Asia 18-018

~§~!2 I VIETNAM INITIAL ENVIRONMENT AL EXAMINATION (IEE)

REQUEST FOR CATEGORICAL EXCLUSION (RCE)

PROJECT/ACTIVITY DATA:

Activity Name: Trade Facilitation Program (TFP) and Linkages fo r Small and Medium Enterprises (LinkSME)

Country/region: Vietnam StartDate: 8/1 /2018 E ndDate:7/3 1/2023 Life of Project Amount($): 50,000,000 IEE Prepared by: EG2 Date: 12/J 3/20 17

ENVIRONMENTAL ACTION RECOMMENDED:

Categorical Exclusion: [X] Negative Determination with Conditions: [ ] Positive Determination: [ ] Deferral: [ ]

Purpose and Scope

The purpose of this document, in accordance with Title 22, Code of Federal Regulations, Part 216 (22CFR2 I 6), is to provide a preliminary review of the reasonably foreseeable effects on the environment, as well as recommended Threshold Decisions, for the activities detai led below. This document provides a brief statement of the factual basis for Threshold Decisions as to whether an Environmental Assessment or an Environmental Impact Statement is required for the activities managed under the scope of this document.

The activities under review are recommended for categorical exclusion.

Background and Description of Activities

USAID/Vietnam's new Trade and Growth (T&G) project's goal is "to enhance Vietnam's global competitiveness." The project's purpose is " to develop replicable approaches to faci litate a more attractive and predictable trade and investment climate for domestic small and medium enterprises (SMEs) and international global value chain (GVC) investors." USAID/Vietnam has identified two sub-purpose areas to accomplish the overall project purpose. These two areas are: I) supporting GVN efforts to simplify, modernize, and harmonize import and export processes in target provinces; and 2) supporting systemic changes in five target sectors to promote SME-GVC linkages. Together, these actions should enhance the attractiveness and predictability of the trade and investment climate, thereby leveling the playing field between domestic and international firms. Two flagship activities have been co-designed to address each of the two sub-purposes. Given the separate but mutually reinforcing nature of the sub-purposes this document presents a joint IEE for both activities.

The Trade Facilitation Program (TFP) - The TFP activity will provide technical assistance to support Vietnam to adopt and implement a risk management approach to customs, defined as "the systematic application of management procedures and practices which provide customs with the necessary information to address movements or consignments which present a risk." The risk management approach will faci litate the implementation of the World Trade Organization' s Trade Facilitation Agreement (TFA) helping to reduce trade barriers and expediting cross border trade. This activity will support Vietnam as it simplifies policies across Government units, strengthens the linkages between central and provincial-level customs offices, coordinates policy and implementation at the provincial levels, and switches to a risk management customs approach.

Linkages for Small and Medium Enterprises (LinkSME) - Vietnamese small and medium enterprises (SM Es) continue to display a low level of involvement in global value chains (GVCs). Th is activity will focus on understanding why Vietnamese SME involvement is low, and how involvement can be increased, through a learning process based on facilitating a handful of transactions and conducting sectoral-level research. Armed with information gained through that process, an activity advisory committee (comprised of private sector partners, SMEs, GVN partners, USAID, and business associations) will work with the implementing partner to develop and implement a plan designed to transform SME involvement in global trade within targeted sub-sectors. The implementing partner will also be involved in helping to fac ilitate ' transactions,' or contracts between SMEs and foreign direct investment (FD!) firms for the SME to participate in the GVC. Targeted sectors will be identified by the prospective implementing partner at the time of proposal submission.

Anticipated interventions in both TFP and LinkSME include technical and policy advice, training workshops, study tours, research studies, surveys and information transfer.

Recommended Threshold Decisions

Justification for Categorical Exclusion Request

The activities described justify Categorical Exclusions, pursuant to 22CFR2 I 6.2(c)( I) and (2), for which an Initial Environmental Examination, or an Environmental Assessment are not required because the actions do not have an effect on the natural or physical environment.

Specifically, as currently planned, these activities fa ll into the following classes of action: - Education, technical assistance, or training programs except to the extent such programs

include activities directly affecting the environment (such as construction of facilities, etc.) - Analyses, studies, academic or research workshops and meetings - Document and information transfers

As currently planned, no interventions will directly affect the environment.

Climate Risk Management

Located on the tropical typhoon belt, Vietnam is considered one of the most hazard-prone countries in the world. This situation is compounded by a host of non-climate factors such as high population density, high levels of poverty concentrated in coastal areas vulnerable to extreme events, and extensive low-lying land highly susceptible to flooding. While there is high dependence on climate-sensitive livelihoods such as fishing and rainfed agriculture, growing industrial and service sectors have reduced the relative contribution of agriculture, forestry and fishing to GDP. However, these sectors still collectively contribute 21 percent of GDP and employ over 47 percent of the country' s labor force, according to the World Bank. 2050 climate projections foresee a 180% increase in the frequency of heat waves, an increase in temperature of 1-2° C, and more extreme variability in precipitation between the dry and wet season.

