For every 1 per cent increase in growth under the current model, it’s been calculated, the damage caused by environmental pollution costs 3 per cent. Meanwhile, according to the State Bank of Vietnam (SBV) this year’s total credit as at June is estimated at $157.5 billion. So where do banks stand in terms of assisting “green growth”?

Environmental protection is mentioned in the Constitution of 1992 and was further emphasized in Resolution No. 51/2001 from the 10th session of National Assembly (NA) X. In December 2005 the NA enacted the Law on Environmental Protection, then the Law on Environmental Protection 2014 at the 7th session of NA XIII, which came into effect on January 1 this year. 

One step forward, two back 

The question then, is why growth is still sluggish because of environmental pollution when environmental protection has been paid attention since 1992. 

At the “Green Growth Solutions” workshop held on September 9 the Central Economic Committee said that economic growth changes the environment. 

It also provided some worrisome figures. Every year approximately 9,000 people die due to dirty water and poor sanitary conditions and tens of thousands will suffer from respiratory and digestive ailments caused by inhaling pollutants. 

The number of cancer cases from exposure to contaminated waste stand at about 150,000 people a year and increases annually.

 

“Sources of funding from the State budget for green growth are limited and no specific instructions are in place, while the mobilization of financial resources from other channels is difficult. MPI and MoF should urgently introduce guidelines and a policy framework to allocate and manage the State budget and serve green growth.”
 

 

Dr. Nguyen Huy Hoan, Department of Science and Technology, Ministry of Industry and Trade 

In certain economic centers in Vietnam, such as Ho Chi Minh City, Hanoi, Dong Nai, and Hai Phong, the proportion of people suffering from respiratory illnesses is four to five times higher than in northern mountainous provinces such as Bac Kan and Dien Bien. A survey conducted in Phu Tho and Nam Dinh provinces sh

owed that the cost of treating respiratory diseases due to air pollution is around $14 per person per year while the figure in Hanoi is $27. 

“In ten years, if GDP doubles and inadequate attention is paid to environmental protection, pollution will increase three-fold and four or five-fold by 2025 compared with now,” the Central Economic Committee’s report stated. 

Sources of money

According to Ms. Pham Hoang Mai, Head of the Department of Sciences, Education and Environment at the Ministry of Planning and Investment (MPI), under Decision No. 403 on the National Plan for Green Growth in the 2014-2020 Period, Vietnam now needs $10.8 billion for 177 programs and 36 activities and this will increase to $30 million by 2020. 

Government investment in programs and projects to address climate change, including green growth, has been only $1 billion a year in recent times. 

Finding financial resources for green growth strategies in 2020, Ms. Mai said, therefore represents a major challenge as 70 per cent of the total capital must come from the sector.

 

“Preferential credit from the Vietnam Environmental Protection Fund (VEPF) of the Ministry of Natural Resources and Environment features lower interest rates and interest rate support for projects aimed at environmental protection and climate change adaptation.
 

 

Vietnam Environmental Protection Fund

 

Under Decision No. 403, the Prime Minister asked the SBV and the Ministry of Finance (MoF) to perfect and strengthen the credit operations at commercial banks to serve green growth, at the same time reviewing and adjusting credit in line with growth objectives. 

It is also necessary to create and develop banking and finance services to support enterprises to implement green growth. 

To attract capital from the private sector for green growth, Ms. Mai said, it is necessary to diversify possible channels, such as FDI, securities, and re-lending by the State and commercial banks. 

Part of a banking sector’s role is to provide credit to green growth projects. Environmental experts believe that given credit to the economy reached $157.5 billion as at June this year, commercial banks can do more, for example including environmental protection criteria in decisions on lending.

Banks and green credit

Environmental issues are not new but only in March this year did the SBV issue Directive No. 03, where its sets out three requests. 

The first is that the banking sector focus on providing credit to enterprises to support them in developing green growth. 

Credit institutions are also to review and implement environmental and social risk management when evaluating borrowers. 

The second is that credit institutions cut lending rates to assist businesses, especially those applying high technology. And the third is adjusting interest rates and loan conditions to encourage large-scale production models and high-tech applications in agriculture. 

The first is viewed by the SBV as being the most important, as banks face the risk of bad debts from lending to projects that cause environmental pollution. The Van Loi Steel Co. is the latest in a long list of examples. 

At the end of 2014, local people in An Hong commune, An Duong district in northern Hai Phong city, erected barricades to prevent the transfer of materials from an iron factory to its steel factory, which created delays to the company’s operations. 

Local residents took the action after the surrounding area became seriously polluted. Notably, Van Loi Steel has investment capital of VND1.7 trillion ($76.5 million) but loans from banks of more VND1 trillion ($45 million). 

According to the SBV’s Credit Department, in 2012 it worked with the International Finance Corporation (IFC) to conduct a survey on the environmental and social management situation. 

Results showed that most credit institutions did not implement green credit policies, except for some foreign banks. 

Mr. Nguyen Tien Dong, Director of the Credit Department, said that as financial intermediaries the banking system is an important link in investment decisions for socioeconomic development. 

“The implementation of solutions would therefore help credit to flow into green and environmentally-friendly projects,” he said. 

VN Economic Times