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Traditional
coal kiln in the village of Bat Trang, Vietnam: inefficient and highly pollutant.
(Photo: UNDP) |
Small
and medium enterprises are a critical part of the rapidly growing Vietnamese economy. However, their inefficient use of energy
not only narrows profit margins, but also contributes to Viet Nam’s swift increase in CO2 emissions. To help green these businesses,
with funding from the Global Environment Facility, UNDP and the Government of Viet Nam are helping raise awareness among managers,
also providing technical and financial support to install energy-efficient technologies. The initiative promotes energy conservation
in five key sectors: brick, ceramics, textiles, paper production and food processing.
“Currently, small and medium
enterprises are becoming the driving force of the economy and contribute greatly to job creation,” said John Hendra, UN Resident
Coordinator and UNDP Resident Representative in Viet Nam. “But the predominant use of out–of-date equipment, lack of awareness
and inadequate financing options for investment hamper the production process – and the environment. This is why this initiative
comes at a crucial time.”
In the past four years the project has supported more than 400 businesses, resulting
in cumulative energy savings of 156 ktoe (kilo tons oil equivalent) in the five priority sectors. This means that the use
of energy-efficient technologies also increased the profits of participating businesses – through direct energy savings (four
to 60 percent reduction in energy cost per unit production) and by increasing the products’ quality, especially for the bricks
and ceramics sector, with the use of more modern kilns.
The project’s success is directly related to alliances with
the government and financial institutions. In partnership with key ministries, the goal is to establish a financial and tax
incentive schemes for small and medium enterprises using energy-efficient technologies, as well as a labeling mechanism to
motivate the adoption of energy-efficient measures.
Reducing risks
Part of the goals has already
been met. The project encompasses a Loan Guarantee Fund to reduce the risks encountered by the financial institutions providing
loans to small and medium enterprises for energy-efficiency investments. In case of default, the Fund is used to protect up
to 75 percent of loans (in some exceptional cases, even 100 percent of the loan), which significantly reduces the financing
institution’s risk, further encouraging loans to small and medium enterprises. To date, such guarantee Funds have given out
$2.13 million in loans—more than 70 percent of all loans granted for these Energy Conservation projects and nearly half of
all loans given out to small and medium enterprises.
Thanks to the Project’s support, Am Nhan from the Bat Trang
village replaced two traditional coal kilns with a liquefied petroleum gas kiln. She invested VND 900 million ($56,250) in
her ceramics production, of which half was self-financed and the other half was borrowed from the Viet Nam Environment Protection
Fund. As a result of the kiln improvements, Am Nhan’s production increased, her revenue more than doubled and the energy
use per unit of production was cut by half.
By the end of 2011, the project aims to cover 500 small and medium
enterprises, contributing to a cumulative reduction of CO2 emissions in 700 kilotons, with a cumulative amount of saved energy
equivalent to 160 kilotons of oil.
