International financing key to develop Vietnam's power sector: Officials

Vietnam needs 150 billion USD to invest in power projects in the next 10 years, equal to half the country’s current gross domestic product (GDP), which raises demand for international financing.
International financing key to develop Vietnam's power sector: Officials ảnh 1A solar power project (Source: VNA)

Hanoi (VNS/VNA) —Vietnam needs 150 billion USD to invest in power projects in the next 10 years,equal to half the country’s current gross domestic product (GDP), which raisesdemand for international financing.

DangHuy Dong, head of the Institute for Planning and Development, provided thisestimate and emphasised that given the current size of the domestic capital market,for at least the next five years, the economy cannot meet the capitalrequirements for the development of the power sector.

Dongmade this statement at the seminar on International Financing for IndependentPower Projects on November 25 in Hanoi.

Since2015, Vietnam has transitioned to a low-middle-income country which reduces itsaccess to concessional sources of finance from development partners such asOfficial Development Assistance (ODA).

“Therefore,capital can only be mobilised from international financial institutions,” hesaid.

Theinternational capital market is very large with tens of thousands of billionsof US dollars, more than enough to satisfy Vietnam’s capital need. However, Dongsaid such capital flows are highly competitive, running on supply-demandprinciples and certain standards, which requires borrowers to comply.

InFebruary this year, the Politburo issued Resolution No. 55-NQ/TQ on Vietnam’sstrategic orientations for energy development through 2030 and with an outlookto 2045.

To meetthe target of a total capacity of all power sources reaching 125-130GW andtotal power output of 550-600 billion kWh by 2030, the resolution has laid outthe task of researching and completing the funding mechanism for the powersector.

Nguyen DucHien, vice chairman of the Central Economic Commission, said attracting privateand foreign direct investment in the power industry as well as in independentpower projects includes many difficulties, while funding from the State budgetand ODA sources is limited.
He saidloans from domestic credit institutions are restrained because energy projectsrequire large capital sources but the central bank’s requirements on creditpolicy hamper lending to this sector. In addition, foreign direct investment(FDI) in the power sector also has some problems in the field of foreignexchange management such as foreign currency conversion, money transfer andexchange rate risk.

With atotal investment of nearly 13-15 billion USD per year, the size of theVietnamese market is attractive enough for investors, Hien said but noted Vietnamneeds to attach importance to the role of the national credit rating as it willhelp the Government, financial institutions and businesses reduce the cost ofraising capital in international markets./.
VNA

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