Project Development and Investment Finance Sources for the Finnish Companies in Vietnam

Project Development and Investment Finance Sources for the Finnish Companies in Vietnam

MAY 2020

Commissioned by the Embassy of Finland, Vietnam

Overview to the Project and Investment Finance in Vietnam

TABLE OF CONTENT 1. INTRODUCTION ......................................................................................................................... 3 2. FINNISH, NORDIC AND EU FUNDING IN VIETNAM ................................................................... 4 2.1.

Finnish Funding .................................................................................................................. 4

2.2.

Nordic Funding................................................................................................................... 7

2.3.

EU Funding ....................................................................................................................... 10

3. GLOBAL AND REGIONAL FUNDING ......................................................................................... 11 3.1.

The World Bank ............................................................................................................... 12

3.2.

International Finance Corporation (IFC) .......................................................................... 13

3.3.

Asian Development Bank................................................................................................. 14

3.4.

Asian Infrastructure Investment Bank (AIIB) ................................................................... 15

3.5.

InfraCo Asia ...................................................................................................................... 16

3.6.

Green Climate Fund ......................................................................................................... 16

3.7.

Global Green Growth Institute ........................................................................................ 17

4. BILATERAL FUNDING IN VIETNAM .......................................................................................... 18 4.1.

Japanese International Cooperation Agency (JICA)......................................................... 18

4.3.

Denmark .......................................................................................................................... 19

4.4.

Netherlands ..................................................................................................................... 19

4.5.

France .............................................................................................................................. 20

4.6.

Australia ........................................................................................................................... 20

5. PRIVATE INVESTMENTS IN VIETNAM ...................................................................................... 20 5.1.

Investments for the mature companies .......................................................................... 21

5.2.

Investments for the start-up companies ......................................................................... 21

6. RECOMMENDED APPROACH FOR THE FINNISH COMPANIES ................................................ 21 6.1.

Consultant Companies and Research Organisations ....................................................... 21

6.2.

Micro and SMEs ............................................................................................................... 22

6.3.

Large Companies.............................................................................................................. 23

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1. INTRODUCTION Vietnam offers increasingly business and trade opportunities for the Finnish companies. It is one of the fastest growing countries in South East Asia, averaging a GDP growth rate of around 6% for the past two decades.

This publication presents overview for the selected project finance options for the Finnish companies in Vietnam. The focus is in the so called International Financing Institutions (IFIs), such as the World Bank, International Financing Corporation and the Asian Development Bank, but the publication also presents Finnish and Nordic development financing, financing provided by some other countries active in Vietnam and it also lists some of the private equity firms and venture capital which are investing to Vietnam.

Since 2010, Finland’s export to Vietnam has doubled from EUR 65 million to EUR 110 MEUR and imports from Vietnam to Finland has increased from EUR 160 million to EUR 410 million. In addition, Finnish companies has increasingly agents, joint ventures and own subsidiaries in Vietnam. The Ministry for Foreign Affairs of Finland, especially the Embassy of Finland and Business Finland’s office in HCMC have been very active during the past years to promote Finnish and Vietnamese trade and business relations.

This publication was done as a part of the consulting assignment “Facilitating Access to Procurement Opportunities for Finnish Companies in Vietnam” done by Manketti Ltd in 2019 and 2020 to support the Team Finland’s work in Vietnam by the Embassy of Finland (Hanoi) and Business Finland (HCMC).

The publication was done in the close cooperation with the Embassy of Finland. All the options, views are consultant’s and not necessary reflecting the view of the Embassy of Finland or Team Finland. Also, the consultant bears the responsible of possible misinformation or mistakes in this report.

Manketti Ltd wishes that the Finnish companies would use this publication, other available information on IFI financing options as well as services provided by the Team Finland to increase business and trade relations between Finland and Vietnam. The main Team Finland contacts in Vietnam are: Embassy of Finland and Business Finland.

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2. FINNISH, NORDIC AND EU FUNDING IN VIETNAM There are several Finnish, Nordic and EU -funding instruments which the Finnish companies can utilise in the project development, feasibility study preparation and investment phases of their projects in Vietnam. This chapter presents main funding instruments and contact detail to the organisations managing the funding.

2.1.

Finnish Funding

2.1.1. Business Finland Business Finland has several available funding instruments to support Finnish companies market access in Vietnam. Business Finland’s financing instruments are mainly for the project development phase. Below is the description of the main funding and services provided by Business Finland applicable to Vietnam.

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Explorer Product Family. Funding allows to hire or acquire know-how for international market entry, to participate in a foreign trade fair with an SME group or to assemble a group of SMEs for joint export opportunities. https://www.businessfinland.fi/en/for-finnishcustomers/services/funding/explorer Tempo. Funding is intended for Finnish startups, SMEs and mid cap companies aiming for international growth that have the desire and ability to build their expertise and solutions into an international success story in innovative ways. https://www.businessfinland.fi/en/for-finnish-customers/services/funding/tempofunding/ Cooperation between companies and research organizations. Co-Innovation Funding for companies´and research organizations´ joint actions that enable increased business competitiveness and significant new international business. Co-Creation, Funding for preparing joint actions between companies and research organizations. Research to Business Funding for preparation of commercialization of research based ideas. https://www.businessfinland.fi/en/for-finnish-customers/services/funding/cooperationbetween-companies-and-research-organizations/ Growth Engine. To enable collaboration between companies of different sizes, research organizations and public actors to achieve a common concrete business goal; launching a new operator, a platform company to achieve a business goal and the construction of the platform company's business and through it generating extensive networking effects. https://www.businessfinland.fi/en/for-finnish-customers/services/funding/growthengines/ Developing Markets Platform (Service). Developing Markets Platform (previously BEAM Program) helps Finnish companies and their partners develop sustainable business and

