The Role of the Private Sector in Việt Nam’s Green Transition: Insights from Thomas Jacobs, IFC Country Manager
On October 13, Việt Nam commemorates the 20th anniversary of Entrepreneur’s Day, a significant milestone that underscores the government’s acknowledgment of the private sector’s vital role in the nation’s market economy. In light of this occasion, Việt Nam News engaged Thomas Jacobs, the International Finance Corporation (IFC) country manager for Việt Nam, Cambodia, and Laos, to discuss the private sector’s contributions to Việt Nam’s economic landscape and its pivotal role in the country’s green transition.
Celebrating Two Decades of Entrepreneurship
Reflecting on the past two decades, Jacobs expressed his congratulations to Việt Nam for its remarkable journey in entrepreneurship. He emphasized that the private sector has been instrumental in driving the country’s economic growth, supported by favorable government policies. Today, the private sector accounts for approximately 45% of Việt Nam’s GDP, 40% of total investment, and over 85% of jobs. Jacobs noted that without the private sector’s contributions, the economic development and the emergence of a rising middle class in Việt Nam over the last two to three decades would not have been possible.
The Path Forward: Opportunities in the Green Transition
As Việt Nam embarks on a new growth model, Jacobs highlighted the immense opportunities that lie within the green transition. To achieve high-income status by 2045 and net-zero emissions by 2050, the country must undergo significant reforms. This includes creating a conducive regulatory framework that supports private sector initiatives aimed at sustainability.
Jacobs pointed out that the energy transition is a critical area for development, with energy demand projected to grow by approximately 8% annually. To meet this demand sustainably, Việt Nam must expand its electricity supply while integrating greener technologies, which will require substantial capital investment—much of which is expected to come from international sources.
According to a report by the World Bank and IFC, Việt Nam will need an estimated $368 billion by 2040 to meet its growth and sustainability targets, with more than half of this investment coming from the private sector. Jacobs stressed the importance of supportive government regulations to attract both domestic and foreign investments, particularly in sectors such as power, transportation, green buildings, and energy efficiency.
Navigating Challenges in the Green Economy
Despite the promising opportunities, Jacobs acknowledged several challenges that the private sector must address to adapt to the green economy. He identified four key areas:
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Regulatory Framework: The government must establish a robust legal and regulatory framework, coupled with public investments in infrastructure, particularly in energy and transportation. The current weaknesses in Việt Nam’s power grid necessitate large-scale government intervention.
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Access to Finance: While a significant portion of domestic savings flows through banks, less than 5% of bank assets are allocated to green investments. Jacobs sees an opportunity for local banks to support green projects, and IFC is actively working with banks like SeABank, HDBank, and VPBank to facilitate this shift.
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Infrastructure Development: Modernizing infrastructure, especially in transport and power, is crucial for sustaining growth and attracting foreign direct investment (FDI). Without these improvements, Việt Nam risks hitting a growth ceiling.
- Skills Development: Transitioning from low-wage manufacturing to high-tech production requires a workforce equipped with advanced skills. Jacobs emphasized the need for Việt Nam to invest in education and training to prepare its workforce for the demands of a rapidly changing global economy.
Strategies for Global Competitiveness
As many Vietnamese companies expand their operations globally, Jacobs offered strategic insights for them to become significant players on the world stage. He highlighted the importance of adhering to environmental, social, and governance (ESG) standards, which are increasingly becoming a prerequisite for international investors. Companies that prioritize ESG practices are more likely to attract investment and achieve large-scale success.
Additionally, Jacobs encouraged Vietnamese firms to remain open to foreign investment and innovative ideas. Many businesses in Việt Nam are still family-controlled, which can hinder adaptability. By welcoming partnerships, including those with foreign entities, companies can foster innovation and growth.
Finally, he urged Vietnamese companies to benchmark their success against global competitors, not just local ones. By setting ambitious goals and measuring their performance against firms in countries like Malaysia, India, China, Europe, or the US, Vietnamese companies can position themselves for significant global success.
IFC’s Role in Supporting Sustainable Practices
Jacobs concluded by outlining the IFC’s commitment to supporting private enterprises in their journey toward sustainability. With Việt Nam ranking among the top 10 in IFC’s global portfolios, the organization has invested over $2 billion in the country, with a substantial portion directed toward green initiatives. Last year alone, IFC invested around $750 million, with 60% allocated to green projects.
The IFC’s strategy focuses on driving private sector investment in sustainability, including the promotion of blue and green bonds, supporting green supply chains, and assisting manufacturers in decarbonization efforts. Furthermore, the IFC is collaborating with the State Securities Commission to establish ESG standards for listed companies, thereby enhancing the overall sustainability landscape in Việt Nam.
Conclusion
As Việt Nam celebrates the 20th anniversary of Entrepreneur’s Day, the insights from Thomas Jacobs illuminate the critical role of the private sector in the nation’s economic growth and its transition toward a sustainable future. By addressing challenges, embracing opportunities, and fostering a culture of innovation and sustainability, Việt Nam can pave the way for a prosperous and environmentally responsible economy. The journey ahead is filled with potential, and with the right strategies in place, the private sector can lead the charge toward a greener, more sustainable Việt Nam.