Macroeconomic Reforms/ Green Growth Programme in Viet Nam
Title: Macroeconomic Reforms/ Green Growth
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Socialist Republic of Viet Nam
Lead executing agency: Ministry of Planning and Investment (MPI)
Overall term: 2014 to 2018
Since it introduced comprehensive policy reforms in 1990, Viet Nam has developed rapidly and achieved impressive economic growth, to the point that it is now classified as a lower middle-income country. This growth entailed the extensive use of labour, natural resources and capital. To maintain the same level of growth in the future, the country must now increase the productivity of these different factors. It must also improve the quality of that growth by mitigating its negative impacts on the environment and the climate.
In 2013, Viet Nam adopted the National Green Growth Strategy to address the inherent challenges of its macroeconomic situation, and to make its economic growth more sustainable. However, the strategy is hindered by the absence of a common understanding within the Vietnamese Government of what green growth means. Government bodies also lack the relevant knowledge and capacities to develop and implement effective policies that would accommodate the needs for environmental protection and for the environmentally and socially responsible use of resources. Other difficulties include a shortage of financing for green investments, which often involve huge capital requirements, long payback periods and high levels of risk.
Guided by the National Green Growth Strategy, the Government of Viet Nam is conducting measures that foster an ecologically and socially sound growth process.
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 to deliver advisory services to a number of government institutions. Activities include an analysis of the regulatory framework affecting economic reforms, with a view to adapting them to the latest developments in policy orientation. The programme is assisting the different bodies to overhaul the processes and instruments they use, and it provides in-service training for their staff, in order to secure the long-term implementation of the reforms. At the same time, as a way of fostering a common understanding of the relevant concepts among the institutions involved, the programme organises a wide range of study trips, international exchanges, peer learning and training measures, examining aspects of green growth in Germany and Viet Nam.
These services are directed at institutions responsible for key areas of the economic reforms, including the Ministry of Planning and Investment, the Central Institute for Economic Management, the Ministry of Finance, the State Securities Commission and the State Bank of Viet Nam. Accordingly, the programme is divided into the following components.
- Strengthening advisory capacity on green growth issues: The programme provides a range of capacity building measures to assist the Central Institute for Economic Management in providing appropriate advice to the government. The measures include policy simulation, environmental impact analyses and stakeholder dialogues.
- Coordination of the National Green Growth Strategy: GIZ is supporting the Ministry of Planning and Investment in its task of coordinating the various government agencies involved in the Strategy. This includes the development of related legal and administrative instruments and, at the provincial level, training for civil servants and the formulation of green growth action plans.
- Capacity development support to the Ministry of Finance (MoF): On behalf of the EU Delegation to Viet Nam, GIZ is implementing a capacity building support facility as part of the EU’s ‘Public Financial Modernization Project’. By providing technical assistance to the MoF, the project aims to improve transparency, accountability and efficiency in public financial management (good financial governance). Strengthening the institutional and operational capacities of the Ministry should contribute to the alleviation of poverty in Viet Nam, while reinforcing the country’s macroeconomic stability and resilience to external shocks, and strengthening the government’s ability to implement its economic and social policies.
- Green fiscal policy reform: The programme provides targeted advisory services to the MoF on fiscal policy reforms to facilitate Viet Nam’s economic transformation to green and sustainable growth. This includes support for the development of a national action plan, the analysis of budget process 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.
- Green financial sector reform: In this component, GIZ works with the State Bank of Vietnam (the country’s central bank) and with commercial banks, the State Securities Commission and the stock exchanges. Through various training measures and support for the development of innovative green investment instruments, the programme is promoting environmentally and socially sustainable reforms to the financial system – above all green banking and green capital markets.
- Human capacity development (HCD): HCD measures enable the partner organisations and other key stakeholders to implement their reforms sustainably. Experts and managers from all the relevant institutions participate in training measures in Viet Nam and abroad. This equips them with professional and personal competences, and with the management and leadership skills needed to initiate sustainable changes in their institutions. To foster a common understanding of green growth concepts, the HCD component also includes the long-term ‘Young Fellows Programme’ on the green economy. This is planned and implemented by a consortium of international consulting firms headed by IP CONSULT. It offers experts and management staff the chance to attend residential courses of varying duration in Berlin as well as workshops in Viet Nam. Moreover, an e-learning course for experts is also being planned.
- The ecological tax rate has been substantially increased, thereby raising the price of fossil fuels.
- In June 2015, the newly amended State Budget Law was approved by the National Assembly. This reflects international practices and establishes a legal framework that will strengthen the transparency, accountability and efficiency of public financial management.
- The governor of the State Bank of Vietnam has approved a new policy for the promotion of green credit, and to introduce social and environmental risk assessments in the lending activities of the banking sector.
- A banking sector action plan was issued in August 2015 to underpin the implementation the National Green Growth Strategy.
- Around 40 executives and managers from relevant government institutions took part in three training events in 2015, in Germany and Viet Nam. They acquired advanced and inter-connected knowledge and developed their competences in the field of green growth.