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access global funding in developing markets. https://www.businessfinland.fi/en/for-finnishcustomers/services/programs/developing-markets-platform/ Market Opportunties (service). Web –based service presents market opportunities to the companies. Presents several market opportunities from Vietnam in e.g. energy and waste sectors. https://www.marketopportunities.fi/

CONTACT: • https://www.businessfinland.fi/toimipisteet/aasia/vietnam/ 2.1.2. Finnpartnership – for the Preparatory Support The Finnpartnership business partnership programme supports Finnish companies and companies in developing countries in finding new business opportunities and partners. The programme is funded annually with about EUR 4 million from the development cooperation appropriations of the MFA. In 2018 totally 18 Business Partnership Support applications to Vietnam were handled.

Vietnam is also the most registered company in the Matchmaking (MM) services of Finnpartnership.

In 2018 only one of the Vietnamese company used MM services while in 2017 the number of this service user companies was 18.

Two examples of Finnish companies which have managed to export their services/products with Finnpartnership’s services.

• Niemen Tehtaat Ltd, in 2004 the company founded a partnership company in Vietnam that manufactured wooden garden furniture. Niemen Tehtaat received support from Finnpartnership this gave to the company an opportunity to use the needed expert help in the contract negotiations • Watrec Ltd, which supplies biogas plants, is steadily progressing toward the first sale in Vietnam. The Finnpartnership support received in 2015 was used by the company to commission country analyses of potential target countries and identify partners in them.

CONTACT: • www.finnpartnership.fi fp@finnpartnership.fi 2.1.3 Public Sector Investment Facility The Public Sector Investment Facility (PIF) for developing countries has objective to support the public sector investments in developing countries that comply with the sustainable development goals of the UN and utilise Finnish expertise and technology. The predecessor of the PIF instrument, concessional credit / mixed credit instrument was widely used in Vietnam for the 5-20 MEUR project in the waste management, water supply, waste water treatment, electrification, public safety and Manketti Ltd Helsinki, Finland

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cleantech sectors. The PIF instrument is in the process of started to be utilised in Vietnam and some PIF -concept papers have been approved since 2017.

CONTACT: • https://um.fi/public-sector-investment-facility , pif@formin.fi keo-50@formin.fi 2.1.4 Finnfund – for the Private Sector Investments Finnfund grants long-term funding for responsible private business activities in developing countries and countries in transition. Finnfund is a development finance company whose main shareholder is the Finnish State. Finnfund’s funding is for the private company registered in emerging markets, e.g. in Vietnam, which can then use funds to buy Finnish equipment and services. The variation of the size of the financed projects is from 1 MEUR – 20 MEUR. Finnfund makes annually 20-30 new investments worth of 200-250 MEUR. At the end of 2018, Finnfund had investments and commitments in 181 projects in 45 countries, totalling 800 million euros. Finnfund has been actively looking projects in Vietnam. It has invested in some regional funds, e.g. BOPA 1 which also covers Vietnam. Finnfund has one direct investment in Vietnam.

• Australis Aquaculture Vietnam Limited, fishing and aquaculture, Finnfund’s financing: USD 9,500,000, share of Finnfund’s financing: 56%, size of project/financing: USD 17,000,000 2 .

• In 2020, Nafoods Group Joint Stock Company, a fruit production plant in Vietnam, Finnfund’s financing: USD 5 million senior secured loan facility for 6 years.

CONTACT: • https://www.finnfund.fi/ 2.1.5 Finland–IFC Blended Finance for Climate Program GoF and the IFC has set up a joint climate fund in 2017 which is supporting renewable and clean energy solutions and climate projects in developing countries. Finland has channelled a total of EUR 114 million into the Fund, which duration is 25 years. The IFC will also invest its own capital in all of the projects. Similar criteria as for the IFC’s normal investments. The funding is e.g. loans, capital investments and guarantees, no grants. Accepted sectors include energy efficiency, renewable energy, sustainable forestry and land use, meteorology, and water and wastewater solutions. The variation of the size of the financed projects is about 10 MUSD to 100 MUSD and higher. There are currently no investments in Vietnam.

CONTACT: 1 2

https://www.finnfund.fi/en/investing/investments/bopa/ https://www.finnfund.fi/en/investing/investments/australis-aquaculture-vietnam/

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https://um.fi/finland-ifc-blended-finance-for-climate-program

2.1.6 Finnvera - Export Guarantee for the Finnish Supplier Finnvera is the official Export Credit Agency (ECA) of Finland. Its task is to supplement the financial services provided by the private sector. Finnvera gives guarantees against political or commercial risks associated with the financing of exports. Finnvera provides e.g. export guarantees – which is an instrument for covering domestic needs for collateral in exports. By means of an export guarantee, an exporter can acquire pre-delivery or post-delivery financing for working capital from a bank.

Finnvera’s Vietnam country classification: Country Policy C = Restrictive country policy. Special conditions: Risk period less than 2 years: Corporate, bank and sovereign risks case by case. (ILC) recommended. Risk period 2 years or more: Specific financing structure mitigating country or counterparty risks required. Finnvera is one of the key organisations if the PIF financing is arranged.

