13

3.0 Climate Technology Market Landscape: Vietnam ........................................... 17

3.1 Defining Climate Technologies in the Vietnamese Context ........................................................ 17

3.2 Technology Prioritization ...................................................................................................................... 20

3.3 Stakeholder Analysis ............................................................................................................................. 34

4.0 Climate Innovation Analysis: Vietnam ................................................................ 48

4.1 Gaps along the Value Chain ............................................................................................................. 48

4.2 Technology Gaps ................................................................................................................................. 49

4.3 Company Gaps .................................................................................................................................... 50

4.4 Finance Gaps ........................................................................................................................................ 51

4.5 Market Gaps .......................................................................................................................................... 52

4.6 Policy Gaps ............................................................................................................................................ 53

5.0 Vietnam Climate Innovation Center Model ....................................................... 54

5.1 Program Tracks ...................................................................................................................................... 56

6.0 Operational Plan ................................................................................................... 62

6.1 Project Timeline ..................................................................................................................................... 62

6.2 Governance .......................................................................................................................................... 63

6.3 CIC Host Selection ................................................................................................................................ 63


6.4 Fund Manager ....................................................................................................................................... 65

6.5 infoDev .................................................................................................................................................... 70

6.6 Donors ..................................................................................................................................................... 71

6.7 Safeguards ............................................................................................................................................. 72

6.8 Other Issues to be Addressed during Implementation .................................................................. 73

6.9 Exit Strategy ............................................................................................................................................ 73

6.10 East Asia Regional Engagement ..................................................................................................... 74

6.11 Organizational Structure ................................................................................................................... 74

7.0 Financial Plan ........................................................................................................ 77

7.1 Budget for Years 1 to 5 ........................................................................................................................ 77

7.2 Sustainability .......................................................................................................................................... 79

7.3 Co-investment and leverage ............................................................................................................. 82

7.4 Fundraising Plan .................................................................................................................................... 83

7.5 Second round funding: Years 5+ ....................................................................................................... 85

7.6 Additional Funding ............................................................................................................................... 85

7.7 Global Network Participation: ............................................................................................................ 86

8.0 Indicative Impact and Results ............................................................................. 87

8.1 Highlights ................................................................................................................................................ 87

8.2 Spillover Effects ...................................................................................................................................... 87

8.3 Monitoring and Evaluation ................................................................................................................. 88

8.4 Indicative Results Framework ............................................................................................................. 89

9.0 Risks ........................................................................................................................ 92

10.0 Conclusion ........................................................................................................... 95

11.0 Stakeholder Support ........................................................................................... 96


1.0 Executive Summary

infoDev is establishing Climate

Innovation Centers (CICs) in a number of

developing countries. CICs provide a

country-driven approach to climate

change, thereby assisting countries in

achieving their green growth objectives.

Each Center provides early-stage

financing and other services to enable local enterprises to pro-actively and profitably develop

innovative climate technology solutions that meet local needs. This not only helps a country

address climate change challenges, but also creates economic development, job creation and

industrial competitiveness.

This business plan outlines a required investment of USD 17.95 million to establish a CIC in Vietnam

over a five-year period which includes implementation, launch and operations. The CIC will

deliver technology commercialization funding to up to 40 climate technology entrepreneurs

and equity investments to 25 companies, generating more than 3,500 direct and indirect jobs

after 5 years and over 13,000 long-term jobs. With investment returning a 12% IRR, the Center

aims to cover 71% of its yearly operating costs and 100% of yearly investment costs after 7 years.

The CIC will be aligned with Vietnam‟s National Strategy on Climate Change as well as the

Green Growth Strategy anticipated in 2012.

1.1 Context

Vietnam is characterized by the following challenges, which intersect directly with the global

climate change and green growth agendas. These issues underscore the critical need to

stimulate climate innovation and promote new local climate technology industries in Vietnam:

Vietnam is one of the world‟s most vulnerable countries to the effects of climate change with

its markedly rising sea levels and fluctuating rainfall, which include destructive typhoons.

The national economy remains dependent on agriculture, which provides a quarter of

export revenue and 70% of employment.

Vietnam is expected to become a net oil importer by 2015, given that its energy

consumption has tripled in the last decade.

Vietnam‟s economic development requires expansion of industrial activities. Vietnam needs

to boost its overall annual labor productivity growth by 40% (from 4.1% to 6.4%) in order to

sustain the government target of 7-8% annual growth by 2020.


1.2 Barriers to Climate Innovation in Vietnam

Over a 6-month process, infoDev engaged with over 200 local climate technology stakeholders

to evaluate five core areas and identify the major gaps hampering climate innovation in

Vietnam:

Technology: The main perceived barrier to the development of suitable climate

technologies in Vietnam is the lack of coordination between research and industry.

Secondary gaps concern the availability and quality of information, as well as the ability to

test technologies for commercial application.

Company: Prospective innovators view financial support as the most pressing need, followed

by human resource development.

Finance: Predominant gaps involve access to flexible, early-stage risk capital. Overall,

prospective investors in Vietnam would benefit from a greater understanding of how to

evaluate opportunities in the climate sector.

Market: There is a need for stronger demand generation and consumer confidence to

support climate innovation. In a developing country such as Vietnam, price is also a barrier

to mass market adoption.

Policy: Limited and uncoordinated policy in Vietnam inhibits the creation and adoption of

new technologies; additionally, more robust regulatory support is needed around access to

finance and quality standards.

1.3 Climate Innovation Center (CIC)

Over the course of 6 months, infoDev engaged with Vietnamese stakeholders from relevant

sectors and backgrounds. They represented R&D, universities, incubators, industry, government,

entrepreneurs, investors, NGOs and international institutions operating in Vietnam. This

multidisciplinary group gave a wealth of feedback and inputs which translated into the

outcomes of the business plan. The process also confirmed that Vietnam has the required

innovation capabilities to deliver the CIC‟s programs, would significantly benefit from hosting the

Center, and has the market size to attract adequate deal-flow and demand for the Center‟s

financing and services.

infoDev identified the most critical gaps in climate innovation across several areas: technology,

company, finance, markets and policy. Energy efficiency and sustainable agribusiness were

identified as priority technologies in which the Vietnam CIC should develop core competencies,

followed by technologies for adaptation, transportation technologies, and water management

and purification. Based on these, the mission and goals of the CIC were designed:


Vietnam CIC Mission

The Vietnam Climate Innovation Center will provide a targeted suite of early-stage financing, technology

commercialization, business development and capacity building services to Vietnamese private sector

innovators. The Center will work to incubate, commercialize and grow technology solutions that support

Vietnam's low-carbon development, resiliency and adaptation to climate change while creating jobs and

promoting domestic competitiveness.

Vietnam CIC Core Objectives

1. Providing catalytic seed-stage risk capital to local climate technology companies and assisting

companies to secure additional financing through investor match-making and facilitation of debt

financing.

2. Building a pipeline of high-impact climate solutions by supporting the localization, commercialization

and transfer of relevant technologies through access to innovation grants, industry partnerships and

facility providers.

3. Supporting the accelerated growth of climate ventures and entrepreneurial capacity by providing a

holistic set of business development services, mentoring and training programs.

4. Identifying and developing local and international market opportunities for new climate solutions

through providing key sectoral information, supporting policy transformation and creating linkages with

regional and international markets.

