This paper explores the role of environmental funds for helping control water pollution in Vietnam. Pollution control funds are urgently needed as a transitional mechanism for better managing the increasingly serious water pollution problem in terms of load, concentration and toxicity. Such funds focus on providing financial and technical support for polluting firms so that Government commitments to pollution control can be met. The paper sets out the rationale for providing concessional funding for water pollution control, describes current funding mechanisms for pollution control that are already in place, and examines the main considerations in setting up funds. Seven key principles are proposed that should guide fund design and operation as a transitional measure while the needed policy, administrative, technological and enforcement capacities are gradually put in place. The final section outlines the particular benefits of developing Provincial Environmental Protection Funds as vehicles for integrated capacity building and pollution control funding.

 This paper is based on the findings and recommendations from a number of recent reports on pollution and pollution control in Vietnam – they include a national audit of pollution in manufacturing industries and review of pollution control legislation, planning and administration in Vietnam conducted by ICEM for the World Bank (ICEM 2007); a survey of financing demand amongst polluting establishments, financing mechanisms for pollution control and the costs of wastewater treatment in Vietnam conducted by ICEM for JICA Vietnam (ICEM 2010a); a study of revolving funds for water pollution prevention also for JICA Vietnam (ICEM 2010b); and, research by ICEM for the Asian Development Bank (ICEM 2008) and by the World Bank on point source pollution issues in the Nhue-Day and Dong Nai river basins (LBCD 2010).