CONTACT: • www.finnvera.fi , Tel. +358 29 460 2580.

2.2.

Nordic Funding

2.2.1 Nordic Project Fund -NOPEF NOPEF finances feasibility studies related to green growth and sustainable development in a country outside EU/EFTA, for Nordic SMEs. The feasibility studies should contribute to a direct or indirect environmental impact and an increased environmental awareness in the project countries and aim to assess the establishment of long term business operations in the project country. NOPEF’s objective is to strengthen the international competitiveness of Nordic businesses by financing feasibility studies and activities aiming at internationalisation. Totally over 70 small and mediumsized Nordic companies received funding from the Nordic Project Fund (Nopef) in 2018. Nopef is contributing to the internationalisation of Nordic solutions and innovations with upscaling possibilities on global markets. Nopef granted funding totalling EUR 2.3 million to 71 feasibility studies in 2018. These feasibility studies will assess planned Nordic foreign investments totalling of EUR 198 million. The companies that have received grant funding are working with green innovations, climate solutions as well as energy and resource efficiency. The approved projects will be carried out across all continents and in 30 countries. A majority of the projects will be implemented on key Nordic export markets such as the USA, China and India. Several projects in South Asia were approved, including energy-related projects in Vietnam, Indonesia and the Philippines.

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CONTACT: • https://nopef.com , Fabianinkatu 34, 00171 Helsinki, Finland 2.2.2. Nordic Environment Finance Corporation (NEFCO) NEFCO can provide loans or equity to Nordic Small and Medium-Sized Enterprises (SMEs) for green investments in countries outside its core countries of operation. NEFCO’s financing under this scheme is offered to a Nordic company for investments in a subsidiary or an affiliated company that will be established or is already operating in an eligible project country as described below. Typical funded projects could relate to investments in facilities, machinery, equipment or technology needed for production or business development in the project country. The maximum financing per project under NEFCO Global 3 is maximum EUR 5 million. The funding is provided as loans on market terms, but equity investments can also be considered. Nordic small or medium-sized companies can apply funding if they are providing environmentally sustainable products or services with at least three years of operational history and are planning an international investment. NEFCO is currently the only Nordic institution accredited to the GCF. Vietnam is eligible country for NEFCO funding. NEFCO requires borrowers to meet reasonable financial criteria, but the primary focus is on the positive environmental impacts of the project. In addition to the environmental aspects, NEFCO always examines the technical feasibility and financial profitability of all financed projects. In 2018, NEFCO approved globally 21 investments projects, of which 17 in Eastern Europe and 4 globally. 17 projects were from the energy sector, 3 industry and 1 other sector. One project was in November 2018, convertible loan for Loudspring Oyj for a maximum amount of EUR 2.5 million, for the growth of pre-approved Loudspring Oyj portfolio companies. Funding used e.g. for the energy efficiency project in China.

CONTACT: • https://www.nefco.org/ info@nefco.fi , Fabianinkatu 34, 00171 Helsinki, Finland 2.2.3. Nordic Development Fund (NDF) NDF finances projects usually in cooperation with bilateral, multilateral and other development institutions. The operations mirror the Nordic countries’ priorities in the areas of climate change and development. NDF flexibly uses grants, loans, equity and any combination of these as financing instruments. NDF’s capital is provided from the development cooperation budgets of the five Nordic

3 http://www.nefco.org/work-us/our-services/loans-and-equity/nefco-global-facility

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countries. The original subscribed and paid-in capital by the Nordic countries is equivalent to approximately EUR 1 billion.

CONTACT • www.ndf.fi , info.ndf@ndf.fi , Tel: +358 10 618 002 2.2.4. Nordic Climate Fund NCF provides grants for facilitating the testing of innovative climate change concepts and thereby reducing financial barriers and risks for their implementation. NCF can provide financing between EUR 250,000 and 500,000. NCF is financed and administered by the Nordic Development Fund.

Examples of two NCF/NDF financed (non-Finnish) projects in Vietnam • NCF7: Reducing the negative impact of flooding on the Vietnamese society in Vietnam started in 2018 for 24 months. NCF grant 499 390 €. Danish Cold A/S has developed an innovative and much more effective alternative to the traditional use of sandbags. The system is easy to handle and quick to set up and remove.

• NCF 6: Improving rural livelihoods in the North Central region in Vietnam through innovative development of supply chains for energy-efficient cook stoves and wood from sustainable sources, 2017 for 30 months. NCF grant 399 914 €. Danish NGO NEPCon is implementing the project with the local partners.

Next NCF call for proposal is most probably in September 2020.

CONTACT: • https://www.nordicclimatefacility.com/ , NordicClimateFacility@ndf.fi , Tel: +35810618002.

2.2.5. Nordic Investment Bank (NIB) NIB finances projects that improve competitiveness and the environment of the Nordic and Baltic countries. The Bank offers long-term loans and guarantees on competitive market terms to its clients in the private and public sectors. NIB is an international financial institution owned by Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden. The Bank has lending operations both in and outside its member countries. NIB acquires the funds for its lending by borrowing on the international capital market. Loans and guarantees are for the projects and investment programmes. Also on-lending to SMEs and small midcaps. Total project costs amount is about EUR 20 million and upwards. Smaller projects and investments of SMEs and small midcaps would be financed from special loan facilities opened in cooperation with local intermediary banks.