1.4 CIC Programs

The CIC‟s services and programs can be categorized as follows. It is important to note that

leveraging and coordinating existing institutions and initiatives in Vietnam will form a key

component of the CIC‟s approach to implementation and service delivery. Furthermore, the

programs and services offered by the CIC only address a subset of the needs identified by

private sector innovators during consultations. Navigating complex regulation, business-enabling

environments, market and political risks will be outside the scope of the Center. The below

programs were those identified through extensive stakeholder consultations and will be ramped

up over the life of the program based on demand and impact.

1.4.1 Access to Finance 1.4.2 Technology Commercialization

Providing risk capital through highly flexible

first-loss equity investments (USD 100K -

750K). This fills the gap between micro-loan

amounts and those offered by existing fund

managers.

Catalyzing investment syndication and

debt facilitation between CIC companies

and private financers, state development

banks, and the Vietnamese Diaspora to

build local investment capacity.

Offering proof-of-concept grants (USD 20-50k) that enable local innovators to demonstrate and scale

their climate technologies and business models.

Promoting collaborative industry partnerships, supported by a comprehensive technology

database (components, sourcing, certifications,

costs, user guides, and intellectual property).

Linking local innovators to facility providers for prototyping, testing, production and other logistical

needs (e.g. office space, equipment).

1.4.3 Venture Acceleration 1.4.4 Market Development


Training individuals who are eligible for CIC

financing on basic business planning and

financial management, in addition to

offering a fund for out-sourcing other

advisory services.

Organizing seminars and university

partnerships to promote professional

development, business

administration/entrepreneurship, and

aware-ness of climate technology issues.

Networking SMEs with angel investors,

business mentors, and technical experts at

the national, regional and global levels.

Producing market studies, cases and analytical

reports on climate technology sectors and

opportunities at a local, regional and global level.

Encouraging dialogue between government and

the private sector to strengthen Vietnam‟s policy

framework around R&D, innovation, green growth,

taxation, and exports.

Supporting the growth and establishment of climate

sector business associations in Vietnam.

Networking Vietnam‟s climate innovators to their

regional and global counterparts by hosting an

annual CIC Forum and facilitating trade or

capacity-building relationships.

1.5 Operational Plan

Programs will be launched and operate over a five-year period. A preparatory implementation

phase of 6-9 months will be required for sourcing and selection of (i) a host institution and

consortia partners and (ii) a fund manager with the capabilities and capacity to deliver on the

CIC business plan. Additional institutional capacity building, expertise and oversight will be

provided by infoDev. The implementation and operation of the CIC will include the following key

elements:

1.5.1 Governance: The CIC will be housed in a local organization and supported by a

consortium of local and international partners. infoDev will manage and oversee

implementation including the provision of ongoing technical assistance, performance

evaluation and importantly, linking the Center with global level activities.

1.5.2 Fund Management: A fund manager will also be appointed to independently screen,

structure deals, make investments, provide relevant technical assistance, and secure additional

leverage from private sector co-investors.

1.5.3 Organizational Structure: The CIC management team will require the full-time equivalent of

19 individuals (in a combination of in-house and out-sourced roles) to oversee the center‟s daily

operations. In addition, an advisory committee of up to 7 members will support the CIC host

organization and facilitate linkages with external bodies.

1.5.4 Implementation Issues: After implementation partners for the CIC, further negotiation will

occur to determine matters such as (i) board membership and ownership, (ii) investment

structuring and mechanisms, (iv) staff sourcing, (v) intellectual property agreements, and (vi)

performance metrics.


1.5.5 Exit strategy: After year 5, the CIC will seek direct financing and in-kind contributions from

local stakeholders to supplement its investment revenues. The Government of Vietnam and the

private sector will assume primary funding responsibility for the CIC at this time.

1.6 Indicative Impact and Results

In carrying out its mission, the Center will measure performance against aggressive impact and

outcome targets. A comprehensive results framework will be designed during implementation to

establish a baseline and actively track outcomes. The CIC will support 65 climate technology

ventures, generating 3,500 direct and indirect jobs at a cost of approximately USD 5,000 per job

and close to 15,000 jobs within 10 years costing about USD 1,200 per job. The total economic

impact of these firms is projected at USD 150+ million beyond 10 years.

The accelerated growth of CIC-supported technologies will also deliver social, economic and

environmental impacts. These include carbon mitigation (1.3m tCO2), access to renewable or

more efficient sources of energy (190 MW installed capacity), access to water (391m kL) and

increased agricultural efficiency. Overall, the CIC will empower close to 1 million Vietnamese,

including women, youth, and the poor, to be less vulnerable to climate change.

1.7 Financial Plan

The USD 17.95 million budget for the establishment of the CIC over a five-year period will include

53% for financing, 31% for programs, and 15% for staff and central costs. The Center is expected

to cover at least 70% of its costs by the end of Year 7, including full replenishment of the annual

investment fund.

At this level of funding, investors will see concrete economic, environmental and social returns as

outlined above. Through private sector co-financing, more than 8 times leverage will be

achieved for each donor contribution. Further, investors will benefit from:

1. Exposure to an on-going pipeline of climate technology innovations.

2. Considerable knowledge generated and disseminated through the CIC‟s market

information, policy best-practice, analytical products and global benchmarking.

3. Access to a complete local network of CIC partners and stakeholders.

4. A primary point of contact for establishing international linkages that can facilitate

technology transfer, as well as trade and business-to-business opportunities in Vietnam.

These are the types of long-term impacts in Vietnam that a well-resourced and holistic institution

like the CIC can provide.


2.0 Climate Innovation Centers

Over an six-month period, infoDev assessed the feasibility of establishing a locally owned and

operated Climate Innovation Center (CIC) in Vietnam through an intensive stakeholder

engagement process. The process concluded in April 2012 with over 200 stakeholders from

varied backgrounds and experiences providing input into the conceptualization, design and

development of a CIC in Vietnam.

2.1 infoDev Goals

1. Assess the feasibility for establishing a CIC in Vietnam and develop a full business plan that

addresses market failures preventing domestic innovation in climate technologies.

2. Based on the business plan, mobilize investment to implement the CIC to execute the

Center‟s programs, services and financing via suitable in-country partner

institutions/consortia.

3. Network the Vietnam CIC regionally and internationally to promote technology

collaboration, business linkages and support local and international trade opportunities for

Vietnam‟s climate technology sector.

2.2 The Climate Innovation Challenge

New technologies are essential to reduce the long-term cost of climate change and achieve

Green Growth. Developing countries want to build their own capacity to innovate to (i) ensure

energy security and increased energy access, (ii) address climate change mitigation and

adaptation and (iii) create competitive domestic industries in clean tech for job creation and

other benefits.

However, barriers to innovation in climate sectors are especially high and even more

pronounced in developing countries. These barriers often include gaps in appropriate financing,

lagging technical and business capabilities, entrepreneurial and human capacity constraints

and uncertain regulatory environments. Moreover, many developing countries lack the public

and private sector bodies that support innovation, and as a result support for locally appropriate

climate innovation is often weak or absent.

2.3 Gaps in Existing Initiatives and Institutions

infoDev commissioned a report by Bloomberg New Energy Finance that surveyed and analyzed

hundreds of government, private and public-private initiatives that support climate and clean

energy innovation. These included centers of excellence, seed funds, technology accelerators,

business incubators, advisory centers and other programs. Of the 500 that were analyzed, 70


were mostly focused on climate technologies and only 25 dedicated all of their operations to

climate – a small number relative to the gravity of the challenges and immense market

opportunities.

