A destination for sustainable European investments

Vietnam is increasingly demonstrating its determination to transition to a green and sustainable economy, realizing the commitment it made at COP26 in late 2021 to achieve net-zero emissions by 2050. How would you evaluate its transition so far?

Vietnam has taken commendable steps on its journey towards a green and sustainable economy, underscored by its commitment at COP26 to achieve net-zero emissions by 2050. Significant investments in renewable energy, particularly in solar and wind, highlight this determination.

By the end of 2023, renewable energy sources, including solar and wind, constituted 26.9 per cent of the country’s total installed capacity - equivalent to around 22 GW - according to a Vietnam Electricity (EVN) report. This capacity is sufficient to provide power to approximately 20 million people, positioning Vietnam as a leader in renewable energy adoption within Southeast Asia.

When hydropower, which accounted for 28.4 per cent of the energy mix, is included, more than 50 per cent of Vietnam’s energy mix in 2023 came from renewable sources; a remarkable achievement for a developing economy.

The Just Energy Transition Partnership (JETP), established at the end of 2022, promises to accelerate this transition. With $15.5 billion in grants and loans divided between public and private funding, JETP offers an opportunity to scale Vietnam’s green energy ambitions. However, progress has been slow, with delays in defining frameworks and identifying projects eligible for funding. Once these systems are in place, the JETP could play a transformative role in Vietnam’s transition.

Vietnam’s openness to collaboration, especially with European partners, demonstrates its commitment to combating climate change. However, challenges persist. Regulatory ambiguities, inconsistent policies, and infrastructure gaps remain significant obstacles. To fully realize its green transition, Vietnam must prioritize legal reform, enhance technical expertise, and foster continuous dialogue with international stakeholders.

With the right frameworks and partnerships, Vietnam can further solidify its position as a regional leader in renewable energy while ensuring sustainable growth and resilience against climate change.

What contributions are EuroCham in particular and the European business community in general making to this transition in Vietnam?

Through advocacy, investment, and knowledge-sharing, EuroCham and European businesses are actively driving sustainable innovation across multiple sectors. European companies are global leaders in sustainability, and their investments in Vietnam reflect this commitment. These efforts not only reduce carbon emissions but also align Vietnam with global best practices while meeting its growing energy demands.

Practical examples abound. A brewery in Vung Tau in the southern region employs locally-sourced biomass for thermal energy, while numerous European firms have integrated rooftop solar systems into their manufacturing processes. Beyond energy efficiency, European enterprises have also enhanced Vietnam’s waste management capabilities and developed carbon-neutral factories equipped with cutting-edge, energy-efficient technology.

European contributions extend beyond the energy sector. In sustainable agriculture, European companies are empowering coffee farmers to adopt regenerative practices, promoting environmental health and economic resilience. In green finance, European investors are supporting the development of industrial infrastructure designed to withstand extreme weather events, demonstrating a long-term commitment to Vietnam’s climate adaptation efforts. Additionally, eco-tourism initiatives led by European businesses are helping preserve Vietnam’s natural beauty while promoting sustainable travel.

EuroCham serves as a key enabler of these efforts. Through platforms like the Green Economy Forum & Exhibition (GEFE), it fosters dialogue, collaboration, and knowledge-sharing between European businesses, Vietnamese stakeholders, and international organizations. These initiatives ensure Vietnam has access to the expertise, technology, and financial resources needed to achieve its sustainability goals.

Looking ahead, EuroCham is committed to addressing challenges such as regulatory barriers and policy inconsistencies to unlock further opportunities for sustainable growth. By promoting collaborative partnerships and innovation, EuroCham and the European business community are helping Vietnam navigate its green transition while fostering inclusive and resilient economic development.

What sector most clearly demonstrates the investment of European businesses in contributing to Vietnam’s green growth process?

Renewable energy stands as the most prominent sector showcasing European businesses’ contributions to Vietnam’s green transition. European companies have led the development of wind and solar power projects, addressing Vietnam’s rising energy needs while reducing its carbon footprint. Many European businesses also integrate green practices into their operations, from energy-efficient buildings to sustainable manufacturing processes.

