The conventional financial model, mostly relied on public funds backed by government guarantees, for the energy sector in Vietnam are no longer tenable, while the domestic private sector has involved in developing renewable energy generation projects. Hence, there must be a progressive shift of responsibility for investment in renewable energy to the private sector, in line with the government’s own objective set out in its development plan. However, there are three main sets of constraints affecting principal channels for raising additional capital, including the lack of consistency in form of Public-Private Partnerships, the limited access of major SOEs from international financial markets without recourse of government guarantees (not be further discussed due to its irrelevance to concerns hereof), and the unavailability of long-term packages in domestic debt and capital market.
The government needs to recognize that the efficiency and improved infrastructure services gains that can be accrued through successful PPPs are, over the long term, more important than the simple objective to mobilize private investment and to help fill a public sector budget gap. In this context, government is responsible for ensuring greater policy clarity and consistency with respect to opening up more private sector participation opportunities. Furthermore, the local capital foundation could be improved through the financial initiatives, particularly the “green” banking program, and the “green” corporate bond market to finance the environmentally-friendly infrastructure, including large-scale renewable energy projects.
Reference: Nguyen, T.H.Accelerating private investment in Vietnam renewable energy: prospects and constraints.2019 Vietnam Sustainability Forum (VSF-2019). Academy of Policy and Development(Ha Noi, 17-18 January 2019)
About author: Ha Nguyen (LLB, LLM), a partner of Huy&Partners LLC., is interested in cross-border trade and investment, energy, infrastructure construction, competition and State-owned enterprises. He has participated in energy megastructure projects in Vietnam and other ASEAN countries (Nghi Son Refinery & Petrochemicals Plant, Song Hau 1 coal-fired power plant, petroleum production platforms in Vietnam offshore, Petronas RAPID project, Southern Johor, Malaysia) and airport projects in Vietnam (T3 Terminal – Tan Son Nhat Airport, Long Thanh international airport (phase 1)). He has also published a few articles on Vietnam oil and gas sector, renewable energy, State-owned enterprises privitisation and competition.
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