Promoting Sustainable Infrastructure in Vietnam

8:19:31 AM | 5/17/2023

According to PwC's research on green infrastructure, Asia-Pacific's middle to low-income nations, including Vietnam, need to invest up to 60% of new infrastructure for green transition purposes.

Vietnam is the leading country in Asia for infrastructure investment, currently spending 5.7% of its GDP on infrastructure, including renewable energy infrastructure

Asia-Pacific lacks capacity to fund green transition

PwC's latest research on green infrastructure shows that Asia-Pacific's middle to low-income nations, including India, Indonesia, Philippines, Thailand and Vietnam, are where 60% of new infrastructure investment is needed most (for green transition purposes). However, these countries lack the capacity to fund the necessary green transition, which highlights the need for foreign direct investment and support from foreign grants. Meanwhile, developed nations are failing to meet a long-standing pledge to deliver US$100 billion to help poorer countries cope with climate change by 2020, as reported by the OECD.

On a positive note, investor interest in sustainable investments is rising, with Environment, Social and Governance (ESG) considerations becoming increasingly important in investment analysis and decision-making, as per PwC's Global Investor Survey. Furthermore, partnerships backed by government or international finance are emerging, providing financial institutions with assurances to align their investment portfolios towards meeting the goal of limiting global warming to 1.5 degrees as agreed during the Intergovernmental Panel on Climate Change in late 2018. The commitments made at COP26 (26th United Nations Climate Change conference) and net-zero target by 2050 have also significantly boosted investor interest in sustainable infrastructure investments, with a surge in investments in renewable energy, green buildings and other sustainable infrastructure projects.

To tap into this finance pool, governments must prioritize green elements and promote infrastructure projects that support fair and inclusive transition to low-emission economies, while accelerating climate-resilient growth. It is also crucial to develop capacity and upskilling in renewable energy.

The involvement of the private sector is important in achieving sustainable infrastructure, especially in areas with limited public resources. With their financial resources, technical expertise and efficiency, private sector entities can help bridge the infrastructure gap and support the transition towards sustainable development.

At the recent Asia-Pacific Capital Projects & Infrastructure Summit, organized by PwC Vietnam, Mr.  Adrian Box, Partner in PwC Australia and Asia-Pacific Infrastructure Leader stated: "At PwC, we recognize the significant challenges facing the delivery of sustainable infrastructure in the Asia-Pacific region. Our commitment is to bring together the private and public sector to collaborate and find effective solutions to these challenges. By working together, we can create innovative policy solutions and ensure the successful delivery of sustainable infrastructure projects that benefit communities and support economic growth."

High pace for Vietnam

Vietnam is the leading country in Asia for infrastructure investment, currently spending 5.7% of its GDP on infrastructure. The country is undergoing a major transition towards becoming a high-income economy, and infrastructure development plays a key role in achieving this target. Vietnam is investing heavily in infrastructure to support economic growth, improve the lives of its citizens, support energy transition, and increase its resilience to climate change and natural disasters.

Mr. Dang Huy Dong, President of Vietnam’s Planning & Development Institute, and former Vice Minister of the Ministry of Planning and Investment commented: “Vietnam's National Master Plan for 2021-2030 with a vision to 2050 emphasizes the need for an efficient and sustainable spatial organization model for national development, supported by modern and interconnected infrastructure. The government has implemented several policies and initiatives to support sustainable infrastructure development such as investing in renewable energy sources, encouraging the adoption of green building practices, and promoting e-mobility.”

The challenges facing investors and public agencies in infrastructure investment in Vietnam, include the lack of clear and accurate visibility of demand for infrastructure, poor coordination across multiple actors during the project life cycle, limited public funding capability, complex legal and institutional landscape, and capital and time sensitivity.

Tackling these challenges requires long-term planning, clear project pipelines, and integration of local strategic and regulatory frameworks with national policies to attract private investors and developers. Sub-national governments may lack the capacity, experience, and financial resources for high-quality infrastructure project preparation, hence assistance from national governments and international institutions is needed. Allocating project risks between private and public sectors is also important, with examples including the government absorbing demand risk for new toll roads in underdeveloped areas to make such projects more viable for private investment.

"Developing the infrastructure required for sustainable growth in Vietnam is a complex challenge, but one that presents significant opportunities for stakeholders and investors. We believe that by prioritizing green, sustainable and inclusive infrastructure projects, we can help accelerate the country's transition to a high-income, low-emission economy and contribute to creating a sustainable future for the people of Vietnam," said Edward Clayton, Partner, Capital Projects and Infrastructure Leader, PwC Vietnam.

By Duy AnhVietnam Business Forum