Macroeconomic Reforms/Green Growth Programme in Viet Nam

Context

Since the comprehensive policy reforms in 1990, Viet Nam has developed rapidly and achieved impressive economic growth, reaching the status of a lower middle-income country. This growth entailed the extensive use of labour, natural resources and capital. In order to maintain high growth rates in the future, the country faces the challenge of increasing its productivity and improving the quality of growth by mitigating its negative impacts on the environment. 

In 2012, Viet Nam adopted the Vietnam Green Growth Strategy to address some of those challenges and to make its economic growth more sustainable. However, the progress in the implementation of the strategy is hampered by insufficient policy coherence and the lack of capacities to enforce policies addressing environmental protection and environmentally and socially responsible use of resources. The low availability of financing for green investments is a further obstacle in the implementation of the VGGS. Fiscal (eco tax, environmental protection charges) as well as financial and capital market instruments (green bonds, green credits, green index) are limited. 

Objective

Guided by the Viet Nam Green Growth Strategy, the Government of Viet Nam is conducting measures that foster an ecologically and socially sound growth process.

Approach

GIZ is implementing this programme on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), and for the European Union (EU) as a co-financer.

To achieve its objective, the programme deploys international and national experts foradvisory services to a number of government institutions. The programme supports the Government of Viet Nam in (i) reforming its regulatory framework, (ii) introducing new policy instruments and (iii) capacity-building, enabling the country to transition to an environmentally and socially sustainable market economy.

These services are directed at institutions responsible for key areas of the economic reforms, including the Ministry of Planning and Investment (MPI), the Central Institute for Economic Management (CIEM), the Ministry of Finance (MoF), the State Securities Commission (SSC) and the State Bank of Viet Nam (SBV).The programme is divided into the following areas of intervention:

1.  Strengthening advisory capacity on green growth issues: Support the Central Institute for Economic Management, as a research institute under the MPI, in providing state-of-the art research thereby contributing to strengthening evidence-based policy making. International and local experts provide advisory services  related to economic modelling, policy simulation, environmental impact assessments and stakeholder dialogues.

2.  Coordination of the National Green Growth Strategy: Support to the Ministry of Planning and Investment in coordinating the implementation and the monitoring of the VGGS. This includes the development of related legal and administrative instruments, monitoring and review tools and, at the provincial level, training for civil servants and formulation of green growth action plans.

3.  Green fiscal policy reform: The programme provides targeted advisory services to MoF on fiscal policy reforms to facilitate Viet Nam’s economic transformation to green and sustainable growth. This includes support for the analysis of budget processes from a green-growth perspective, the adjustment of fiscal instruments and incentives for green investments, the levying of taxes to discourage environmentally irresponsible behaviour, and the introduction of green standards for public spending.

4.  Green financial sector reform: GIZ supports the State Bank of Vietnam (the country’s central bank), commercial banks, the State Securities Commission and the stock exchange to mobilize private investment for green growth. Through various training measures and support for the development of innovative green investment instruments, the SBV introduces environmentally and socially sustainable reforms to the financial system – above all green banking and green capital markets.

Results achieved so far 

The major results in the support of the Vietnamese government bythe Macroeconomic Reforms / Green Growth Programme and its predecessor projects since mid-1990s can be divided along three pillars:

Strengthening the regulatory framework:

1. The government of Viet Nam revised its business and investment laws which contributed to gradually liberalising the economy and to an improvement of the business climate.
2. GIZ supported the Ministry of Finance to introduce the first State Budget Law (SBL) in Viet Nam thereby increasing fiscal discipline and budget transparency. 90 million people gained access to state budget information. GIZ continues its support for the secondary legislation guiding the implementation of the SBL to further strengthen y budget transparency and decentralization and to improve medium term economic and financial planning.
3. The environmental protection tax imposed on refined fuels, coal, selected pesticides and plastic bags raises additional funds for the state budget to implement sustainable policies.

Introducing policy instruments:

1. GIZ assists several Vietnamese provinces in the Mekong Delta in analysing options for green growth by developing green growth action plans
2. State Bank of Vietnam introduced a green credit programme providing access to 240 m USD for green investments in Viet Nam. The State Bank also introduced social and environmental risk assessments in the lending activities of the banking sector.
3. The Ho Chi Minh Stock Exchange launched the first Green Index (Vietnam Sustainability Index) tracking sustainability performance of 20 listed companies in Vietnam, expected to become an important driver of sustainable investment and corporate sustainable development in Vietnam.

Building capacity:

• More than 200 policy makers from a plethora of Vietnamese government agencies increased their knowledge and capacity in the area of green economy through targeted trainings and practical transfer projects in Viet Nam and Germany.
• More than 4000 officials from 11 provinces have been trained in State Budget Law and its implementation guiding regulations