Boats lie on the dried-up riverbed of the Red river in Hanoi on Tuesday

Vietnam faces a serious financial crunch in its response to climate change, a phenomenon that it is particularly vulnerable to, says a UN expert.

Nguyen Khac Hieu, deputy director of the Department of the Hydrometeorology and Climate Change under the Ministry of Natural Resource and Environment, said the country needs about VND1.97 trillion (US$109.4 million) for a climate change project, half of which is expected to come from donors, 45 percent from the state budget, and the rest from other sources.

But Vietnam has so far received a commitment of only $40 million from Denmark for its climate change response program between 2009 and 2013, he said, adding that the National Assembly has recently approved a state budget of VND67 billion ($3.72 million) for the same program.

Neefjes also said Vietnam will be eligible for a significant share of “new and additional” grants and concessional loans under the UN Framework Convention on Climate Change (UNFCCC), to support adaptation and greenhouse gases mitigation.

According to a United Nations Vietnam report, how substantial the financial outcome of the international climate negotiations will be is unclear, but there is already a trend of re-prioritizing ODA towards climate change responses and mainstreaming of climate change in wider development efforts. There is a strong likelihood that future ODA to Vietnam is linked to climate change, the report said.

Vietnam may also access financial resources from the Global Environment Facility, an official financing mechanism of the

UNFCCC, the Adaptation Fund funded by a Clean Development Mechanism levy under the Kyoto Protocol, or from climate financing windows of the development banks.

The country will need substantial capacities to access such funds, requiring concerted efforts to learn about funding options, as well as excellent cooperation between ministries and sectors, the report said.

For Vietnam to be able to finance the many billions of dollars needed to address sea level rise and other climate change effects in the coming century, it cannot rely solely on ODA, but must also raise investment capital domestically.

However, Vietnam has limited institutional or regulatory capacity in the area. There is a strong need to strengthen capacities at many levels to develop and apply financial policy instruments and index-based insurance to reduce climate vulnerabilities, the report said.

Reported by Bao Anh