The report found gaps in the existing institutions which prevented them from addressing the

broad range of barriers associated with climate innovation. Some focused only on financing or

business advisory while others concentrated efforts solely on technical development – few

advocated policy reform or standards. Only

a few institutions addressed most barriers

including China‟s Baoding New & High Tech

Industrial Development Zone, China, The

UK‟s Carbon Trust and Brazil‟s CIETEC at the

University of Sao Paulo. Geographic

coverage was also sporadic with a majority

of centers located in either in developed or

highly industrialized developing countries –

few were located in Africa.

2.4 Incubators, Accelerators and Innovation Centers

infoDev supports innovation in developing countries through facilitating a global network of over

400 business incubators. These incubators act as hubs to aggregate financing and shared

services to accelerate innovative companies, helping them overcome market barriers that are

particularly high in developing countries. Experience has shown that these centers dramatically

increase the survival rate of new enterprises with over 75% being operational after 3 years of

exiting the incubator.

As a policy tool, incubators are a highly effective form of public spending, resulting in lower long-

term employment costs when compared with infrastructure projects1. Incubation experience

also has shown that for every USD 1 of government subsidy, a Return on Investment (ROI) of USD

30 tax revenue can be generated in the long-term through corporate and income taxes from

the spun out companies2. With infoDev‟s business incubator network expanding to over 400

centers in more than 100 developing countries, supporting over 20,000 enterprises and creating

250,000 jobs, such programs form an important component of developing country economic

growth and employment strategies.

1 Grant Thorton Report on Incubation: Source: EDA 2 NBIA (National Business Incubation Association) data

Locations of institutions supporting climate innovation


2.5 Climate Innovation Centers

As multilateral, national and local solutions are being structured to address the issue of climate

technologies, infoDev‟s Climate Technology Program is rolling out Climate Innovation Centers

(CICs) in a number of countries in Africa, South East Asia and the Caribbean and assisting

developing countries achieve their green growth objectives. CICs support innovation by offering

a full suite of financing and capacity building services to technologists, entrepreneurs, and SMEs

that address challenges to starting and scaling their climate technology ventures. In addition to

incubating promising start-ups, CICs provide dedicated proof-of-concept and seed funds to

entrepreneurs to bridge local funding gaps.

In parallel to investments, CICs also provide business advisory and training services, market

intelligence products, access to product testing facilities, and government engagement on

policy. In this way, a Center acts as a national focal point, coordinating efforts in promoting the

growth of locally relevant climate sectors. CICs also provide a platform to create international

business-to-business linkages, enhance knowledge sharing and facilitate trade.

Brazil’s CIETEC

CIETEC, or Centro de Inovacao, Empreendedorismo e Tecnologia, is the largest incubator in

Latin America and one of the most successful in Brazil. Although it covers a range of sectors,

CIETEC‟s focus has shifted recently, and now hosts some 20 climate technology companies,

more than any other incubator in Latin America. With many renewable energy success

stories in its portfolio - including wind, hydro, solar hot water and fuel cells - CIETEC offers

valuable insights for the Climate Innovation Center in Vietnam.

Founded in 1998 with funding from government microfinance program SEBRAE, CIETEC is a

„full-service‟ incubator that provides assistance to companies at all stages of innovation -

from R&D through demonstration and deployment to diffusion and transfer. The center

provides incubatees with office space, laboratory use, and consultancy services at heavily

discounted prices. It also helps to arrange financing from public and private sources, and is

thinking about creating its own investment fund.

The CIETEC model is proving successful on a wide range of measures. In its first decade, the

number of companies under incubation has grown from 15 to 140. CIETEC also helps its

companies secure private sector equity investment – rising to USD5M in the past few years.

CIETEC‟s success rate is also impressive: while 75% of Brazilian start-ups fail within three years,

for CIETEC companies, that rate is just 30%. The center‟s work also represents value for

money: according to its 2008 annual report, for every USD 1 the government furnished

CIETEC companies, it received USD 3.40 in taxes. A total of 90 innovative companies have

already graduated from CIETEC, of which some 30 continue to be associated with the

center, achieving revenues of USD12M per year and creating thousands of jobs.


Services provided by Climate Innovation Centers

The Kenya Climate Innovation Center (CIC)

The Kenya Climate Innovation Center (CIC) will provide an integrated set of services,

activities and programs that leverage and expand existing innovation capacity and support

the accelerated scale and deployment of climate technology solutions. In the first five years,

the CIC is expected to create more than 70 sustainable climate technology businesses,

generating some 4,600 direct and indirect jobs. Over the next decade, it is estimated that

1.74m tCO2 will be mitigated from CIC supported technologies.


2.5.1 Complementarity with Ongoing and Future Programs

Each CIC is being designed and developed, leveraging the experiences and expertise of

hundreds of local stakeholders representing R&D, academia, entrepreneurs, NGOs, private

sectors and host government ministries such as water and energy, environment, commerce,

finance and science and technology. This is to ensure that existing local initiatives are

complemented and coordinated without duplication. It is also to secure local participation and

ownership that will increase the success of the CIC‟s implementation and operations. infoDev is

also coordinating efforts at the global level including existing and future programs designed to

support climate technology development and deployment. This includes ongoing efforts at the

UNFCCC, multilaterals such as The World Bank & IFC and bi-lateral organizations including

development partners and donors.

2.5.2 Stakeholder Engagement Process

The Center‟s business model and associated services are dependent on, and tailored to, the

local market. To identify market needs, opportunities and challenges from a local perspective,

infoDev developed a business plan via detailed analysis and an extensive in-country, multi-

stakeholder engagement process. Stakeholders were convened for a series of workshops, focus

groups, surveys, and interviews to explore the key barriers to climate technology

The Kenya CIC will become operational in July 2012. The host selection process included:

23 Expressions of Interest with 87 Organizations as Lead or Supporting Partners

Countries: Kenya (49 organizations), Germany, Denmark, UK, USA, Holland, Sweden,

Tanzania, Uganda, India, Belgium, South Africa, Finland, Switzerland, Austria

Organizations: Public and Private Universities, Research Institutes, Consultants, Nonprofits,

Tech Accelerators, Incubator Associations, Centers of Excellence, Industry Associations.

Strathmore University, PwC, GVEP and KIRDI have been selected for the implementation of

the CIC.

60% 11%

9%

8%

7% 5%

Kenya CIC funding breakdown -

USD 15.2m SME finance

Business advisory

Training,

education

Market

information

Government

advisory

Networking, trade

$0

$1

$2

$3

$4

$5

Year 1 Year 4 Year 7 Year 10 M

illio

ns

CIC Revenue Model

CIC Cost

Invesment

cost

Revenue


commercialization and assist in the development and design of appropriate solutions to

overcome barriers. This gaps-needs analysis formed the basis for the Vietnam CIC business

model.

The flow chart shows the process of the business plan development

September '11: Local stakeholder

identification

October '11: Sector mapping and

research

November'11: Workshop - Expert panels & working

groups

December '11: Quantitative analysis and

surveys

February '12: In-depth interviews

March '12: Development of

CIC business model

April '12: Focus group on model

design

May '12: Delivery of business plan


3.0 Climate Technology Market Landscape: Vietnam

3.1 Defining Climate Technologies in the Vietnamese Context

In the last quarter century, Vietnam has transformed itself from a war-torn country into one of

Asia‟s success stories, with annual per capita growth of 5.3% since 1986. China is the only Asian

economy to have grown faster than Vietnam since 2000.

