Vietnamese firms face numerous barriers in green transformation

Enterprises require significant capital to invest in machinery and production processes to embrace green transformation, says Nguyen Quoc Anh, chairman of the Ho Chi Minh City Rubber-Plastic Association.

Anh expressed this sentiment during a forum in HCMC on Friday that seeks solutions to bolster a green economy.

He added that businesses are making strides in innovation, adopting modern technologies, automation, and green transformation to meet the increasingly stringent demands of international markets.

However, they face considerable challenges, such as integrating 20-30% recycled materials into their processes to obtain green certifications, qualify for tax incentives, and expand their markets. Many companies are recycling scrap and used materials to minimize environmental impact, enhance values, and lower production costs.

Despite these efforts, enterprises seeking green transformation face significant barriers. They genuinely want to go green, but doing so requires substantial capital for upgrading machinery and production processes.

Anh also noted that recycling operations require land, a resource that is becoming increasingly scarce and costly. These obstacles dampen businesses’ determination to pursue green initiatives.

Accessing capital for green transformation is another significant challenge. Dr. Bui Duy Tung, a lecturer at RMIT University Vietnam, highlighted the lack of a clear legal framework and cohesive green classification criteria as one of the most significant barriers.

Vietnam has yet to develop a standardized green taxonomy, making it difficult to identify, evaluate, and implement green projects effectively.

A report from the Ministry of Finance revealed that more than 50% of financial institutions struggle to assess the risks and potential of green projects due to inadequate guidance. As a result, credit risks remain high, and distinguishing truly green projects is a significant challenge.

According to Tung, currently, green credit accounts for just 4.2% of the economy's total outstanding debt. Although HCMC recently issued VND3,000 billion ($118.2 million) in green bonds for 34 projects, this is a small-scale initiative compared to the substantial investment needed in renewable energy, sustainable transportation, and waste management sectors.

Moreover, many financial institutions remain hesitant to enter the green finance market due to a lack of skilled human resources. Banks often favor short-term, high-profit projects over long-term investments in green initiatives, as the latter typically have longer payback periods and lower profitability.

To overcome these hurdles, Tung stressed the importance of establishing a clear legal framework and cohesive green classification criteria. "Vietnam must urgently create a green taxonomy based on international practices, such as the EU Taxonomy, to ensure transparency and practical application."

Additionally, forming a National Green Finance Council to coordinate and oversee green finance programs is essential. This council could serve as a platform for ongoing dialogue between regulatory agencies, businesses, and financial institutions to resolve policy implementation challenges and accelerate the adoption of green financing.