NIB in Vietnam: Country loan agreement. NIB has a framework with the Ministry of Finance of Vietnam, but no ongoing loan programme. In general, NIB would need guarantees from Vietnam for Manketti Ltd Helsinki, Finland

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a loan to a private project in the country, or a loan programme with the finance ministry. NIB has had loan programmes with the Ministry of Finance of Vietnam 4 .

CONTACT: • https://www.nib.int/ , info@nib.int , Fabianinkatu 34, Helsinki, Tel +358 10 618 001 2.3.

EU Funding

2.3.1. EU’s Trade and FDI In 2018, the EU constituted one of the most important overseas markets for Vietnam (EU came second after the US). The EU purchased as much as 17% of the country's global exports in 2018. The two way trade expanded to US$56.3 billion. The EU was also the fourth largest trading partner of Vietnam after China, South Korea and the United States of America. Comprehensive information on EU import tariffs and other market access conditions can be found at the EU's Export Helpdesk.

The European Union is one of the most important sources of foreign investments for Vietnam.

According to the Foreign Investment Agency of the Vietnamese Ministry of Planning and Investment, investors from 23 out of 28 EU Member States injected a total committed FDI worth more than US$23.9 billion into 2,133 projects over the course of the past 28 years (by the end of 2018). In 2018 investors from the EU poured more than US$1.068 billion in 139 projects in Vietnam.

The EU's ranking has been shifted up to the sixth position from the seventh position in 2016 among the biggest FDI partners of Vietnam. During this period, Japan was the largest investment partner of Vietnam with committed FDI worth US$6.59 billion followed by South Korea (US$3.66 billion), ASEAN (US$2.65 billion), China (US$1.2 billion) and Hong Kong (US$1.13 billion).

2.3.2. European Development Fund In the area of development cooperation, through the EU and its Member States' engagement, the EU has become the largest grant donor in Vietnam. The current EU projects in Vietnam EU projects in Vietnam, covers areas such as governance and education, water and energy, human rights and securit https://eeas.europa.eu/delegations/vietnam/area/projects_en . EU Development Fund is mainly grants to the Vietnamese public sector projects. Finnish companies can participate through EU & Vietnam tenders .

4 https://www.nib.int/what_we_offer/agreed_loans?year=all&country%5B%5D=Vietnam&client_name=&Search=Search

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The EU will contribute with €400 million for development cooperation during the period of 20142020 focusing on good governance, energy and climate change 5 .

CONTACT: • Delegation of the European Union to Vietnam, https://eeas.europa.eu/delegations/vietnam_en , Delegation-vietnam@eeas.europa.eu Lotte Center Hanoi, Vietnam, Tel. +84 24 3941 0099 2.3.3. European Investment Bank EIB is active financier in Asia. It is world’s largest multilateral lender and the biggest provider of climate finance. The EIB Group has two parts: the European Investment Bank and the European Investment Fund. The EIF specialises in finance for small businesses and mid-caps. The project size for EIB, starts with the loans at €25 million, certain cases EIB can consider lower amounts. The total investment of a typical project during 2014-2020 mandate is above €40m. The projects with a total investment above €25m can be financed either directly to a project promoter or indirectly through a government or financial intermediary. In Vietnam EIB has financed projects with more than 700 million euros. One of the latest project is 68 million euros provided to the Hanoi Metro. EIF is providing finance to e.g. Moscow based International Investment Bank 6 , which Government of Vietnam is one of the owners.

EIB is also supporting GEEREF, which is a fund-of-funds. GEEREF invests in private equity funds which focus on renewable energy and energy efficiency projects in emerging markets and its funds concentrate on infrastructure projects that generate clean power through proven technologies with low risk. GEEREF's funds target attractive financial investments that also deliver a strong positive environmental and developmental impact. It has invested in several funds in South East Asia, which are operational in Vietnam, Thailand etc. 7.

CONTACT: • https://www.eib.org/en / , https://www.eib.org/en/publications/eib-financing-in-asia.htm 3. GLOBAL AND REGIONAL FUNDING

5 https://ec.europa.eu/europeaid/multi-annual-indicative-programme-vietnam-2014-2020_en 6 https://iib.int/en 7 http://geeref.com/portfolio/

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There are several global and regional development financiers in Vietnam which are financing major infrastructure projects in Vietnam.

3.1.

The World Bank

The World Bank Group Country Partnership Framework (CPF) for Vietnam guides the Bank Group's engagements in the country from 2018 to 2022. Endorsed on May 30, 2017, and reflecting the priorities expressed in the World Bank Group's 2016 Systematic Country Diagnostic, the Vietnam 2035 Report, and the government of Vietnam’s 2016 - 2020 Socio-Economic Development Plan (SEDP), the CPF has four prioritized areas: 1) inclusive growth and private sector participation; 2) investment in people and knowledge; 3) environmental sustainability and resilience and 4) good governance.

Meanwhile, through its traditional political risk insurance and credit enhancement products, the Multilateral Investment Guarantee Agency (MIGA) will complement World Bank lending and IFC engagement by mobilizing private investment and supporting commercial borrowing by the government and potentially also by State-Owned Enterprises.On balance, Vietnam’s medium-term economic outlook remains positive, but is subject to downside risks. GDP growth remains underpinned by robust domestic demand, in turn reflecting strong private consumption and investment growth. With an expected pickup in global activity, Vietnam’s growth prospects may improve to 6.4 percent over 2017–2019.