According to UNDP forecasts, Vietnam is one of the five most vulnerable countries to climate

change. The country‟s unique attributes and rapid development are causing increased pressure

to implement a locally driven, globally responsive climate change strategy.

In the last 50 years, sea level in Vietnam has risen by 50 cm. Vietnam is a low-lying coastal

country whose food supply comes from two deltas: Mekong Delta in the south and Red River

delta in the north. If the sea level rises by 1 meter, 40% of the Mekong Delta and 11% of the

Red River Delta will be inundated. 20% of Ho Chi Minh City will be underwater, causing an

estimated loss of 10% of national GDP3.

Vietnam has 60% of its population working in agriculture and 20% of its export revenue

coming from agricultural products4. Agriculture, the livelihood of more than 63 million

Vietnamese, will be severely affected by the rise in temperature and changes in rainfall

patterns caused by climate change. From 1951-2000, the average annual temperature in

Vietnam increased by 0.5 - 0.7 OC5. Rainfall has showed a tendency to increase in the rainy

season and decrease in the dry season, leading to more floods and water scarcity. The rise in

temperature affects crops and increases the risk of crop diseases and pest plague. The

Mekong delta has already been affected by more frequent droughts and saline intrusion

caused by rising sea level and reduced river flow during dry season.

Vietnam already suffers 5 to 7 typhoons a year. Increasing frequency of extreme climate

events as a result of climate change will take a significant toll on the nation. From 2001-2010,

extreme climate events (typhoon, flood, landslide, drought, saline intrusion, etc.) have cost

the country 9,500 human lives and approximately 1.5% of GDP each year. 3

Energy consumption in Vietnam tripled in the last decade6. In the last five years, Vietnam has

started to import steam coal and oil products for its energy needs. Though oil is currently its

largest source of export revenue, Vietnam is expected to become a net importer by 2015 due

3 Vietnam National Strategy on Climate Change 4 http://www.fao.org/countries/55528/en/vnm/ 5 Vietnam's second national communication to the United Nations Framework Convention on Climate Change. 6 World Bank - Asia Sustainable and Alternative Energy Program – Vietnam Expanding Opportunities for Energy Efficiency

March 2010


to its rapidly rising energy demand. This growing reliance on imports worsens the country‟s

chronic trade deficit and is exacerbated by the global context of dwindling fossil fuel supply

and increasing energy cost. Meeting Vietnam‟s needs through alternative sources and/or

energy efficiency has become vital to sustain the country‟s growth and its competitiveness. In

addition, this would reduce emissions to mitigate climate change, generate cost savings, and

help to ensure affordable access for the poor.

Emission rate per capita in Vietnam, though relatively low compared to developed countries,

is rising rapidly as the country is on a rapid path of urbanization and transitioning to a more

manufacturing economy. Between 2020 and 2025, it is expected that 50% of the population

will be living in urban areas.7 The per capita emission rate has increased from 0.3 tons CO2e in

1990 to 1.2 tons CO2e in 2007. The total greenhouse gas emissions in Vietnam in 2000 were

150.9 million tons CO2e and reached an intensity of 4.48 tons of CO2e for every USD 1 million

of GDP. It is forecasted that total emissions will reach about 500 million tons CO2e by 2030.

Two of the main drivers behind Vietnam‟s recent success are its young and low-cost labor force

and the upgrading of skills from agriculture into manufacturing and services. However,

Vietnamese exports remain concentrated in low-value-added products compared to other

countries in the region. In a 2012 report on sustaining Vietnam‟s growth, McKinsey & Company

pointed out that Vietnam needs to boost its overall annual labor productivity growth by 40%

(from 4.1% to 6.4%) in order to sustain the government target of 7-8% annual growth by 2020.

Without this boost, Vietnam‟s 2020 GDP would be 30% lower than the target. The ability to adopt,

innovate, and master new technologies is critically needed for the nation‟s next phase of

growth.

Climate technology, in particular, would address the country‟s many overlapping challenges.

Local climate technology innovation would enable Vietnam to adapt to climate change,

mitigate emissions, meet energy needs, boost productivity, maintain competitiveness, reduce

the trade deficit and minimize dependence on fossil fuel imports.

Investing in climate technology will also help the country capture more benefits from carbon

markets and climate finance. As of June 2012, Vietnam has 283 registered clean development

mechanism (CDM) projects. Though only a few of these projects have received money from

selling Certified Emission Reductions (CER), Vietnam still ranks third in number of registered

projects after China and India. This shows the potential of emission reduction activities in the

country. Because Vietnam is not a Least Developed Country, its new CDM projects will not be

7 World Bank: Vietnam Urbanization Review Technical Assistance Report, November 2011


eligible for European markets after the end of 2012. However, there are new markets being

developed around the world, as well as new market mechanisms that would very likely enable

companies who invest in climate technology in Vietnam to sell carbon credits and participate in

carbon markets.

Climate-specific development finance is another promising sector. In 2009, the Climate

Technology Fund approved USD 250 million for Vietnam to co-finance energy efficiency,

renewable energy and mass transit projects by ADB, IBRD and the IFC. A number of

development partners are working with Vietnam‟s government to develop NAMAs (Nationally

Appropriate Mitigation Actions) for the country. These sector-wide emission reduction efforts

present a significant funding source and market for climate technology and carbon credits.

Vietnam has demonstrated that it recognizes this multi-faceted potential of climate

technologies. The country is developing a Green Growth Strategy that will be issued within 2012;

this is a coordinated effort by the central government and various ministries, spearheaded by

the Ministry of Planning and Investment. This strategy is emphasized as a 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 to 3%

per year (a 2.5% reduction) and reduce greenhouse gas emissions by 15% by 2020.8 The strategy

draft outlines actions to reform the policy and fiscal environment and to create investment

flows that reduce greenhouse gas emissions, thereby stimulating green growth as measured by

GDP and jobs. The strategy asserts that by 2050, “clean energy and clean

technology will be widely used in Vietnam”.

For Vietnam, innovating and restructuring toward a low-carbon economy is for the lives of its

citizen and also an obligation to the global community. In March 2012, the Vietnam National

Strategy on Climate Change was signed by the Prime Minister. This lays out priority projects to be

implemented from 2011-2015, plans for 2016-2025, as well as objectives for 2050 and a long-

range vision to 2100. One of the strategy‟s two overall targets is “to develop low-carbon

economy to protect and improve the quality of life of Vietnamese people, the security of the

nation and its sustainable development in the context of global climate change, and to

contribute actively with international community to protect earth's climate system”.

8 Base year: 2010.


3.2 Technology Prioritization

The Vietnam CIC must address the country‟s most pressing concerns, maximize impact, and use

its resources efficiently. To this end, it will focus primarily on two priority climate technology

sectors: energy efficiency and sustainable agribusiness.

Technology Prioritization Process Prioritized Sectors

1. Energy efficiency

2. Sustainable agribusiness

Other important sectors:

Technologies for

adaptation

Transportation

Water management and

purification

The process of prioritization involved three key components:

1. A long-list of almost 50 relevant climate sectors was identified in Vietnam, including key

priority areas for the government based on secondary research.

