MEET-BIS VIETNAM PROJECTMainstreaming Energy Efficiency through Business Innovation Support – Vietnam

Commercial solutionsfor clean technology

in small to medium-sized enterprisesin Vietnam

The European Union’s MEET-BIS Vietnam Project

This project is funded by the European Union

MEET-BIS is a project under the SWITCH Asia Program (Project 2008 VN 171-201)

MEET-BIS Vietnam acts as a catalyst for eco-entrepreneurship and busi-ness promotion. To enhance the efficient use of energy and water, it brings together suppliers, technologies and customers. By targeting complete supply chains, the project aims to provide commercial solu-tions for a wider introduction of clean technology in small to medium-sized enterprises in Vietnam.

It works both ways: suppliers create new business opportunities, and their customers not only enjoy the competitive advantage of ‘going green’, but also lower energy and water bills.

This is the story in a nutshell. Obviously, the wider story contains both pitfalls and victories. This document reveals the most important ones, not only to prevent future ventures from replicating futile steps, but also to disseminate the vital elements for success.

TURNING MARKET GAPS

INTO OPPORTUNITIES

Project partnersMEET-BIS Vietnam is funded by the European Commission as part of its SWITCH-Asia Program that promotes sus-tainable production and consumption in Asia.

The project started in 2009 and ran until the end of 2013, focusing mainly on urban North Vietnam and specifically Hanoi. It is implemented by ETC Foundation, TriodosFacet (AdaPPPt) and Aidenvironment in the Netherlands, and Research Center for Energy and Environment (RCEE) and Vietnam Chamber of Commerce and Industries (VCCI-IBCI) in Vietnam.

During its four and half years, the project partnered with a dozen suppliers of energy and water efficient technolo-gies to perform market research and to develop innovative business and sales techniques.

This project is funded by the European Commission's SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

Project team and local teamThe project team consists of a core local team, based in Vietnam, and is headed by an international team leader. On an intermittent basis, the local team is supported by a pool of international consultants. The local team provides on the ground support for business development and marketing research, and manages sales activities and sales agents.

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In Vietnam, economic and population growth is resulting in severe pressure on the environment and on the use of energy and water. Much of Vietnam’s growth is expected to be fuelled by small to medium-sized enterprises (SMEs). They have a clear potential to save on their water and energy consumption bills. For suppliers they are a promising business opportunity, currently accounting for over 60 per cent of the market value of all final goods and services produced in the country.

Vietnam has already seen many projects to introduce energy and water efficient technologies. As a result, market research, technology reports and environmental impact studies are readily available, as are well-trained installation companies. How-ever, the diffusion of technologies for sustainable production has not yet achieved significant penetration in mainstream SME markets.

THE OPPORTUNITIES

THE CIRCUMSTANCESMany SMEs in Vietnam work with outdated and inefficient technology, rendering high business costs and environmental det-riment. Technologies that enhance energy and water efficiency of SMEs do exist, but suppliers are not aware of the market opportunities in this sector, and staff is not trained for sales to relatively small companies. They lack capacity to adequately translate technical solutions into business-smart, cost-saving products for SMEs. At the same time, SMEs are often not aware of the benefits of investing in cleaner technology and lack the capital to invest in cleaner technology.

Infrastructure is generally good in Vietnam; entrepreneurs enjoy high standards of communication, roads and transport. The legal environmental framework is mostly in place, but its enforcement could be more supporting. Energy subsidies reduce incentives to save on electricity. Yet, energy prices are slowly increasing and a law promoting energy saving has been passed. Unfortunately, non-compliance with the laws remains abundant and is seldom fined. Concerning water efficiency, govern-ment action would be even more welcome, as the concept is quite unknown and the market is hardly explored.

Another challenge is the access to inexpensive loans. Most Vietnamese banks are not used to assess the needs and risks involved in financing clean technology of SMEs and their suppliers. The level of loan requested by an SME for clean tech investments tends to be relatively small for a bank, compared to the transaction costs involved. Hence, it is an unattractive business for banks.

We will surely continue to invest in energy saving and environmental protection, because besides all direct and immediate benefits for our company, we also have long term benefits which are even greater: reputation on product’s quality, stable and sustainable long-term investment, and help build a “green industry” brand for the enterprise.