During the USA ID/Vietnam CDCS Strategic Midpoint Portfolio Review in 2016 as well as the development of the Vietnam Integrated Country Strategy (ICS) for 2017-2020, existing objectives were evaluated to determine ifthere is a low, moderate, or high risk that climate change could impact attainment of objectives. Both the overall I CS and the CDCS were rated " low" when taking into account potential actions to Vietnam' s climate risk profile. Given the overall low risk rating, a high-level climate risk screening of the activity has been conducted and is presented below.

Further Analysis aind Actions for OpportunitiH

Defined or Activity to Strengthen Anticipated Project How Risks Addressed Design/lmp~ment Clim•te Elements Climate Risk Risk Raiting at Project level ation Resilience

linksSME

S.CCo"S and proWIC:H I" pro\ .. se<::or-Wldt dtnt.l..o eg ICCHS to •s.1anc:t a;oc •• re ProJl<:l •S a:iaptNtly Au.us parlleula• r .sk of a"'CI •ce•1,,z1

S:rt• ;t~tn t~t m.a•.factunng 'IUIY be dtsg••d and hu not odtl\t.:f.+d cltmat .. sl1'..art S\IE-GVC Bus ntss ~11rly suSttplble :o fflt<:ted ~ov "OH s.ec:o-s to •westl'N!nt L.•u;t i:.,.,...,vork tlood.d•ough: nsic '""" seccors. atoarap!\111 climaltU< Strlll~llS

tmpro\'e se<:or-wldt acctn 10 .r.sJrance, ~tVIZt

climate-smart "lVHllT'i!nl

S.O:o"S and proWICH strat~,.s. a•d 6tnL1'ed tg ensJre 11:dus try a;nc •• r• Project is adapt~ly Assess pattieulat r sk of clusl*rs c.lp~ity

Erhance VN SME firm IN" u1actuMg 'IUIY ~ desgr:ed and has not dtnllfied b~ khng inc:Judes cap1eq to s;ipply GVC ~l.lrly susctplb t to stltteted prov •ou'wc:o"S to bu: pr.c:t-cts on firms flood. d '()UOh: f"S,( LO'l'I sectors.a.o:irap'lJtS c:Jwratt • S< b"•ldio; res ••ct

St~O"S Ind pl"OVV'ICH rrprovt sec:or-vlldt dtnL~ed tg atetss to • s. r anc:t a;nc."' r• ProjlCI IS allptllltly An.tu par:.cula• r sk of a•<Q "c:."t,,.:t <N" .fKtuong 'lllly bt dtsg•ttd and hH not dttnLr!ltd cima1e-s~rt

Enhance VI\ SME firm parteu11rly suscttptb t lO sttle<:tttd p•ov • OH leO'.O'S IO nwuir-.nt tlric.trcy flood d•ough: r sic ... ow StclOfS. O.o:!rJp r_,15 clon-111 r ~ Stllll!':,.s

Trlde Fuiht1b0n Prognm r-por. , • d t>q)Olt

po.icots s1r-p •d and coo•o .nattd across G\N 'IA - C'n 'IA 'IA 'IA

C001'~11a:ion al'ld -np11t"lrtr.o• Sl'ltnQ:t:t•l!'d be-n Ct·:ti -Ovt. rd tf'0'V"""'t:e5 v. -CHI 'IA 'IA '-IA

i=o1q eootd-..atoo• a· d 111po1...,rt1:J0• a: p•oV"•c.al l'lt 'l\prove; 'IA ~Oil •.jA 'IA 'IA

1'10-ottnl CUSIO"IS policy :o ti" brace \V"'O • sk-r- .gwg e;istoms approaches •.jA :.ow 'IA 'IA '-IA

Revisions and Limitations

Specific sectors will be proposed by the offerer at the time of proposal submission and the Contract Officer's Representative will closely consult the Mission Environmental Offi cer on sectoral impact. Once sectors and future interventions have been further defi ned, an amendment to this IEE will be prepared. To the extent that the proposed sectors technical assistance/capacity building interventions are proposed that encourage the scale up of activities with impact on the environment, or any other activities are considered outside of those described in this document, these wi ll be included in the IEE amendment. Sector guidelines on impact mitigation available on the USAID GEMS site wi ll be utilized as needed (www.usaidgems.org/sectorGuidelines.htm).

Pursuant to 22CFR216.3(a)(9), as planned interventions are further defined , new interventions are added and/or information becomes availab le which indicates that interventions to be funded by the project might be "major" and the project's effect "significant," this determination will be

1/18/18