2. The infoDev team consulted local experts to evaluate these 50 sectors against 13 criteria

of market opportunity, business viability, and potential impact. See Table 3.2.6 for the

detailed evaluation criteria and Annex 2 for full analysis9.

3. Over 130 stakeholders ranked sectors most suitable for the CIC via a quantitative survey.

The weighted average of this process resulted in two focus areas for the Center including energy

efficiency and sustainable agribusiness. Other immediate areas of importance for Vietnam

included adaptation technologies, transportation and water management and purification.

Other areas such as hydro and wind were identified as “already on track”; these sectors were

either already attracting enough investment or were not seen as areas were the Vietnamese

SME sector could be competitive.

The in-depth consultations with climate sector experts and stakeholders have provided infoDev

with clear indicators on which sectors the CIC is most likely to create the greatest positive

impact in Vietnam‟s context. These impacts are measured along three dimensions: 1) economic

impact 2) greenhouse gas mitigation and climate resiliency impact and 3) social impact.

9 Adapted by infoDev: Nortech

Vietnam's Priorities Evaluation

Criteria Stakeholder Feedback


For emission impacts and economic impacts, the infoDev team cross-checked findings with the

Vietnam Second National Communication to the UNFCCC, a quantitative analysis of potential

emission savings and cost savings of different sectors. The CIC-identified sectors of priority

aligned well with the sectors identified in the national communication as having the most

emission reduction potential and lowest cost to mitigate.

The top two priority sectors identified by

stakeholders were energy efficiency and

sustainable agriculture. As shown in the

chart to the right, agriculture accounted

for the largest share (43%) of GHG

emissions in 2000. Energy compares at 35%

of GHG emissions for that year; however, it

has since overtaken agriculture and will increase faster in 2020 and 2030. Focusing on these

sectors would likely result in the largest impact in terms of emission savings.

Greenhouse gas emission by different sectors in Vietnam in 2000 (thousand tons)

Sector CO2 CH2 N2O CO2e Percentage

Energy 45,900.00 308.56 1.27 52,773.46 35

Industrial processes 10,005.72 0 0 10,005.72 6.6

Agriculture 0 2,383.75 48.49 65,090.65 43.1

LULUCF 11,860.19 140.33 0.96 15,104.72 10

Waste 0.00 331.48 3.11 7,925.18 5.3

Total 67,765.91 3,164.12 53.83 150,899.73 100.00

The Vietnamese national

communication also identified the

economic costs (or savings) of different

emission mitigation measures. It can be

seen that most of the negative cost

(profitable) measures are those of

energy efficiency (efficient public

lighting, electric motor, air conditioner)

or agriculture (switching feed for cattle)

or transportation (switching from

GHG emissions by sector in 2000 in CO2e

35%

7%

43%

10% 5% Energy

Industrial processes

Agriculture

LULUCF

Waste

GHG emission projections 2010-2030

-100

0

100

200

300

400

500

600

2010 2020 2030

Millio

n t

on

ne

s o

f C

O2e

Energy Agriculture LULUCF Total


traditional fuel to CNG and LPG for vehicle). Transportation is another identified sector of priority

for the Vietnam CIC.

Mitigation potential and cost of 27 options10

Option Mitigation Potential

(million tCO2e)

Mitigation Cost

(US$/tCO2e)

Replacing coal with LPG in household cooking 22.0 23.80

Wind Power replacing coal-fired thermal power 14.2 16.20

Switching from coal-fired to LNG thermal power 16.0 15.10

High-efficiency refrigerators 7.3 12.30

Biogas replacing cooking coal in mountain areas 5.2 9.70

Rice paddy field water drainage in South Central

Coast 4.1 7.00

Rice husk power replacing coal thermal power 6.9 6.60

Rice paddy field water drainage in the Red River delta 21.9 5.20

Biogas replacing cooking coal in lowlands 17.4 4.10

Planting short-rotation pulpwood forest 176.0 1.38

Protection and sustainable management of existing

production forest area 904.0 1.36

Planting short-rotation trees for lumber 296.0 0.81

Conservation of existing protection forests 1,153.0 0.77

Planting melaleuca forest on alkaline wetlands 25.0 0.59

Planting long-rotation large timber trees 271.0 0.55

Growing long-rotation non-timber-product forest 117.0 0.48

Reforestation of large timber forests in conjunction with

natural regeneration 80.0 0.38

High-efficiency air conditioner 9.9 -4.40

Innovative bricks / kilns 14.2 -5.10

Solar water-heating appliances 13.9 -6.20

Small-scale hydropower replacing coal thermal power 15.3 -7.20

Energy-saving compact fluorescent light bulbs 23.4 -8.20

MUB cattle feeds 7.9 -10.90

LPG-fuelled cabs 3.3 -11.00

10 Vietnam's second national communication to the United Nations Framework Convention on Climate Change.


Switching from DO to CNG in transportation 2.1 -14.10

Innovative coal stoves 25.3 -17.40

High-efficiency electric motors 15.5 -24.90

Identifying priority sectors is intended to help the CIC develop core expertise and to provide

guidelines for resource allocations over the life of the program. While the Center will primarily

target funding and support to energy efficiency and sustainable agriculture sectors, it will not

neglect other promising and high-impact companies operating in other areas. In the start-up

phase, it is particularly important the CIC remains receptive to a more diverse range of climate

tech solutions to ensure robust deal-flow and demonstrate quick success.

After cross-checking with official government quantitative analysis in the National

Communication to the UNFCCC, infoDev researched low carbon development policies in

Vietnam. The draft Green Growth Strategy, though not yet official, provides a good snapshot of

the country‟s preferences for low carbon development options. The three prongs of the strategy

are: (i) greening production (which includes industrial production and agriculture); (ii) reducing

greenhouse gas emissions, increasing low-carbon technologies (new and renewable energy),

and saving energy; and (iii) greening lifestyles and sustainable consumption. These are

reinforced by the CIC-selected priorities. Furthermore, the draft strategy identifies an immediate

action for the period 2011-2020 which is fully aligned with the CIC mission: to promote research

and development of appropriate green technologies and selective purchase of green

technology patents with anticipated broad applicability and high effectiveness in Vietnam.

The remainder of this section presents the scoring for each prioritized sector. in addition to

outlining key opportunities. The combined score is the average of the expert evaluation and

stakeholder surveys, while the matrix displays the aggregated results of the expert interviews.

Evaluation criteria for priority sectors

Code Evaluation Criteria Description

TR Technology Readiness Potential of the technologies to enter the market in the

near future

MD Market Demand Market pain-point, product subsidies, consumer

orientation, competing technologies, affordability etc.

AF Availability of Funding Near-term fund for R&D, commercialization and

expansion

RS Clear, Ready Stakeholders Stakeholders able to affect the likelihood of adoption of

a given technology


BM Business Model How viable is the business model today? Includes supply

chain, distribution, consumer access.

IR Leverage of Indigenous

Resources

Ability to utilize and/or leverage natural resources and

endowments

EC Entrepreneurial Capacity Existence or ability to develop/recruit talent to make the

technology companies successful

WF Workforce Current or potential workforce capabilities necessary to

commercialize and scale given technology

PO Policy Regulations, incentives and policies impacting a given

technology

EI Economic Impact Impact of a given technology on local economy

including the creation of jobs

GI GHG Impact Impact of a given technology on emission reduction

SI Social Impact Impact on rural areas, specific demographics (e.g.