Mr. Do Dinh DinhGeneral Director - Hung Long Garment Company

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This project is funded by the European Commission’s SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

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Suppliers of energy and water saving technology could become an important player in bringing knowledge about the business case to the SMEs. This implies that they need to identify new market opportunities and design commercially attractive business packages for SMEs.

SMEs not only have to be informed about their possibili-ties of saving energy and water; once they are tempted to make improvements, they stand for investments that may exceed their present budget. Local and interna-tional financial institutions would have to develop suit-able products for SMEs. The ambition of the project was thus to incorporate a financial solution into the business package.

The project intervention strategy is based on scaling up

THE ANSWERS

After analysing existing initiatives, MEET-BIS opted for a risky approach: activating supply chain partners. This is risky, because at the outset not much is known about the openness of the players in the field to invest in energy and water efficiency. Nevertheless, it was considered worth taking the chance, as building capacity with market players guarantees a high spin-off; by their very nature, they continually seek opportunities and will keep in-novating, also after termination of the project.However, developing commercial markets takes time, and requires flexibility of the project (and its donors) to adapt to local economic circumstances.

A RISKY APPROACH

initiatives that have been piloted in the past few years, introducing them into the market, and ensuring their commercial viability. As many solutions for saving energy and water have a proven commercial rationale, it is foreseen that the created supply chains will continue after expiration of the MEET-BIS project.

Targeted SMEsIn Vietnam, SMEs are defined as independent production and business establishments with a registered capital less than VND 10 billion (USD 0.5 million) or with less than 300 employees.After preliminary research, it was decided to concentrate on the following SMEs:

• Hotels and office buildings• Textile, shoes, leather and apparel manufacturers• Food processing enterprises• Restaurants• Steel producers (water only)• Paper producers (water only)

“ We save energy because saving energy not only helps save cost for our business, but also keep our clients and staff in a good environment when they stay at our hotel. Besides that, saving energy help us to build up a green, environmental friendly hotel.

Mr. Nguyen Van UtVice Director - Saigon Halong Hotel ”

This project is funded by the European Commission’s SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

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THE TECHNOLOGY SUPPLIERS

THE GOVERNMENT

The Vietnamese clean technology sector was in need of cost-effective business models and suitable sales strategies to serve SME markets. MEET-BIS made itself known among the suppliers through seminars and business meetings, emphasizing the potential of these markets. Building relations with the suppliers, however, proved to be time consuming, but finally the project managed to convince them of the profitability of pro-viding to SMEs. Eventually, formal cooperation was established with eleven suppliers of energy and water saving products complemented with a wider network of over 250 suppliers. One international firm and a local supplier were matched to introduce innovative water saving products on the Vietnam-ese market. Training and capacity building sessions were organized for technology suppliers and relevant associations. Together with the technology part-ners, innovative sales approached where piloted. When developing such a new sales activity, the project aimed to come up with potentially cost-ef-fective approaches that could be taken over by the suppliers themselves. This resulted in a toolkit of sales and marketing activities.

Initially, the involvement of the government was limited. The project focused on building relationships with the business sector, and underestimated the importance of the Vietnamese government institutions in facilitating and supporting com-mercialization. Many trade-related organizations, vital to promoting business opportunities, are in fact government bodies. Realizing this, the project linked to government initiatives, such as a new energy law, the promotion of green tourism and ambitions on corporate social responsibility. This collaboration proved to be mutually beneficial: the project assisted in real-izing the government’s aims, while the government assisted in promoting the project.

“ As a small technology supplier, we lack the know-how in sales and marketing. MEET-BIS helps us to approach the market in a different way. We used to depend mainly on our relation-ships to win projects. Now we approach a wider group of potential customers. My staff learns a lot on how to reach out to the SME and to network with other suppliers.

Mr. Vu Ngoc TuyenDirector - Systech Eco Company ”

This project is funded by the European Commission’s SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

THE SME-MARKETSGenerally, SMEs are run by an individual or a small team. This makes them flexible and decisive. On the other hand, their technical expertise and budget for investments with a longer payback period are limited.

But costs appeared not to be the main obstacle to invest in saving energy and water. According to a survey of MEET-BIS among 172 SMEs, the main reasons are: too busy (69%), lack of authoritative information (43%) and too much information to make a choice (41%).In the course of the project, saving energy and water was promoted among some 4,000 SMEs, of which about 1,000 showed interest in events like seminars, mini-markets and business meetings. Such events were shaped in co-operation with Cham-bers of Commerce and relevant associations.

