FDI Enterprises Pioneer Green Growth Strategies

10:05:53 AM | 4/4/2024

The Annual Vietnam Business Forum, under the “FDI Enterprises Pioneer in Implementing Green Growth Strategies” was recently convened in Hanoi. This event was a collaborative effort between the Ministry of Planning and Investment, the World Bank (WB), and the International Finance Corporation (IFC). The 2024 edition of the VBF was amalgamated with the Prime Minister’s meeting with the FDI business community, signifying an important milestone with an impressive turnout of over 600 members.

Prime Minister Pham Minh Chinh and other delegates attend the meeting with the FDI enterprises and the Vietnam Business Forum, Hanoi, March 19, 2024

According to Minister of Planning and Investment Nguyen Chi Dung, the world is increasingly witnessing many new robust trends. Particularly, green growth has become an inevitable trend, an indispensable factor of sustainable development.

Minister Nguyen Chi Dung affirmed that Vietnam’s economic achievements in the past years have been importantly contributed by the foreign direct investment (FDI) sector. This is a strong testament to Vietnam’s consistent policy stance on the FDI sector as an important component of the economy. The FDI sector is encouraged and facilitated for long-term development and healthy competition with other economic sectors. FDI firms not only invest and do business effectively and contribute to Vietnam's socioeconomic development but also consult the Government on policies and importantly help improve the open and transparent investment and business environment in Vietnam.

Recognizing the importance of green growth to the country's future, the Prime Minister approved the National Strategy on Green Growth for the 2021-2030 period, with a vision to 2050. The strategy clearly defines green growth as an important solution to promote economic restructuring, reform the growth pattern, improve competitiveness, and directly help reduce greenhouse gas emissions towards a carbon neutral economy in the long term.

In that process, the business community is identified as a central factor that plays an important role. With their strengths in capital, technology, governance, network, market and other elements, FDI firms must play a pioneering role, lead and accompany domestic enterprises to achieve the goals of the Green Growth Strategy.

Minister Dung emphasized that green growth is key to ensuring the successful achievement of the goals in the 10-year Socioeconomic Development Strategy in the 2021-2030 period; creating opportunities for Vietnam to continue its innovation momentum, accelerating growth repatterning, promoting quality, efficiency and sustainability of the entire economy as well as at the corporate level.

Mr. Nitin Kapoor, Co-Chairman of VBF, said that this year’s event is a platform to promote dialogues and cooperation for stakeholders committed to fostering sustainable economic growth. Sustainability is essential for the well-being of the planet and future generations. “By emphasizing the key role of FDI enterprises in pioneering the implementation of green growth strategies, we hope to inspire viable solutions that benefit both businesses and society as a whole,” he stressed.

The overview of the meeting with the FDI enterprises and the Vietnam Business Forum

Prime Minister Pham Minh Chinh articulated Vietnam’s commitment to green growth, positioning it as a pivotal component, alongside digital transformation, in the nation’s economic restructuring and growth model overhaul. This strategic shift aims to bolster economic productivity, quality, efficiency and competitiveness, and foster rapid, sustainable development.

Vietnam firmly rejects the “grow first, clean up later” paradigm and the pursuit of growth at all costs. Instead, the nation is set to transition its growth model from “brown” to “green”. This involves the mobilization and effective utilization of both domestic and foreign resources to foster the development of a green ecosystem, promote a circular economy and facilitate low carbon and energy transformation.

In conjunction with the robust advancement of the Fourth Industrial Revolution, this transition is not only a key trend but also a universal objective and a new engine of growth. No country can afford to remain on the sidelines of this transformative process.

Prime Minister Chinh said that Vietnam has actively and responsibly participated in promoting green growth and sustainable development. At COP26, Vietnam was committed to net-zero emissions by 2050 and participated in the Asia Zero Emission Community (AZEC) and the Political Declaration on establishment of the Just Energy Transition Partnership (JETP). Vietnam issued many strategies, master plans and detailed plans on green transformation such as the Climate Change Strategy; the Green Growth Action Plan; the Action Program on green energy conversion, carbon and methane emissions reduction; the Sustainable Forestry Development Program, and the Power Planning 8.