Women) and base of the pyramid markets

AT Already on Track

MULTIPLIER: There is good traction in the market for these

technologies as barriers are low - therefore further

innovation or intervention is not required

3.2.2 Priority Technology 1: Energy Efficiency

TR MD AF RS BM IR EC WF PO EI GI SI AT

M M H M H L L L L M M L M

Main applications: Lighting, appliances (e.g. cook stoves), metering, HVAC, energy efficient

manufacturing, transmission and distribution, green ICT, building design and materials.

Opportunities in energy efficiency: During the nine-year period from 1998 to 2007, commercial

energy use in Vietnam grew at an average rate of 12.1% per year, while household energy use

grew at 10.7%. Both outpaced the country GDP growth of 7.3% per year. As such, the energy

intensity of Vietnam‟s economy grew from 387 kilograms of oil equivalent (kgoe) per US$1,000 of

GDP in 1998 to 573 kgoe per US$1,000 in 2007 (in constant 2000 prices).

(H) High (M) Medium (L) Low

Combined Score: 3.39/5.0


Vietnam‟s energy demand is expected to triple in the next decade. Satisfying this demand is a

daunting task since Vietnam has already been importing coal and oil for its energy needs in

recent years. According to a World Bank report on energy efficiency in Vietnam in 201011, if

Vietnam took further advantage energy efficient technologies, it could meet a significant

portion (20%-30%) of business as usual energy demand at about 25% of the cost for developing

additional energy supply.

The CIC is being established at an important time to help drive energy efficiency technology

and business opportunities in Vietnam. In 2006, the government put in place the first

comprehensive national program for energy efficiency (Vietnam‟s National Energy – Efficiency

Program or VNEEP) with the support of the Netherlands government, EU, SIDA and UNDP. The

2006-2010 phase of the program has done considerable work in research (notably, an energy

use survey of 500 large scale industrial enterprises), capacity building, awareness raising and

formulating the Law on Energy Conservation and Efficient Use.

The Law on Energy Conservation and Efficient Use was adopted by the 12th National Assembly

on June 17th 2010. The law requires intensive energy consumers (energy intensive enterprises,

public constructions, transportation establishments, groups that use government funds, e.g.

office buildings, road lighting, and public lighting) to conduct energy audits and prepare

specific action plans to increase energy efficiency. The plan must also cover implementation

management and compliance with reporting requirements. Residential entities and SMEs are

encouraged but not required to implement these practices.

The Law on Energy Conservation and Efficient Use also requires labeling products in terms of

energy efficiency to educate the market, encourage consumption of energy efficient products,

and gradually eliminate their energy intensive counterparts. This could be done on a voluntary

labeling of electronic appliances up to July 1st 2011, after which the labeling was made

mandatory. The deadline for industrial equipments (electric motors, small and medium-sized

boilers, three-phase transformers, etc) was January 1st 2012; for construction materials such as

insulation, glass, windows, roofing, sheeting materials, it will be on January 1st 2015.

These legal requirements signal an upcoming surge in market demand for energy efficiency

products and technologies in Vietnam, bolstered by escalating energy demand and costs.

Responding to this market development poses certain challenges due to the necessary level of

technical specialization and complexity. Vietnam will need not only reliable and affordable

11 World Bank - Asia Sustainable and Alternative Energy Program – Vietnam Expanding Opportunities for Energy Efficiency

March 2010


energy efficiency services and products, but also qualified energy auditors and energy service

companies (ESCOs). Considerable innovation and ingenuity will be needed to develop new

products/services for Vietnam or to introduce and customize existing products/services from the

international market. The CIC can provide effective technological support by leveraging its

expert network and its experience from other CICs in developing countries, such as India and

South Africa, which are moving ahead with energy efficiency efforts.

Energy efficiency presents good opportunities for the CIC to make a significant economic

impact. As mentioned in the table of emissions mitigation potential (page 23), most of these

technologies have a negative cost; that is, they can be profitable versus business as usual.

Among the five prioritized sectors, energy efficiency is considered the most private sector ready,

with a significant number of new companies, initiatives and innovators. In the course of

designing the Vietnam CIC, the infoDev team has met with multiple SMEs and entrepreneurs in

this sector: energy efficiency centers, private ESCO companies, Vietnam Green Building

Council, green architecture club, energy auditor, manufacturers and innovators of energy

efficient products (LED lighting, ventilation, building materials, industrial boilers, transmission,

telecommunication, etc.). The three common challenges faced by stakeholders in this sector

are a) difficulty in obtaining loans, or prohibitively high interest rates b) weak implementation of

government policy supporting their products12, and c) consumer hesitance to spend the upfront

cost for a new product that promises to save cost in the long run.

These issues can also be addressed by CIC service offerings. Difficulty in access to lending is

common to all climate technology sectors; Vietnam‟s commercial lending rate is extremely high,

reaching 18%-24% in the last two years as a result of government policy to contain inflation.

Access to loans is further complicated for climate technology businesses as banks are often

unfamiliar with their business models. The CIC can help with providing technical due diligence

training to banks, offering credit guarantees, or facilitating access to more favorable loans from

overseas. To strengthen the implementation and realization of government support policies, the

CIC can provide technical advisory to the corresponding ministries and agencies. To address

customer unfamiliarity and resistance to upfront cost, the CIC can initiate customer awareness

raising programs, subsidize technology pilots in test markets, or work with the government and

donors to establish end-user financing programs.

12 Example: Despite the general policy for favorable treatment for import of efficient lighting product components, the

custom import code does not yet have specific code for efficient lighting,. As a result, these components are still taxed

as normal lighting.


Energy efficiency is also a sector that has good potential to generate carbon credits for CDM or

future carbon markets, as more and more methodologies to calculate emission reduction for

energy efficiency projects are approved by the UNFCC CDM Executive board. The sector also

attracts attention from many of Vietnam‟s development partners; by June 2010, multilateral

development banks committed USD 40 million and the Climate Technology Fund committed

USD 50 million for industry energy efficiency in Vietnam13. This can engender support for CIC

investment efforts, particularly those targeted at the sector‟s chronic challenges of low

electricity price and fossil fuel subsidies.

The average electricity tariff was estimated to be USD .07/kWh in 2010, which is below the ASEAN

regional average of USD 0.10/kWh. To become financially sustainable, an estimated increase of

power tariffs above inflation by 15-30% of the current price will be needed. Low power tariffs act

as a disincentive for users to invest in more efficient energy technology. International Energy

Agency estimates that (indirect) fossil fuel consumption subsidies in Vietnam in 2007, 2008, 2009

and 2010 were USD 2.1, 3.56, 1.2 and 2.93 billion respectively, and were allocated especially to

electricity, i.e. fluctuating between about 1 and 4 percent of GDP in current USD. These

challenges are of macroeconomic nature and not within the capacity of CIC to tackle.

There are nevertheless signs of improvement, notably the country‟s road map to a more

competitive electricity market. Currently, the market is monopolized by the state company EVN;

the government has given EVN permission to gradually increase the electricity price. The CIC

can help its investee companies to prepare for entry into a more open market.

3.2.2 Priority Technology 2: Sustainable agribusiness

Main applications: new resilient crops and seeds, fertilizers and compost, water/energy efficient

machinery and equipment, water/energy efficient irrigation systems, climate friendly/energy

efficient food processing, bio-pesticides, waste management, waste-to-energy. livestock and

byproduct management, afforestation and sustainable land use practices.