By 2013, over 420 SMEs had started investing in clean technologies, mainly in saving energy. Introducing water efficiency was only materialized in the last two years of the project, and waste water treatment has not been successful at all. The price of water is low, and especially investments in waste water treatment are high. Suitable plug-and-play technologies for SMEs hardly exist. And apart from the lack of awareness on the benefits of water efficiency, there is no nation-wide implementa-tion of waste water standards. However, water saving measures have been well established in some sectors, especially hotels, office buildings and the gar-ment industry. The project decided not to focus any longer on waste water management, as insufficient demand from SME’s and a lack of standardized solutions make promoting sustainable production in the textile and garment industry a standalone project.

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“We have installed a solar hot water system. It works very fine. There is always enough hot water for customers, also during outages. We no longer pay monthly bills for electric water heaters that consume a lot of power. And the solar system is safer; we don’t have to worry about electric shocks.”

Mrs. Do Thi Hiep DangOwner of Old Home Hotel with 45 rooms Save 60 - 90% energy

EXAMPLES OF INSTALLED ENERGY & WATER SAVING PRODUCTS• In the garment industry, old lighting systems were substituted by TL8 with electrical ballast or even TL5 technology. The

food sector also invested in more efficient lighting.• Hotels, restaurants and office buildings invested in Compact and LED lights.• Buildings and especially hotels confronted with high consumption of hot water, were particularly interested in solar water

heaters and heat pump systems. • Variable Speed Drivers were installed for the industrial fan of the boiler / ventilation system. Hotels / Buildings installed/

integrated VSDs in elevators, or used it with water pimping system, chiller.• Hotels, offices and factories have installed energy consumption monitoring software.• Especially medium-sized companies were interested in energy audits that advice on increasing efficiency.• Double button toilet and efficient showerheads/tape for hotels and commercial buildings.

Naturally, this list is not exhaustive. Window film, for example, is an easy and cheap solution to reduce heat and thus the costs of air-conditioning. It is ‘low-hanging fruit’. Although partnership agreements with suppliers were drafted, they eventually pulled out, mainly because presently SMEs are not their priority.

This project is funded by the European Commission’s SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

“We found that investing in the T5 lightings is very effective. This lighting brings the best light to our workers, help them make more precise stitches. Moreover, T5 lighting saves a lot of energy for our company, about energy reduction in average.”

Mr. Tran Huy TucDirector - Nam Dinh Textile Company

15%

“We are satisfied with the energy saving result after investing in some energy efficiency solutions, especially in the heatpump. After using the heatpump we could save more than 15 million vietnam dong per month on oil. The heatpump does not create a polluted environment and it helps to reduce cost for staff to operate the machine like the boiler.”

Ms. Vu Thi LanDirector - Blue Sky Hotel Halong Save 60% energy

“I think energy audits are very necessary for every company. They help enterprises to evaluate the real situation of energy uses within the company and review how its equipment work. After that, energy audit experts will analysis, evaluate and advice to invest in new solutions or improve the current working situation of equipment to save energy, increase production effect for company”

Mr. Pham Ngoc VinhDirector - Tien Hung Garment Company

Save up to 15% energy

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Innovative technologies are often generated by large, multina-tional companies. To gain access to these new technologies, the project has called in the expertise of companies like Philips Lighting, Schneider Electric and Neoperl water solutions.

Schneider and Philips brought their marketing directors into action during workshops for local technology suppliers on how to expand their market to SMEs. Conversely, both companies capitalized on the training material of MEET-BIS to provide their local retailers with Vietnamese examples of sales and marketing.

The cooperation with the Swiss-German company Neoperl in the last year of the project provided a renewed focus on saving water: their innovative faucets for water saving and improving water flow are easy to install and affordable for a typical SME. Neoperl is matched with a local technology supplier.

MULTINATIONAL TECHNOLOGY PROVIDERS

ACCESS TO FINANCE

At the outset, the project envisioned specific loan products for SMEs to invest in energy and wa-ter saving, in concert with banks and the partnering technology suppliers. This approach proved unrealistic. Vietnamese banks do not consider equipment finance to SMEs as an attractive busi-ness, and they are currently extra conservative in their risk assumption. From their side, SMEs are reluctant to borrow from banks, for fear of cumbersome procedures and unattractive condi-tions.Linking lease firms and technology firms then appeared to be a more effective solution. Lease firms are specialized equipment financiers that also target medium enterprises. During the lease term, the suppliers assure the proper maintenance of the equipment. It is now up to the lease and technology firms to come to a basic co-operation model. If this works out, project like MEET-BIS can come in to push the effort forward by liaising with providers of medium- to long-term funding, with international financial institutions or with government agencies that provide incentives or subsidies.