The proposed WBG framework for engagement in Vietnam for FY18–22 is organized around three focus areas and 11 objectives (Table below).

CPF focus areas and objectives Focus Area 1: Enable Inclusive Growth and Private Sector Participation 1. Strengthen economic governance and market institutions 2. Promote private sector and agribusiness development Manketti Ltd Helsinki, Finland

Focus Area 2: Invest in People and Knowledge 6.

Improve access to quality public and private health services and reduce malnutrition

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Focus Area 3: Ensure Environmental Sustainability and Resilience 9. Promote low carbon energy generation, including renewables and info@mankettigroup.com www.mankettigroup.com

Overview to the Project and Investment Finance in Vietnam 3.

Enhance trade competitiveness, multi-modal transport connectivity, and logistics services 4. Improve planning, management, and delivery of infrastructure and land in cities 5. Broaden economic participation of ethnic minorities, women, and vulnerable groups CROSS-CUTTING AREA: GOVERNANCE

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8.

Improve integration and efficiency of social assistance, pension, and health insurance systems Strengthen the relevance and quality of tertiary education and labor market institutions

energy efficiency, and reduce GHG emissions 10. Increase climate resilience and strengthen disaster risk management 11. Strengthen natural resource management and improve water security

There are strong links between the focus areas as well as the objectives. The CPF results framework reflects, to a large extent, existing and ongoing commitments and engagements (legacy), with the strategic shifts reflected to the extent possible (given that it will take time before the effect is measurable). It is intended that the Country Partnership Framework (CPF) results framework be revisited at the Performance and Learning Review (PLR) stage.

CONTACT: • https://www.worldbank.org/en/country/vietnam . The World Bank Country Office Contacts, vietnam@worldbank.org , +84 2439346600, 8th Floor, 63 Ly Thai To, Hanoi, Vietnam 3.2.

International Finance Corporation (IFC)

IFC fosters sustainable economic growth financing private sector investment, mobilizing capital, and advising businesses and the government on projects that generate returns for investors. IFC invests in private enterprises in developing countries: companies, financial institutions, and other businesses that are majority-owned by the private sector IFC does not lend directly to micro, small, and medium enterprises. IFC investments typically range from 10 MUSD to 100 MUSD and higher.

To ensure the participation of investors and lenders from the private sector, IFC typically finances no more than 25 percent of the total estimated project costs. The project has to be technically sound, have good prospects of being profitable, benefit the local economy and be environmentally and socially sound.

Throughout the Country Programme Period in Vietnam, the International Finance Corporation (IFC) will also leverage its investment and advisory services and mobilize long-term financing for investments that have strong socioeconomic benefits, and support the development of Vietnam’s capital markets other private finance. IFC’s Long-term finance (LTF) investment program in Vietnam has grown significantly over the last years. IFC’s LTF investment portfolio reached $872 million (March 2019), dominated by Financial Institutions Group (FIG) investments, accounting for nearly 74 percent of the total portfolio, followed by Infrastructure (INF), Manufacturing, Agribusiness, and Services (MAS), and Telecom, Media, Tech & Venture Capital (CTT) sectors. The Manketti Ltd Helsinki, Finland

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average outstanding balance of Short-Term Finance was approximately $281 million for FY14-19 and was approximately $208 million as of March 2019.

Figure 1. IFC’s Annual Long Term Commitments in Vietnam 2014-2019 (as of Feb 2019).

CONTACT: • https://www.ifc.org/wps/wcm/connect/region__ext_content/ifc_external_corporate_site/ east+asia+and+the+pacific/resources/ifc+in+vietnam 3.3.

Asian Development Bank

ADB's Country Partnership Strategy (CPS) 2016–2020 for Vietnam 8 will support investments and policy reforms that promote more inclusive and environmentally sustainable economic growth. To achieve this, ADB’s strategic framework will be based on three pillars: (i) promoting job creation and competitiveness, (ii) increasing the inclusiveness of infrastructure and service delivery, and (iii) improving environmental sustainability and climate change response. The CPS lays out a program of priority activities to support each of these strategic pillars. This approach is results-oriented and aims to maximize the impact of ADB assistance by improving synergies across ADB operations. ADB will also seek to strengthen the links and synergies between (i) sovereign and non-sovereign programs to promote private sector operations, and (ii) national and regional reform agendas. ADB has several ongoing projects in Vietnam 9 In addition to providing funding for the public and private sector projects, ADB also supports publicprivate-partnership cooperation (PPP). ADB supports e.g. in the development of PPP frameworks and enabling policies to facilitate increased private sector investment and participation in the development and operations of infrastructure assets, transaction advisory services to both the public and private sector clients and financing of projects (both public and private) using ADB’s 8 https://www.adb.org/countries/viet-nam/main 9 https://www.adb.org/projects/country/vie

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various lending modalities, including guarantees and commercial co-financing. Example of ADB’ support for the PPPs can be seen in the figure below.

Figure 2. Example of ADB’s Support to the PPP10 ADB’s new CPS is expected to be implemented in 2021-2025. Finnish companies interested to learn ADB’s coming projects, should contact ADB’s office in Hanoi. ADB is also financing several regional initiatives. In January 2020, ADB established ADB Ventures to invest in companies offering impact technology solutions that contribute to the SDGs. Finland has a significant investment in the Fund with a EUR 20 million loan from the Ministry for Foreign Affairs of Finland. Nordic Development Fund is also involved with 9 million euros in the Fund. ADB Ventures 11 provides investment funding and seed funding for the companies based in the Asia and the Pacific.