13 Update on CTF investment plan for Vietnam, 2011


M H M M L L L L L H H L M



Opportunities in sustainable agriculture: 70% of the Vietnamese population works in agriculture

and 25% of its export revenue comes from agriculture; thus, the negative impacts of climate

change on agriculture will have a sizable and widespread impact on the country. By prioritizing

sustainable agriculture, the CIC will likely create significant impacts in terms of job creation,

reduced vulnerability, and improved livelihoods.

The Mekong delta, the food basket of the country, is ranked as one the three river deltas most

vulnerable to sea level rise (alongside Egypt‟s Nile and India‟s Ganges deltas). The Mekong delta

already suffers from saline intrusion making water unsuitable for agriculture and drinking at

certain times of the year. During high tide, saline intrusion can be found 200 km upstream. In one

extreme climate change scenario, it is estimated that as much as 40% of the Mekong delta

could be lost underwater.

Different scenarios project that the annual average temperature in Vietnam will increase 2-3OC

by 2100. In all scenarios, the evapotranspiration rate of crops will increase significantly, resulting

in a two- to threefold increase in agricultural water demand in 2100 compared to 2000. This will

be compounded by a projected decrease in dry season rainfall and increased saline intrusion

from rising sea levels. This triple change poses a serious risk of severe water shortage and

threatens Vietnam‟s food security.

The government has put in place programs oriented toward a more “climate smart” agriculture.

In 2008, the Ministry of Agriculture issued the Action Plan Framework for Adaptation to Climate

Chang in the Agriculture and Rural Development Sector Period 2008-2020. This framework set out

preliminary steps for research, communication awareness raising, strengthening international

support, allocating human resources and importantly, developing a policy system and integrate

climate change in all development programs for the sector. In March 2011, the Ministry

announced its “Action Plan on climate change response of agriculture and rural development

sector in the period 2011-2015 and vision to 2050” in which it outlines activities and expected

output for each sub sector (agriculture, forestry, fishery, water resource management, salt

production and rural development) to facilitate climate change adaptation and mitigation.

Each subsector has been tasked to develop further programs along these outlines.

In Vietnam, many of the technology subsectors in Sustainable Agriculture are managed and

operated by the state. These include crop breeding, fertilizers, and irrigation. New resilient

breeds are researched and introduced by state research institutes, though major international

crop research companies such as Monsanto or Croplife are also present in Vietnam. Fertilizer


manufacturing is invested and run by state companies, most notably the Vietnam Chemical

Corporation (VinaChem) and Petro Vietnam. Irrigation infrastructure is developed and

managed by the state, while irrigation schemes and schedules are managed by local

authorities. Promoting climate innovation in these subsectors means collaborating with state

research centers to introduce climate resilient products. More importantly, the Vietnam CIC can

facilitate the integration of SMEs along the supply chain of these subsectors (such as in logistics,

services, and after- sale). In these state-dominated subsectors, there remain some promising

niche segments for SMEs, such as organic fertilizers, compost, small scale drip irrigation, and site

specific fertilizer/nutrition management. Although there have been fertilizer/nutrition

management pilots between farmers and scientists in the North and the Mekong delta, current

fertilizing practice sill relies heavily on farmers‟ anecdotal experience. Companies providing

services in nutrient monitoring and site specific nutrient applications would benefit from this

current market gap.

Sustainable agriculture subsectors with a relatively more established presence of SMEs include

food processing, agro-forestry, organic vegetable, fair trade agricultural products, and livestock

waste management (biogas). During the infoDev team‟s discussion with a number of these

businesses, their challenges were revealed to be as follows: a) difficulties in getting certification

(either organic or fair trade certification) and internal quality control, due to the fragmented

supply base, b) lack of market information and technical training, and c) difficulties in access to

loans. The CIC can support these subsectors by providing technical training, facilitating

certification, and connecting them to international markets.

Since agriculture is one of the largest contributors of greenhouse gas emission in Vietnam, this

sector presents opportunities for the Vietnam CIC to achieve results in emission savings. In

November 2011, the Ministry of Agriculture and Rural Development approved the Ministry‟s

Proposal to Reduce Green House Gas Emission in Agricultural sector. The proposal lists mitigation

measures14 to be implemented throughout the sector and estimates CO2 savings from each

measure. The approval of this proposal means that the Ministry will allocate funding (including

international climate change finance) and other resources to implement these measures,

thereby stimulating demand for climate smart agribusiness. Working closely with the Ministry of

Agriculture and Rural Development will enable the Vietnam CIC to capitalize on this opportunity.

14 These measures include changing feed for 30% of livestock, providing 190,000 Molasses Urea Block as feed for dairy

cows, planting 2.6 million hectare of forest, increasing energy efficiency in irrigation, reducing emission in fishing fleet,

and switching household fuel from coal and wood to more sustainable fuels such as biomass and biogas


3.2.3 Other Technology Areas:

Technologies for adaptation


H M L M M M L M L H M H H

Main applications: Green houses/shade materials, Waste harvesting & storage, Irrigation &

distribution technologies, Afforestation products, Weather services (warning systems, insurance),

Disaster prevention, Biodiversity and agriculture, Health care, Integrated coastal management,

Transportation and construction.

Opportunities in Technologies for adaptation: Vietnam‟s government has indicated in the

National Strategy on Climate Change that adaptation should take precedence over mitigation

in the near future. Adaptation efforts of the country during this period will focus on the following:

a) monitoring and early warning system for disasters, b) improvement of disaster response and

recovery, and c) food security and water security for all regions. Vietnam experiences significant

losses every year to natural disasters, especially tropical typhoons and flooding. The country

knows the extreme costs of increasing frequency of extreme climate events. As such, Vietnam is

prepared to allocate significant budget to adaptation. The country has developed a major plan

to build sea dikes to protect against storm surge and erosion from rising sea levels, as well as

irrigation structures to prevent saline intrusion. Vietnam is actively seeking international support

for these massive infrastructure undertakings.

In the 2011 yearend review of the National Target Program in Response to Climate Change, the

National Steering Committee of the Program, headed by the Prime Minister, issued the following

instructions to relevant ministries: a) rapidly finish projects to prevent flooding in five vulnerable

cities (Ho Chi Minh, Hai Phong, Can Tho, Ca Mau and Vinh Long), b) finish the irrigation planning

for the Mekong Delta with financial and technical support from the Netherlands, c) develop

plans to relocate people from areas at extreme risk of sea level rise, and d) complete the Green

Growth Strategy of Vietnam. The CIC can support technology transfer in this area and help SMEs

to leverage private sector resource. For example, it can support SMEs in construction to build

expertise and experience as sub-contractors in large adaptation infrastructure projects. Water

resources planning, weather modeling, and crop/fishing insurance all require complex technical



or financial skills which the CIC can help provide to research institute and private consulting

companies.

Interviews with several enterprises and entrepreneurs involved in climate change adaptation,

particularly disaster response, revealed their most pressing challenge: the lack of real market

demand for adaptation products and services and thus the need to rely on government

purchasing. For example, one entrepreneur piloted a vehicle that can quickly clear paths of

forests to contain forest fires. He subsequently found out that there are few clients willing to

purchase his product, beyond a number of state national parks. He notes that institutions are

unwilling to set aside a budget for such new products, although some are likely to do so in the

event of a major forest fire. Another entrepreneur sells low cost mobile houses (similar to trailer

homes) for flooding adaptation. Demand for his products spikes after large flooding events, but

it this demand is primarily from the government and his company does not have the

manufacturing capacity to fulfill these orders at short notice. Many households in frequently

flooded areas cannot secure mortgage loans to purchase his products, because banks do not

consider his mobile houses as real estate property. For the above cases, the Vietnam CIC can

help with demonstrating these products to the right audiences (government and donor

institutions) and advocating for disaster readiness financing.

