Foreign enterprises can boost Vietnam's green growth with investment in renewable energy and eco-friendly production chains.
Although Vietnam is, in absolute terms, still a minor polluter it has been making a stronger commitment towards environmental protection. The recent push for investment in eco-friendly production processes and renewable energies reflect its desire for sustainability. The message appears to be gaining traction among those in the business world, as there is heightened interest in the renewable energy sector from foreign investors while a greater number of foreign-invested enterprises (FIEs) already in Vietnam have been adopting green ways of doing business.
Vietnam does not have the financial resources many other countries do to set up funds for supporting energy development. Thankfully, the country has a huge basin of renewable energy sources, including solar, wind, biomass, geothermal and hydropower, which are all capable of supplying a large proportion of its energy requirements. But these green energy sources remained largely untapped until recently, when the government, faced with escalating fossil fuel costs and environmental issues, set the development of renewable energies as a top priority.
As cited in the National Environmental Protection Strategy to 2020 and Vision to 2050, the proportion of new and renewable energy in the country’s total energy consumption is to increase to 5 per cent by 2020 and 11 per cent by 2050, from the current 2 per cent. This target suggests that the potential for foreign companies to invest in green energy is huge.
Foreign companies have many advantages in supporting green growth in Vietnam, including capital and expertise in green technologies. This is why specifically calling for foreign investment in this field is key to success. But as the experience of other countries shows, good intentions are not enough. If policies and incentives don’t work properly it will be difficult for Vietnam to work towards a green economy.
Investing in sustainable clean energy projects is a great way to help the environment and foreign companies know this well. But even if they are keen to be green or are simply attracted by the high returns on offer, they understand the risks in embracing green investment opportunities. Under current legislation, foreign investors are entitled to maximum incentives for every aspect relating to solar and wind energy projects, such as land or water surface lease terms and fees, corporate income tax, value-added tax, import and export duties, land site clearance, and depreciation of fixed assets, among others.
Still, the procedures and approval process are slow and complex, not to mention that renewable energy investments tend not to be as attractive as other energy investments. Mr Nguyen Duc Cuong, Director of the Ministry of Industry and Trade’s Institute of Energy, said that although Vietnam had potential for developing renewable energy it still lacks incentive policies to attract foreign investors to the field. “A major obstacle for investors is the low sale price of electricity,” he said. Under existing rules, investors must negotiate with Electricity of Vietnam (EVN), the country’s sole power distributor, over the average sale price of 7.8 cents/kWh.
Of a similar mind, Mr Mark Tribble, Director of the Vietnam Clean Energy Programme under the US Agency for International Development, believes that the energy Vietnam offers is not attractive to investors compared to regional countries. “An inevitable rise in prices will lead to affordability issues among the Vietnamese population, but it is clear that the current low prices are not appealing enough for investors,” he said.
With a comparatively low per capita income, Mr Cuong explained, if Vietnam sets a wind power price equal to other countries it will be hard to ensure social welfare. Therefore, it will consider issuing an appropriate roadmap to ensure the interests of both foreign investors in wind power projects and consumers. “The country will also establish a more comprehensive wind power database as well as make adjustments to electricity prices and others,” he said.
Some FIEs have begun to respond warmly to Vietnam’s calls for foreign investment in renewable energy. For example, General Electric International (GE) and the Electricity Regulatory Authority of Vietnam (ERAV) recently signed a contract to develop a wind grid code to increase renewable power sources in the country. Funded by a technical grant from the US Trade and Development Agency (USTDA), a team from GE will conduct an assessment of the country’s current wind power capabilities and strategies for expansion. This project will form the basis for future renewable energy projects for US wind power producers in Vietnam.
Vietnam has made noticeable changes in shifting its efforts in foreign direct investment (FDI) attraction to green technology, hi-tech, and capital-intensive sectors, and now discourages polluting FDI projects. As a result, the country’s growing demand for eco-friendly technology is on the radar of many foreign companies.
For example, a leading South Korean company in green building materials, Gmatek, is considering seeking Vietnamese partners to export its products to the country. “If we succeed in establishing a network of partners we will build a factory here,” said Mr Jean-Mann Cho, President of Gmatek. Gmatek was among some 50 South Korean companies that visited Hanoi to showcase their eco-friendly building-related products and seek local partners. They were encouraged by the government’s plans to promote a low-carbon economy, in which environmentally-friendly products would gradually be applied in buildings.
Additionally, a sustainability network has been started by French companies, including APB Environment, Ecodas, and Eau Pure. They have worked with the Ministry of Health and hospitals in Vietnam to introduce modern technology for healthcare waste treatment on site, helping to reduce greenhouse gas emissions.
Meanwhile, a group of British businesspeople recently visited Vietnam, and Mr Mark Comerford, International Business Development Manager at the UK’s Spectrum Environmental Group, indicated the group’s willingness to work with local enterprises in promoting green business. “We want to work with the government, State-owned and private enterprises in Vietnam on investment opportunities in distributing our technologies, like static mobile incinerators, static or mobile medical waste disposal and energy recovery systems,” he said. “Our technologies can provide environmentally-secure incineration systems with smoke, gas and odour emissions virtually eliminated.”
Among the FIEs with a presence in Vietnam’s construction materials market is the Xella Group, a supplier of eco-building materials such as fermacell dry-lining systems. “We believe that Vietnamese developers are keen to learn more about the advantages of new and eco- building materials,” said a company representative. “Vietnam has a long history of clay-brick masonry and as a result it will take some time to educate the market.” He believes that local organisations are key resources in helping educate the market about green buildings.