ADB is providing funding for the Finnish companies directly, but it could provide funding for the Vietnamese clients of the Finnish companies. However, ADB’s loans to private sector projects are from about 10 MUSD upwards to few hundred million USD. Thus, also the Vietnamese clients would need be relatively big and the project would need to be economically feasible for them.

CONTACT: • https://www.adb.org/countries/viet-nam/main 3.4.

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Asian Infrastructure Investment Bank (AIIB)

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https://ventures.adb.org/

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AIIB is a young organisation with a mission to (i) foster sustainable economic development, create wealth, and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors; and (ii) promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions. AIIB is the first global IFI established on the direct initiative of a non Western country. The initiative was launched in October 2013 as a response to the severe finance gap for sustainable infrastructure in Asia, and it started operations in January 2016. According to the AIIB website, it doesn’t have projects in Vietnam by 2019.

CONTACT: • https://www.aiib.org • http://aiib-ansv.org/ 3.5.

InfraCo Asia

InfraCo Asia is infrastructure development and investment company. It aims to stimulate greater private sector investment in infrastructure in South and South East Asia. InfraCo Asia funds high-risk infrastructure development activities by taking an equity stake. InfraCo Asia invests in private enterprises, it funds pre-financial-close, early stage infrastructure development activities by taking an equity stake in high-risk projects. It mitigates risks at the beginning of the project. The size of its investments varies from few million USD to about USD 10 million.

CONTACT: • http://infracoasia.com/ , info@infracoasia.com , InfraCo Asia Development Pte. Ltd., Manulife Tower, #23-04/05, 8 Cross Street, Singapore, T +65 6321 6666.

3.6.

Green Climate Fund

Green Climate Fund (GCF) is part of the United Nations Framework Convention on Climate Change (UNFCCC). GCF was set in 2011 as a financial mechanism for the Convention. It was founded to support developing countries in responding to climate change. GCF invests both in mitigation and adaptation activities, and focuses especially in developing countries. Green Climate Fund is working with Denmark based Climate Technology Centre and Network (CTCN). There is currently one bigger approved project in Vietnam: 1) Scaling Up Energy Efficiency for Industrial Enterprises in Vietnam (120 million USD financing through GCF) 12.

12 https://www.greenclimate.fund/countries/viet-nam

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The projects for GCF can be proposed through the accredited entities. NEFCO is currently the only Nordic institution accredited to the GCF. NEFCO is accredited in the category to provide financing under 10 MUSD, but the total project size can be bigger. GCF has approved one project with NEFCO, about 46 MUSD solar micro-grid project in Haiti 13.

Figure 3. GCF Project Preparation Cycle (source: GCF).

GCF also has a project preparation facility which can be applied. The facility can provide funding available up to USD 1.5 million for each application, to the funding proposal being developed and to the activities included in the PPF application.

CONTACT: • https://www.greenclimate.fund/countries/viet-nam 3.7.

Global Green Growth Institute

Global Green Growth Institute (GGGI) works with its member governments to achieve green growth.

GGGI supports countries to develop their green growth sector. GGGI’s objective in Viet Nam is to increase green energy production, reduce GHG emissions, increased capacities on access to climate finance and to develop green master plans and bankable projects for Vietnamese cities.

Viet Nam has adopted a National Green Growth Strategy (VGGS) and developed a corresponding Green Growth Action Plan. The cost to implement the VGGS is estimated to be at least $30 billion, requiring a significant increase to current financing levels. GGGI’s program in Viet Nam is supporting government at the national and sub-national level to increase green energy production, reduce, increased their capacity on access to climate finance and to develop green master plans and bankable projects for Vietnamese cities.

13 https://www.nefco.org/news/first-green-climate-fund-project-by-nefco-receives-board-approval/

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GGGI provides advisory support for the early stage project development and building the financing package for the projects. Some Finnish companies and their clients have been benefitting GGGI’s advisory services in Vietnam.

CONTACT: • https://gggi.org/country/vietnam/ 4. BILATERAL FUNDING IN VIETNAM There are several bilateral donors in Vietnam which are actively promoting also business and trade relations with Vietnam. These donors have their own focus areas, some financing infrastructure project while some donors are promoting their education sector. They mainly procure from the companies from their respective countries or from Vietnamese companies, but the Finnish companies might have possibility to be subcontractor if they have excellent products or services.

4.1.

Japanese International Cooperation Agency (JICA)

JICA Partnership Program in Vietnam; since 2002, JICA Vietnam has implemented 123 projects (as of April 2018) to improve water supply and drainage system, strengthen disaster prevention capability, establish environmental management system, support rural development, health care, human resource development in supporting industries 14 . Japan has very active loan portfolio. The ODA -loans provided by Japan can be different length, interested rate or tied aid -level. Depending on inflation / valuation rate the Finnish PIF -financing which is shorter term than typical JICA loan, is probably cheaper to the borrower. But the advantage of the JICA loans are that JICA is also providing project preparation support and is actively promoting the use of JICA loans.

CONTACT: • https://www.jica.go.jp/vietnam/english/office/index.html 4.2.

