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As the world is combating the adverse effects of climate change, there is a growing focus on sustainable investments (green investments). Vietnam is a leading region in this shift towards a greener future due to its favorable policies. This has led to a surge in opportunities for sustainable investment in Vietnam, particularly for foreign investors.
In this article, we will explore the landscape of green investment in Vietnam and how foreigners can invest in this sector.
What is a Sustainable Investment in Vietnam?
Sustainable investment or “Green Investment” refers to the investment in projects that have a positive environmental impact. These projects aim to reduce carbon emissions, improve energy efficiency, and develop sustainable infrastructure.
Opportunities for Sustainable Investment in Vietnam for foreign investors
Vietnam’s sustainable sector is a favorable investment due to the government’s supportive policies and growing public demand for eco-friendly practices. Following are some of the opportunities for foreign investors:
Investment in Renewable Energy in Vietnam
According to McKinsey, Vietnam has the potential to generate 160 gigawatts of electricity from renewable energy sources, including solar, wind, and hydropower. This potential opens up investment opportunities in the renewable energy sector for foreign investors looking to benefit from Vietnam’s transition to clean energy.
- Solar Energy Investments: Vietnam’s tropical climate and high solar irradiation (averaging 5 kWh/m.sq. per day) make it ripe for solar energy projects. Provinces of Binh Thuan, Ninh Thuan, and Tay Ninh receive the highest average solar radiation in the country. These locations are ideal for large solar farms.
- Wind Energy Investments: Vietnam has a coastline stretching over 3,000 kilometers, making it ideal for both onshore and offshore wind farms. Areas such as Binh Dinh, Quang Tri, and Gia Lai have attracted significant wind energy investments due to their consistent and strong wind speeds.
- Hydropower Investments: Vietnam has a number of rivers suitable for hydropower dams, including the Mekong River, the Red River, and the Song Ma River. Provinces such as Lao Cai, Son La, and Thanh Hoa have already seen considerable hydropower development due to their abundant rivers and high rainfall.
Investment in Sustainable Agriculture in Vietnam
Sustainable agriculture is another green sector gaining traction in Vietnam. A report from the Ministry of Agriculture reveals that the demand for organic food will grow at a growth rate of 20% from 2022 to 2028. With increasing consumer demand and favorable conditions for sustainable investments, Vietnam presents appealing opportunities for foreign investors interested in sustainable agriculture.
Investment in Green Real Estate and Construction
Green buildings are environment-friendly constructions that use less energy and water and produce less waste than traditional buildings. As urbanization continues to surge in Vietnam, the government emphasizes the development of green buildings. Some examples of eco-friendly investment projects in Vietnam’s real estate include:
- The construction of LEED (Leadership in Energy and Environmental Design)-certified buildings.
- The renovation of existing buildings to make them more energy efficient.
Investment in Eco-friendly Transportation in Vietnam
Vietnam is focusing on green transportation initiatives, including electric vehicles and eco-friendly public transportation systems. The government of Vietnam plans to have all transportation run on green energy by 2050. In addition, they also aim to develop green charging infrastructure nationwide. Foreign investors have the opportunity to invest in the country’s growing demand for greener mobility options.
Some examples of investment projects in green transportation in Vietnam include:
- Construction of bus rapid transit systems.
- Development of bicycle-sharing programs.
- Installation of electric vehicle charging stations.
Why Invest in the Sustainable Sector of Vietnam?
Vietnam’s green sector provides good reasons for foreign investors to consider investing in this market.
Incentives and Policies to support sustainable investment in Vietnam
Vietnam is attracting foreign investment in eco-friendly sectors. This is supported by a number of policies, regulations, and tax incentives.
- Tax Incentives: Vietnam passed the Law on Investment in 2020 which provides tax incentives for investments in green industries. It offers a 10% corporate income tax rate for 15 years for companies investing in eco-friendly projects and renewable energy. This is a 50% reduction from the standard CIT rate of 20%.
- Feed-in Tariff Scheme: The FIT scheme guarantees a fixed price for electricity generated from renewable sources, such as solar and wind power. This stable and predictable revenue stream provides investors with a degree of certainty and reduces their financial risks.
- Free-Trade Agreements (FTAs): Vietnam has signed several Free Trade Agreements (FTAs) that give easy market access to green products and services. One notable example is the Vietnam-EU Free Trade Agreement (EVFTA), which encourages trade in eco-friendly goods and services by reducing tariffs on such products.
- Vietnam Energy Efficiency and Conservation Fund (VEECF): This fund provides financial assistance in the form of grants and low-interest loans to support energy efficiency projects including transport, construction, and agriculture sectors.
- The Vietnam Green Growth Strategy (VGGS): It provides long-term guidance for green growth projects in Vietnam. The strategy aims to reduce greenhouse gas emissions, improve energy efficiency, and promote sustainable development.
These incentives and policies have been successful in attracting significant foreign investment in Vietnam’s renewable energy sector. In 2022, the country received a record $10.6 billion in foreign investment in renewable energy, up from $8.2 billion in 2021.
Growing demand for green products and services
Vietnamese consumers are becoming more aware of the importance of environmental sustainability. A 2021 survey by Statista found that 81% of Vietnamese respondents want to use eco-friendly products. As a result, there is an increase in demand for green products and services, such as energy-efficient appliances and sustainable transportation.
How to participate in sustainable investment in Vietnam as a foreign investor?
Vietnam amended its investment law in 2018 to allow 100% foreign ownership of local companies in the sustainable sector. This opened up the door for foreign investors to invest in a wide range of energy projects, including renewable energy in Vietnam.
Foreign investors can choose among three permitted investment forms in the green sector:
100% foreign-invested company
This is the most common form of investment for foreign investors in the energy sector. It allows foreign investors to own 100% of the shares of a company in Vietnam.
Joint venture
This form of investment allows foreign investors to own shares of a Vietnamese company, up to a maximum of 90%. So, Vietnamese investors must own the remaining 10% of the shares.
Public-private partnership (PPP)
This form of investment allows the government and private investors to collaborate on a project. So, the government provides the land and infrastructure, while the private investor provides the capital and expertise.
The Vietnamese government has made it clear that it is open to foreign investment in the energy sector. This is a positive development for the country, as it will help to meet the growing demand for energy and boost the economy.
Emerhub helps foreign companies to register their company in Vietnam in the green sector and assists in meeting all the regulations.
Investing in a Sustainable Future: Leading Companies in Vietnam and Their Eco-friendly Initiatives
Leading companies in Vietnam are investing in a green future through their green initiatives. These companies recognize the importance of sustainability and are making significant contributions towards environmental preservation.
- Dragon Capital Group, an asset manager in Vietnam, has recently shifted its focus to green sectors, particularly renewable energy through its clean energy fund called Viet Nam Renewable Energy Fund II (VREF II). It has invested over $1 billion in renewable energy projects in Vietnam including Trung Nam Solar Power (204 MW) and BIM Solar Power (330 MW).
- LEGO Group is completing its first carbon-neutral facility in Vietnam-Singapore Industrial Park. Further, it will feature rooftop solar panels and a neighboring solar farm to meet energy requirements.
- Google is investing in renewable energy projects in Vietnam, such as a solar power plant in Ninh Thuan province.
- Facebook is building a new data center in Vietnam that will run on renewable energy.
- Samsung is investing in green manufacturing in Vietnam with a construction of a new solar-powered factory.
Foreign investors are encouraged to invest in Vietnam’s green sector due to its favorable investment environment. At Emerhub, our experienced team provides comprehensive support. From market research to legal compliance, to help investors navigate Vietnam’s green sector successfully.
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