Besides, Vietnam is accelerating the implementation of the sustainable development project of 1 million hectares of high-quality, low-emission specialized rice in the Mekong Delta; and launching the “Developing large timber commercial forests for the 2024 - 2030 period” Plan under which the total area of large timber commercial forests will reach 1 million hectares by 2030, helping protect the ecological environment, adapt to climate change and mitigate natural disasters.

According to Minister Nguyen Chi Dung, economic recovery and development towards green, sustainable growth is currently the top priority and the goal that every country is aiming for. The overall goal is to achieve economic prosperity, environmental sustainability and social justice. For Vietnam, green growth is not only a vital choice but also an opportunity to become a pioneering country in the region and embrace the world's development trends.

Committed to economic transformation and environmental protection

Mr. Pham Tan Cong, President of VCCI

In the face of a challenging and unpredictable global landscape in 2023, the Vietnamese business community demonstrated resilience and adaptability. Under the guidance of the Party, the proactive and decisive governance of the Government, and the support of authorities at all levels, the business community successfully navigated these difficulties. Their persistent efforts and continued development played an important role in Vietnam’s economic achievements in 2023.

Vietnam maintained macroeconomic stability, controlled inflation, ensured major economic balances and enhanced the quality of its transportation infrastructure. An additional 730km of highways became operational since 2022, bringing the total length of the country’s highways to nearly 1,900km. The Government is currently channeling significant public investment resources into highway development. As per the plan, Vietnam will have 3,000km of highways by 2025 and over 5,000km by 2030.

In 2023, Vietnam’s GDP grew by 5.05% to US$430 billion, ranking 34th globally. As of 2024, Vietnam is projected to join the ranks of upper middle-income countries.

Significantly, Vietnam has elevated its partnerships with global powers and important markets such as the United States, China, Japan, and recently, Australia. Vietnam continues to establish itself as an attractive and secure destination for investors.

At COP 26, Prime Minister Pham Minh Chinh made a declaration of Vietnam’s commitment to achieving net-zero emissions by 2050. This statement underscores the Government of Vietnam’s political commitment and determination to drive economic transformation and address the global challenges of climate change and environmental protection. This high-level forum presents an opportunity for both domestic and foreign business communities in Vietnam to propose specific solutions to the Government to achieve this green growth objective.

Urgent action must be taken to apply and develop green ideas

Mr. Thomas Jacobs, IFC Country Manager in charge of the Mekong region

Foreign direct investment (FDI) serves as an important catalyst in introducing novel technologies, innovative ideas, practices and foreign capital to bolster strategies aligned with green trends. The green growth strategies of foreign investors, akin to those of domestic investors, necessitate the integration of effective Environmental, Social, and Governance (ESG) policies. This integration is essential to stimulate sustainable business activities, foster inclusive employment and drive growth.

In Vietnam, green growth is rapidly transitioning from an emerging trend to a business norm. To enhance financial performance and maintain competitive edge, companies are compelled to devise strategies, implement policies, cultivate a culture, and allocate resources toward greening their business activities. This approach taps into the potential for more sustainable development.

As investors in Vietnam, we bear a collective responsibility to demonstrate our commitment to green growth and the cultivation of a culture of sustainable development. This commitment must originate from the Board of Directors and permeate throughout the organization, ensuring that the company’s climate commitments are translated into tangible corporate actions.

Green ideas do indeed create green opportunities but we must act urgently to apply and develop these green ideas as well as serve strategies that are consistent with Vietnam’s vision.

Committed to supporting the Vietnamese Government in sustainability efforts

Mr. Denzel Eades, Vice Chair of the British Chamber of Commerce in Vietnam (BritCham)

We applaud Vietnam’s dedication to zero net emissions and sustainable development, as well as the government’s endeavors to champion this agenda. The UK private sector stands ready to contribute significantly across key sectors such as energy, finance, pharmaceuticals and consumer goods.

The recent adoption of the Power Development Plan 8 showcases Vietnam’s strong commitment to decarbonization. In alignment with our collective goal of sustainability, we recommend the swift implementation of the Power Development Plan 8, particularly in relation to the development of liquefied natural gas (LNG), solar power and wind power together with the development of legal regulations to enable such implementation, for example regulations that relate to the Direct Power Purchase Agreement (DPPA). To further support this initiative, we recommend the coordinated implementation of the Just Energy Transition Platform (JETP), aligning it with the Power Development Plan 8 and ensuring the readiness of specific pilot projects, particularly in offshore wind energy.