Korea International Cooperation Agency (KOICA)

Republic of Korea’s Country Partnership Strategy (CPS) 2016 -2020 15, for Vietnam with focusing on the 4 following priority areas: 1) Education, 2) transport, 3) water management and healthcare 4) governance (public administration). Korea’s Economic Development Cooperation Fund (EDCF) is providing loans, which are tied in principle, Korean companies are supposed to participate in EDCF 14 15

https://www.jica.go.jp/vietnam/english/index.html https://www.koica.go.kr/sites/vnm_en/index.do#n

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projects as a contractor. According to KOICA, Korea and Vietnam will collaborate to allow both Korean and Vietnamese companies to participate in upcoming EDCF projects. EDCF will decide whether to apply untied terms and conditions to individual projects based on their characteristics.

If a project is relatively simple to be implemented, EDCF can allow Vietnamese companies to participate in the project through separate bidding and/or consortium.

CONTACT: • http://www.koica.go.kr/vnm_en/3591/subview.do 4.3.

Denmark

Denmark has been very actively promoting business and trade cooperation with Vietnam for more than 10 years. Denmark has been providing e.g. Danida Business Finance (DBS) instrument (similar to the Finnish PIF) and several business services to the Danish companies. Also some Finnish companies have participated in bidding in the DBS financed projects in Vietnam but have not won.

Like Finnfund, Danish DFI, IFU has also invested in BOPA, but it seems that IFU doesn’t have any direct investments in Vietnam.

CONTACT: • https://vietnam.um.dk/en/ 4.4.

Netherlands

Vietnam is applicable country for both Develop2Build (D2B) and Development Infrastructure Investment Vehicle (DRIVE) 16. Develop2Build (D2B) 17 is a Government-to-Government programme.

It offers governments in 37 developing countries and emerging markets direct assistance in setting up infrastructural projects. The projects aim to have a positive impact on people, the environment and society. Once a project has completed the Develop2Build cycle, it can receive continued funding from the programme DRIVE. The Netherlands is cumulatively the largest EU investor in Vietnam, and the country's second-largest EU trade partner. The key sectors are as follows: Agri-food and horticulture, energy, maritime industry, transport and logistics and water sector.

CONTACT: • https://www.netherlandsworldwide.nl/countries/vietnam

16 http://english.rvo.nl/subsidies-programmes/development-related-infrastructure-investment-vehicle-drive 17 https://english.rvo.nl/subsidies-programmes/develop2build-d2b

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4.5.

France

In line with the Asian Regional Intervention Framework (2013–2016) and the Vietnamese authorities’ development strategy – in particular the SEDS and the green growth strategy –, AFD’s 2016–2020 strategy for Vietnam will have a single purpose: ”to support Vietnam on its pathway to green and resilient growth.” AFD’s intervention will thus be grounded in the significant challenges related to green growth, the fight against climate change, and the resilience of territories, all in close dialogue with the national authorities. The infrastructure and urban development sector remains highly present. Water management becomes a significant pillar of the 2016–2020 strategy (urban, rural, river and sea water as part of the adaption to climate change). The strategy differs from its predecessor in that it seeks to concentrate activities and strengthen the green component. This strategic choice notably involves the decision to withdraw from any new financing support to the health sector.

CONTACT: • https://vn.ambafrance.org/Missions-de-Business-France

4.6.

Australia

Australia and Vietnam's partnership extends across political, security, economic and people-topeople activities. Australians born in Vietnam represent the sixth largest migrant community in Australia, and around 30,000 Vietnamese students enrol in education institutions in Australia each year. Australia’s support to economic reform of in Vietnam, Aus4Reform 18, is about 4 million euros form Australia for the years 2017-2021. Aus4Reform is helping to relieve key constraints to growth of the private sector (domestic and international), increase Vietnam's competitiveness, and promote regional and global trade.

CONTACT: • https://vietnam.embassy.gov.au/ 5. PRIVATE INVESTMENTS IN VIETNAM There are plenty of different private sector players financing the projects and companies in Vietnam.

For the once of infrastructure projects the financing is typically arranged through the e.g. development financiers, Vietnamese or foreign companies themselves, which are project owners and banks providing loan for the project. For the investments to the companies registered in 18 http://aus4reform.org.vn/en

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Vietnam the financing typically can be from the development finance institutions, such as Finnfund, or special funds, such as ADB Ventures or from the private investment companies and venture funds.

For the Finnish companies selling their products and services to the Vietnamese companies or developing joint projects with their Vietnamese partner companies, it is useful to know that there are several options to look financing for the projects and joint ventures. This chapter lists some of the investment funds, private equity firms and venture capital firms. The classification for the mature companies vs. start-up companies is not fully accurate as some investors invests in the both.

5.1.

Investments for the mature companies

Some of the private equity firms investing in the Vietnamese non-listed or listed more mature companies are e.g. Mekong Capital, Dragon Capital, Vietnam Investment Group, Penm Partners, Creador, KKR, Korea Investment Partners, KB Investment Co, ACA Investments, Indochina Capital, IDG Ventures Vietnam, Vina Capital, CVC, TPG, WarbugPincus, Affirma Capital, Bain Capital and Sequoia Capital India. Interestingly also one Finnish equity fund is very active in Vietnam, PYN Fund Management Oy. 5.2.

Investments for the start-up companies

There are also increasing amount of the investment companies and venture capital firms investing in the Vietnamese start-ups. Some of these companies are e.g. Grab Ventures, Patamar Capital, 500 Startups, Monk’s Hill, NCORE Ventures, Simple Tech Investment, Seedcom, Cyber Agent Capital, BEENext, Vietnam Silicon Valley, Velocity Ventures, and FTP Ventures.