Transportation technologies


M H M M L L L L L H H L M

Main applications:, Alternate fuel and electric vehicles, bicycles and motorbikes (bio-

diesel/ethanol, batteries, energy efficiency, fuel cells), advanced materials, recycling/green

supply chain, public transportation, urban planning and related infrastructure.

Opportunities in transportation technologies: Vietnam‟s growth in transportation and its related

emissions are reflected in the steadily increasing number of registered vehicles - 15-25% a year

since the mid 1990s. Registered vehicles in Vietnam grew from 9 million in 2001 to 17 million in

2005, over 23 million in early 2008, and over 28 million in mid 2009.

As of 2007, transportation accounted for 25% of final energy consumption in Vietnam. Use of

transport fuel grew from 3.6 million ton of oil equivalent (toe) in 1998 to 7.9 million toe in 2007. A



little over half of fuel use was diesel oil, while gasoline accounted for about 39%, and jet fuel and

fuel oil combined accounted for about 7%.

Vietnam is a densely populated country with close to 90 million inhabitants. Congestion is

chronic in cities; gasoline prices increased by 30% in the last 3 years. According to the

Environmental Performance Index report in 2011 by Yale and Columbia University, Vietnam ranks

among the top ten countries with the most polluted air. The Vietnam Environmental

Administration estimated that 70% of air pollution in Vietnamese cities is caused by vehicle

exhausts.

Mass transit, alternative fuels and electric vehicles are needed in Vietnam to facilitate trade,

improve quality of life and alleviate pollution. Both Hanoi and Ho Chi Minh City, the two largest

cities, have a large and frequently running bus fleet. Both cities have planned for years to

develop underground transport, but these massive investment projects are yet to be initiated. As

part of a Nationally Appropriate Mitigation Action (NAMA) pilot for the transport sector, the

Japanese government is helping Ho Chi Minh City to reduce emissions from public transport by

retrofitting buses and modifying bus routes.

Petro Vietnam, the state petroleum company, has built 3 large cassava ethanol plants in the

north, south and center of the country, one of which has already begun operations. Petro

Vietnam started selling E5 gasoline (gasoline with 5% ethanol) in August 2010. Offtake has been

slow, with only 140 gas stations throughout the country offering E5 at present. Petro Vietnam is

asking for a government price subsidy to make E5 competitive with traditional gasoline. There is

also concern that the full-scale operation of the three power plants will cause a shortage of

cassava in the country, which will in turn drive up livestock feed price and cause other

environmental problems related to land use. Since late 2011, there have been many incidents of

spontaneous vehicle fires caused by low quality gasoline. This has further hindered consumer

adoption of E5 gasoline.

Though climate technologies in transportation are being gradually introduced in Vietnam, many

market and policy barriers remain. Opportunities being taken up by SMEs in transportation are

vehicle retrofit, environmental friendly vehicle components and parts, biodiesel from waste

vegetable or fish waste. The Vietnam CIC can liaise between the private sector and different

government departments, aggregating issues at the industry level and advocating for policy

changes to address the most important barriers. For example, one small business assembling

electric vehicles for city use currently can sell only to golf courses, resorts and airports because


there is no license for four wheel electric cars to be operated on public roads. The CIC can assist

with piloting, demonstrating, facilitating policy changes and implementing standardization to

accelerate the adoption of electric vehicles.

Water management and purification


L L L M M M L M L H L L L

Main applications: Waste Water Treatment, Potable water, Water Use Efficiency, Waste Water

Recycling, Desalination, Rain water harvesting, Efficient Irrigation.

Opportunities in water management and purification: In all water basins of Vietnam, the

projected impacts due to climate change are a) increased flow in wet season, resulting in

greater flooding risk, and b) decreased flow in dry season, increasing the frequency of drought

and severity of saline intrusion. Negative impacts from drought and saline intrusion already have

been observed in the drinking water supply, notably in the central highland and the Mekong

delta.

In the Mekong river delta, over 2,500,000 hectares will have over 1% salinity concentration by

2050. Increased flooding projected in the mid-21st century will inundate over 3,500,000

hectare, or nearly 90% of the Vietnamese Mekong delta.

In Dong Nai River Basin (home to Ho Chi Minh City and surrounding industrial provinces) the

water flow decreases significantly with the impact of rising sea level. It is estimated by the end

of the 21st century, up to 300,000 ha downstream will be flooded and saltwater

encroachment will come more than 10 km inland. These impacts will profoundly affect the

economic engine of the country - Ho Chi Minh City and surrounding provinces.

In Red-Thai Binh River Delta in the north, saltwater intrusion into land ranges from 3 to 9 km by

2100. Upstream floods will be more severe. The flood peak of 1% chance will increases to 8% -

10% chance in 2050 and possibly up to 11% - 25% chance by 2100. This greatly affects the

safety of all upstream reservoir systems and nearly 2700 km of dike system protecting the

whole delta.

Thu Bon and Ba Rivers in the centre are already under strong pressure from water exploitation

and growing density of hydroelectric power plants. With the onset of climate change,

conflicts between water users grows more intense and water shortage downstream will occur



more frequently in the dry season. Salinity intrusion is threatening downstream plains with

deeper saltwater encroachment (about 3 km from the sea in Ba river catchment and possibly

up to 8 km in some branches of Thu Bon River in 2100).

Given these threats to water resources across multiple regions of Vietnam, there is an urgent

need for technologies and innovation in water management and water purification to meet

irrigation and drinking demands. Though irrigation is still much a state-managed operation,

domestic water supply has been picked up by the private sector. In recent years, there has

been much privatization of state water companies. Some private companies have invested in

building brand new water supply systems for rural towns. In the Mekong delta, there are a good

number of village-scale water supply systems built and operated by local communities, or built

by the government and operated by the community. Technologies and innovative business

models are still needed for these private/community water supply systems in order for them

provide better quality water, to become more efficient and affordable, and to serve more of

the rural poor.

As salinization renders more surface and groundwater undrinkable, many rural households are

paying for potable drinking water at price about 10-15 US cents per liter. Potable drinking water

is made available through a large number of small businesses in water purification and logistics.

In this fragmented market, opportunities exist for ingenious solutions for on-site and pro-poor

water purification and desalinization.

Water management and purification do not have obvious emission reduction benefits, yet they

are significant for climate adaptation and development. Choosing this sector is a way for the

CIC to strike a balance between mitigation and adaptation, given the importance of

adaptation to a climate-vulnerable country like Vietnam.

3.3 Stakeholder Analysis

Through its stakeholder engagement process, infoDev conducted a landscape analysis of the

climate innovation stakeholders in Vietnam across the climate innovation value chain and in the

five priority technologies. We found a significant number of institutions already working on these

sectors. The CIC will engage collaboratively and take advantage of existing efforts, knowledge

and synergies, rather than to offset or compete with existing activities. The following section

outlines in detail the current climate technology stakeholder landscape in Vietnam, including:


R&D

Government

Universities

Business Incubation

Industry – Large

Industry –

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