Other sectors, including green finance and smart agriculture, further highlight Europe’s commitment to sustainable growth. Eco-tourism is also gaining traction and represents a niche market that Vietnam can easily tap into.

The success of these sectors stems from a shared vision of sustainability between Vietnam and Europe, supported by Vietnam’s favorable policies and strategic location. These collaborative efforts not only accelerate Vietnam’s green transition but also enhance economic opportunities for both sides.

What favorable conditions does Vietnam’s investment environment possess that attract European businesses to invest in these fields?

Vietnam offers a dynamic investment environment that attracts European businesses, particularly in green sectors. Its strategic location as a gateway to ASEAN, coupled with free trade agreements like the EU-Vietnam Free Trade Agreement (EUVFTA), provides seamless access to regional and global markets.

The government’s proactive policies, such as tax incentives for renewable energy projects and favorable terms for green investments, create an enabling ecosystem. Vietnam’s abundant natural resources, particularly its strong solar and wind potential, make it an attractive destination for renewable energy development.

Another critical factor is Vietnam’s competitive operational costs. Energy prices remain relatively low, and the country boasts a highly loyal, adaptable, and cost-efficient workforce. These elements provide European businesses with both economic efficiency and stability. Furthermore, the rise of Vietnam’s middle class and increasing consumer awareness of sustainability create a ready market for environmentally-friendly products and services.

Vietnam’s openness to international collaboration and its ongoing regulatory reforms also appeal to European investors. The government’s commitment to addressing business concerns and fostering dialogue, often facilitated by EuroCham, strengthens the confidence of foreign enterprises.

Trade and investment data reinforce this favorable outlook. Between January and October 2024, Vietnam and the EU posted two-way trade of €54.8 billion ($56.8 billion), a 16.7 per cent increase compared to the same period of 2023, as reported by the General Statistics Office (GSO). European FDI in Vietnam also reached approximately €1.3 billion ($1.34 billion) in 2024, according to the Ministry of Planning and Investment (MPI), further reflecting the deepening partnership.

These favorable conditions, combined with Vietnam’s ambitious sustainability agenda and its strategic integration into global markets, position the country as a top destination for European businesses looking to invest in green growth sectors.

What count among the challenges?

Despite its favorable conditions, Vietnam’s investment environment still faces several challenges. Regulatory ambiguities, such as conflicting laws on renewable energy procurement, create uncertainties for investors. Bureaucratic inefficiencies, including slow permitting processes and unclear administrative procedures, can delay project implementation. Infrastructure limitations, particularly in grid capacity, pose significant hurdles for renewable energy integration.

Labor shortages in highly-skilled fields, such as quality management and electrical engineering, further complicate the transition. Additionally, overlapping responsibilities among government agencies can lead to inconsistent policy enforcement.

To overcome these challenges, fostering public-private partnerships (PPPs) and streamlining administrative processes are essential. EuroCham remains committed to working with Vietnamese authorities to address these barriers and unlock the full potential of Vietnam’s green economy.

What suggestions and recommendations would you make to Vietnamese policymakers to attract more European businesses to invest in these fields?

To attract more European businesses to green sectors, Vietnam should prioritize:

Streamlined processes and regulatory clarity: Reduce bureaucratic hurdles and accelerate approvals for foreign investments. Simplify and harmonize laws to ensure consistency and transparency, particularly in renewable energy procurement and ESG (environmental, social, and governance) compliance.

Incentives: Expand tax breaks and financial incentives for green investments, especially in innovative technologies like green hydrogen and energy storage.

Infrastructure development: Upgrade grid capacity to accommodate renewable energy and improve transport networks to support green logistics.

Capacity building: Invest in workforce training to equip local talent with skills for green and high-tech industries.

By fostering collaboration and implementing robust policy reforms, Vietnam can solidify its position as a leading destination for sustainable European investments, driving mutual growth and long-term resilience.