The UK private sector commits to supporting the Vietnamese government in its sustainability efforts, advocating for the development and implementation of Extended Producer Responsibility (EPR) and promoting a circular economy in plastic waste management.

Targeted tax incentives for green business activities

Mr. Gabor Fluit, Chair of the European Chamber of Commerce (EuroCham) in Vietnam

Eurocham’s 1,200 members and its 20 sector committees are all dedicated partners in this journey towards a green economy and net zero emissions. A central priority of EuroCham is promoting green growth strategies to reinforce sustainable development. Key sectors of European companies’ interests are improving waste management, raising public awareness and pioneering anti-plastic pollution solutions.

To promote this approach, key initiatives we propose include tax incentives to reward sustainable business practices and utilizing recycled waste plastic in road construction projects to reduce environmental impact and support the principles of the circular economy.

Closely tied to this is Vietnam’s green energy transition, a process slowed by unclear investor selection procedures, outdated infrastructure, vague power purchase agreements, transmission delays, non-competitive pricing, and financing shortages.

To combat this, Vietnam needs a comprehensive approach to boosting efficiency, renewable adoption, especially for offshore wind, and attracting private investment to modernize the grid.

Diverse incentive mechanisms and policies for FDI enterprises needed

Mr. Choi Joo Ho, General Director of Samsung Vietnam

I would like to thank the Government of Vietnam for always listening to the opinions of FDI companies and introducing timely solutions to help companies maintain their investment and business activities as well as solve administrative matters.

Samsung always desires to contribute to Vietnam’s development by expanding investment, growing revenue, increasing recruitment of Vietnamese personnel and adopting human resource training programs. Samsung invested an additional US$1.2 billion in Vietnam in 2023, bringing its total investment to more than US$22 billion. It planned to invest about US$1 billion a year in Vietnam.

To further improve the business investment environment, Vietnam needs to have diverse incentive mechanisms and policies for FDI enterprises. Regarding the Investment Support Fund administered by the Ministry of Planning and Investment, this will significantly contribute to fostering Vietnam’s greener and cleaner transition and will be the foundation for businesses to strengthen their trust in the Government.

Samsung proposed that the Vietnamese Government have a testing mechanism to attract high-tech investment to develop artificial intelligence (AI), semiconductor and ESG and ensure the consistency of policies and administrative procedures.

Collaborating with the Government to advance the semiconductor and AI industries

Mr. Phung Viet Thang, Country Director of Intel Vietnam

The elevation of the relationship between Vietnam and the United States to a comprehensive strategic partnership last year marks a significant stride forward, opening avenues for collaboration across both nations, particularly in the semiconductor industry. Intel, a global promoter of computing capabilities and a semiconductor chip manufacturer, has maintained a presence in Vietnam for 17 years and remains committed to future investment. We eagerly anticipate partnering with the Vietnamese government in fostering the development of a green economy, a circular economy, and sustainable development.

We have actively contributed insights and collaborated with the Ministry of Information and Communications on the National Semiconductor Development Strategy and the Semiconductor Human Resources Construction Project under the Ministry of Planning and Investment. We express hope for the prompt release of these initiatives, ensuring they are of the highest quality to bolster the entire semiconductor industry. Concurrently, this will enable Vietnam to adopt a long-term development approach that aligns with global progression.

We propose three recommendations to enhance Intel’s cooperation and seek support from the Government. Firstly, in terms of human resources, we have initiated a project on human resources development for the semiconductor industry, linking it with AI development in Vietnam. We aspire to foster training collaborations between domestic facilities and foreign entities, especially multinational corporations, to expedite semiconductor development.

Secondly, Intel has launched an AI training program in Vietnam, in partnership with the Ministry of Education and Training, Da Nang City and Ho Chi Minh City. This initiative undoubtedly necessitates the cooperation of all stakeholders to implement the Chips and Science Act, thereby supporting Vietnam in human resource training. In terms of technology infrastructure, we anticipate further advancements in constructing next-generation data centers and 5G infrastructure to provide the necessary infrastructure for AI development in Vietnam.

Lastly, regarding tax issues, we are aware that Vietnam has begun applying the global minimum tax. We express hope that the country will implement specific measures to alleviate companies from its impact.

By Anh Mai, Vietnam Business Forum