General

Green Industries in Vietnam with high investment prospects

Trường Lăng

July 26, 2022

General

Green Industries in Vietnam with high investment prospects

Trường Lăng

July 26, 2022

The green industry is now a trend that delivers substantial efficiency in economic growth, social issue addressing, and overcoming the repercussions of environmental degradation. As a result, a variety of green industries are attracting significant investment in Vietnam. 

Renewable energy

Renewable energy or (completely clean energy) as opposed to fossil fuels. They are created from continuously forming sources, which can be considered infinite such as wind, rain, sunlight, ocean waves, tides, etc.

Renewable energy sources had a total installed capacity of 20,670 MW by the end of 2021, accounting for 27% of the total installed capacity of the entire system (76,620 MW); total electricity output from renewable energy sources reached 31,508 billion kWh, accounting for 12.27% of the total output of the entire system. Renewable energy projects in Vietnam have received significant FDI and private investment in recent years. 

vietnam s renewables advantages and considerations
Photo by Vietnamnet

Many reasons are driving Vietnam’s rapid development of the renewable energy industry: Vietnam has a lot of natural geographical potential that is perfect for the growth of the renewable energy sector; high domestic power demand; and the government offers several incentives, including tax breaks and the use of a pricing mechanism.

Renewable energy sources (wind power, large-scale solar power, biomass power…) would progressively raise their percentage to roughly 24 percent by 2030, rising to more than 50 percent by 2045, according to the draft National Power Development Plan VIII (PDP VIII). While the existing share is just approximately 15 percent, the current fiscal space is enormous.

In November 2021, members of the Government of Vietnam led by Prime Minister Pham Minh Chinh pledged to be carbon neutral – Net-zero by 2050 at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) in Glasgow, Scotland (United Kingdom).

Green manufacturing

Green manufacturing is a crucial link in assisting Vietnam’s transition to a green and sustainable economy. Greening production also introduces new needs and requirements for businesses to keep up with the general growth trend, while strengthening their position and boosting competitiveness in both domestic and foreign markets.

Many Vietnamese businesses have prioritized the use of natural materials, fuels, and non-toxic chemicals; investing in modern machinery, technology, and equipment for production lines in accordance with international standards to improve processes and move toward green production; investing in the installation of renewable energy systems to actively use clean energy; and installing quality, safety, and hygiene management system as well as a waste treatment system aimed at green and sustainable production. 

g a architecture urban planning
Photo by Oki Hiroyuki

In order to meet the obligations made at COP26, Vietnam will need to modify the way energy is used in manufacturing and product creation. Currently, the Ministry of Planning and Investment develops and submits to the Government the National Green Growth Action Plan for the period 2021-2030, with a vision to 2050, concretizing the Green Growth Strategy and serving as a premise for the Zero Emissions Roadmap, alongside strategies, master plans, and other policy documents to develop socioeconomically in a green and sustainable direction.

From 2014 to 2019, the Ministry of Planning and Investment worked with donors to implement the initiative to develop eco-industrial parks, with the goal of transforming the industrial park into a newer one with higher operational efficiency, and the goal of better solving the living environment. Eco-industrial parks are growing more popular as the output products of one firm may also become the input products of another, lowering operating costs and enhancing enterprise competitiveness.

Consumer goods industry: environmentally friendly products

Green consumption is defined as the purchase and usage of environmentally friendly items that are neither harmful to human health nor endanger the natural ecosystem. It stems from a desire to preserve resources for future generations while also improving people’s quality of life. 

According to a Nielsen poll, up to 86% of Vietnamese customers are willing to pay more for items from businesses that have a beneficial influence on society and the environment. Vietnamese customers are becoming more conscious of environmental preservation, but in fact, it is unclear if they would spend more money on environmentally friendly items. As a result, investors must exercise caution before investing in this industry. 

woman shops GJPU
A woman shops at a supermarket in Hanoi. Photo by Reuters

‘Green consumption’ is becoming a new way of life. Solving the “green” problem in production activities allows enterprises to enter “tough” markets and to benefit from favorable tax rates when exporting goods to these countries. Furthermore, according to State regulations, establishments that produce and trade in environmentally friendly products bearing the “Vietnam Green Label” will benefit from incentives and support in terms of land and capital, as well as exemption and reduction of taxes and fees on environmental protection. At the same time, green consumption provides advantages such as increasing consumer safety and health; reducing the use of energy and natural resources; and developing new, environmentally friendly goods.

Green agriculture

Green agriculture is an agricultural approach that both serves people’s food demands while also being environmentally and health-friendly.

Ministries, municipalities, enterprises, and farmers have pushed the implementation of scientific and technological advances, erecting several models in the direction of green – clean – sustainable development. Typically, rice production has used models such as “flower-side rice fields,” “1 must 5 reductions,” and “big sample fields using VietGAP.” GAP farming practices and biogas in livestock models are used for fruit trees.  According to COP26 pledges, Vietnam has finally finished the plan for a biogas program for the cattle sector, according to Mr. Phung Duc Tien, Deputy Minister of Agriculture and Rural Development.

Green agriculture now recognizes a great deal of effort from both businesses and farmers, with several exceptional projects: 

  • The Sustainable Agriculture Transformation Project in Vietnam (VnSAT Project) began in Tay Nguyen and the Mekong Delta in 2017, with 13 provinces and cities participating in the implementation of two key commodities: coffee and rice. The project’s entire capital is 288,237 million USD, which is equivalent to 6,629 billion VND. The VnSAT project has four components: strengthening institutional capacity for agricultural restructuring, sustainable rice development, sustainable coffee development, and project management. 
  • The GIC Vietnam project is the German Government’s next technical assistance commitment package, implemented in collaboration with the Department of Economic Cooperation and Rural Development, GIZ, and the six provinces with a total investment capital of 7 million euros. The project will help to improve farming systems toward sustainability, thereby improving the efficiency of natural resource management and use while enhancing the ability of the Mekong Delta’s two main agricultural value chains, rice, and mango, to adapt to and withstand the effects of climate change.
  • Tan Thanh Holdings Investment Joint Stock Company has also offered to invest in the building of the project “Medical value chain related with sustainable forest development in the Central Highlands – Point model in Dak Lak” through the Institute of Green Economy Connection. The project spans more than 1,000 hectares, with a total investment of up to 3,000 billion VND in phase 1. This is believed to be Vietnam’s first closed pharmaceutical production chain that matches international quality and norms. 

In fact, there are still some “bottlenecks” that need to be removed, such as there are no plans for organic production or separate policies to support organic production; there are few organizations that inspect and certify “made in Vietnam” organic production, with most of the certification having to hire foreign organizations with high fees; agriculture continues to operate on a small-scale basis, making it difficult to apply closed and large-scale production forms of gree. Although green sectors are getting more popular, investors encounter several hurdles when joining this industry. Viettonkin is confident in its ability to be a top-notch expert in the Vietnam market and legal environment. We are ready to advise you and keep you up to date on changing market trends as well as policies to promote the growth of green industries. Contact us right now to increase exponentially!

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