6. RECOMMENDED APPROACH FOR THE FINNISH COMPANIES In Vietnam, there is a strong focus in the urban infrastructure projects and more specifically to the projects which would generate cash flow and be commercially viable or at least economically viable.

There are several financiers providing financing and facilitating materialisation of investments, but mainly for the projects starting from about 10 MUSD upwards. In addition, there is an increasingly private investment companies investing in Vietnamese start-ups and mature companies. Depending on Finnish company’s business sector and approach it can look either financing from the development financiers or from the private investors.

6.1.

Consultant Companies and Research Organisations

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The competition especially in the public IFI tenders is extremely hard, but if the Finnish company or research organisation has excellent expertise, references, good networks and understanding of the local markets then it can have changes. Possible approaches for the Finnish consulting companies for the IFI -financed projects are to start building partnerships with the Vietnam based consulting companies, engaging with the project related officials (national officials and development financiers’ officials) and discuss on approaches and concepts, discussing with the central and local government authorities to understand the pipeline of the coming projects and for the private sector projects; starting to build network and cooperating with the project developers and project investors.

For the Finnish research institutions’, the approach in general is very similar as for the Finnish consulting companies, as they are partially competing in the same markets. But the Finnish companies could also identify and develop cooperation projects with the Vietnamese national research agencies by using e.g. Business Finland’s financing. The procurement notices can be followed from the e.g.: • ADB’s Procurement Notices • WB’s Procurement Notices • UN’s Tender Notices • EU Development Cooperation Tenders • EIB Technical Assistance • WB’s Consultancy Contracts • ADB’s Consultancy Contracts • AIIB’s Consultancy Contracts 6.2.

Micro and SMEs

For the micro and SMEs, the opportunities are mainly subcontracting or selling some specific equipment or service. Only if the Finnish company is medium size, turnover minimum 10 MEUR, it has a niche product or service or if it has a good local partner it could have possibilities to directly supply for the IFI financed projects.

Possible approaches for the Finnish micro and small & medium (MSME) size companies to start engaging with the IFIs could start with the market research and project development phase and use Finnish funding instruments (such as BF’s financing and Finnpartnership) and also Nopef’s financing.

Then for the project investment funding, it is probably more feasible to start discussion with the financiers such as Finnfund and NEFCO, rather than start discussing with the ADB or IFC which are financing bigger projects. Depending on the Finnish company’s business, possibly also private investors (see the chapter 5) or Infraco Asia could be contacted.

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For the medium size Finnish company, turnover about EUR 10 million and above, the PIF instrument could be very use for the develop project and financing package for the Vietnamese public sector client. MSMEs could also follow procurement notices and look especially if there are relevant product and equipment supply tenders. MSMEs could also look to partner with the large companies that have already won tenders previously and pursue to become their subcontractor. The procurement notices of the main IFIs can be followed from e.g. following websites: • ADB’s Procurement Notices • WB’s Procurement Notices • UN’s Tender Notices • EU Development Cooperation Tenders 6.3.

Large Companies

For the large Finnish companies selling products and equipment to Vietnamese markets, usually the main challenge is price related. Finnish products and equipment can be a good quality and with a long lifecycle, but the capital investment for the buyer is usually relatively high and thus the buyer usually goes for the cheaper option. If the Finnish company can arrange at least partial financing to the Vietnamese client then its changes to success are much higher. Also, especially for the investment goods and production related projects, if the Finnish company can, in addition to arranging buyer’s financing, act as an EPC -contractor (Engineering, Procurement and Construction), then it’s chances are increasing further. Also, if the Finnish company could provide operating service (e.g. BOT) or even be a minority investor in the project, then the changes of being able to close the deal increases significantly.

Large Finnish companies can identify several IFIs investing directly or idenfity potential public sector and PPP -projects e.g. by looking the investment priority sectors and projects listed by the government agencies. Then the next step is to identify reliable partners and think how the potential risks could be mitigated. The systematic approach would be to review development financiers’ country strategies to understand what is the project pipeline and main sectors to be financed in coming 5 years. Then engaging with the project officials (national officials and development financiers’ officials) to discuss on approaches and concepts and gain understanding on their expectations for the project. Participation in the development financiers’ tenders requires lots of preparatory work, networking and it is usually very competitive.

For the Finnish companies it is more feasible to focus in the projects for which IFI are not required issue public tenders, but which can be financed directly. These types of projects could be e.g. PPP projects as well as commercially viable projects financed by e.g IFC, ADB (non-sovereign), EIB and Finnfund. The Finnish company should discuss directly with these financiers to understand Manketti Ltd Helsinki, Finland

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conditions for their investment. In addition, for the public sector customer projects, Finnish PIF instrument could be possibly used.

Finnish companies should also discuss with GGGI, and GCF to understand their possibility to support the development of the projects. In addition, the more important the project is nationally, then it is also important to discuss with Vietnamese national organisations such as MPI, MOF to acquire backing and possible incentives for the projects. Business Finland and the Embassy of Finland can be also contacted to help establishing the contacts in Vietnam. The procurement notices for the publicly tendered projects can be followed from the e.g.: • ADB’s Procurement Notices • WB’s Procurement Notices • UN’s Tender Notices • EU Development Cooperation Tenders

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