“Of the six solutions in which my company invested, I have been most impressed with the Variable Speed Drive (VSD) for the fan provide-heat 7.5Kw. Despite the high budget needed to investing, the VSD will help to save a lot of energy for our company, calculated it up to energy saving”

Mr. Nguyen Duc SyVice Director/ Technical Manager Hanoi Textile Company

10 - 20%

This project is funded by the European Commission’s SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

“From my experience with several hotels, I see Grohe products integrated NEOPERL water saving technology as much more water saving than other products of the same types. Grohe products help save about of water usage in my hotel.”

Mr. Dao Xuan HungHead of Technical Department - Angel Palace’s Hotel

50%

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The momentum for starting co-operations, and asking banks to venture into fairly new terrain like EE finance, and develop new products with medium term maturities is not the best. The Vietnamese banking sector is going through a difficult period.The Economist: “The souring debts of state-owned enterprises, together with a burst property bubble, have left the country’s ill-managed and secretive banks in a mess.” The Economist fur-ther notes that the banking sector trouble has resulted in a credit squeeze, which has prompted a record number of business failures over the past two years, and that the banking crisis “risks constraining growth for a serious amount of time unless it’s dealt with”.

The Economist, 2 February 2013, page 60: “Vietnam’s banks, Tiger tamed, The good times won’t return until the country’s stricken banks are dealt with”

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ETC Energy (www.etc-energy.org)AdaPPPt (www.triodosfacet.nl)Aidenvironment (www.aidenvironment.org)Research Center for Energy and Environment (www.rcee.org.vn)Vietnam Chamber of Commerce and Industries

For more information, please visit the MEET-BIS Vietnam project website:www.meet-bis.vn and www.meet-bis.orgor contact:ETC Foundation, e-mail: info@etcnl.nl, phone: +31 33 4326000, http://www.etc-international.org/

FACTS AND FIGURES

Duration and funding• The MEET-BIS project originally ran from 2009 to March 2013, but was extended with 6 months in order

to enhance the sales of the technology suppliers.• The total budget of the project was EUR 1.9 million, of which 80 per cent was funded by the European

Union. The remainder came from the project partners; local technology suppliers have shared in some costs of promotional events.

Stakeholder engagement• Formal cooperation is established with 11 local technology suppliers.• By July 2013, 9 of those suppliers successfully generated sales.• Some 70 Technology suppliers participated in events or activities of MEET-BIS.• A database of approximately 278 local suppliers of energy and water saving products has been created. • An international firm and a local supplier are matched to introduce water saving products.• Two international companies performed capacity building on marketing and sales.• Close relations are built with the relevant Vietnamese government bodies.

Research conducted• Relevant product-market combinations are selected.• Market research is done on the SME challenges and bottlenecks.• Research is performed on access to finance for SMEs and potential solutions.• A toolkit of sales & marketing practices and support packages with tested Vietnamese illustrations is

made.

Financial and environmental impact• Energy and water saving technologies have been promoted among 3,852 SMEs.• 1364 SME’s showed their interest in EE/WS products & services by visiting our events or attending indi-

vidual meetings with our project staff. 423 SMEs of these SME’s have invested in those technologies. • Total value of energy and water saving products sold since 2011 is EUR 2.43 million (VND 65.66 billion).• The reduction of CO2 emission is an estimated 9,842,559 kgCO2e between the first sales in January 2011

and end of June 2013. This equals driving around the world 1,800 times with a new passenger car; or the annual emission reduction of a 4 MW hydropower plant in Vietnam.

• The present investments in energy and water saving products & services will contribute to mitigating climate change with an estimated annual emission reduction of 9,788,636 kgCO2e. This will last until products reach their end of life and need to be replaced.

This project is funded by the European Commission’s SWITCH-Asia program (Project 2008 VN 171-291)

* This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of MEET-BIS Project team and its implementing partners and can in no way be taken to reflect the views of the European Union

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