The report "Maximizing finance for energy development in Viet Nam" points out the lack of sustainability of the traditional financial model, which mainly relies on public investment through state-owned enterprises.
The World Bank’s research shows that from now to 2030, the average annual investment requirement of the power industry will be about USD 10 billion, concentrating at the beginning of the period, higher than the average of USD 8 billion/year in the period of 2011 - 2015. Meanwhile, the development of gas industry is expected to require an aggregate investment of about USD 20 billion in the period from 2015 to 2035.
Many power projects of Viet Nam have attracted private investors - Le Viet Photo
Mr. Ousmane Dione - Country Director of WB in Viet Nam commented: “Due to limited fiscal space and anticipated decreasing preferential financial resources, Viet Nam must increase mobilization of alternative financial resources for power and gas industries. The Government needs to comprehensively address all the bottlenecks that are hindering domestic and foreign investment inflows into the two most strategic areas of Viet Nam's economy”.
WB stated that Viet Nam Electricity (EVN) and Viet Nam Oil and Gas Group (PVN) would continue to play an important role in the development of new infrastructure, the majority of new investment in the power industry and the gas industry would come from the private sector. This trend is in line with the strategy and financial goals for future energy development of the Government.
The main author of the research, Mr. Franz Gerner – Lead Energy Specialist and Energy Sector Leader of the World Bank in Viet Nam, emphasized: “We have seen that private investors are very interested in participating in the growing energy market in Viet Nam, especially in the development of renewable energy and liquefied natural gas (LNG). They are willing to invest as long as the projects are well structured and financially sound. Investors need a transparent and stable legal environment, including a suitable risk sharing mechanism for all parties”.
In order to remove the bottlenecks and mobilize maximum funding for investment in power and gas industries in Viet Nam, WB proposed a well-coordinated policy around three pillars:
A PPP (public-private partnership)/IPP (renovation, cooperation, creativity) program should be established to develop new power generation sources, which is part of the "8th National Power Development Plan" to create trust for investors.
In addition, financial positions and credit ratings of EVN and PVN should be improved so that these two groups can access commercial loans in the absence of government support. At the same time, the availability of domestic financial resources - an important financial resource for both project financing and corporate financing, should be enhanced.