Vietnam's increased infrastructure investment target and its implications

By VinaCapital analysts
Fri, February 28, 2025 | 11:48 am GMT+7

The Vietnamese Government’s newly approved plan to increase infrastructure investment by nearly 40% this year to $36 billion should help offset the hit to the country’s economic expansion from slower export growth to the U.S., write chief economist Michael Kokalari and logistics analyst Tran Hoang The Kiet of VinaCapital.

The Vietnamese Government last week increased its 2025 infrastructure spending target from 6% to 7% of GDP and simultaneously lifted its GDP growth target for 2025 from 7% to 8%.

The increased 1%/GDP of planned spending on infrastructure projects should help the country achieve the Government’s new, 1% higher 2025 GDP growth target and will also support the country’s long-term growth prospects and appeal to FDI investors.

The Government’s newly approved plan to increase infrastructure investment in Vietnam by nearly 40% this year, to $36 billion (up from the $31 billion originally approved late last year), should help offset the hit to the country’s GDP growth we expect from slower export growth to the US, following a 23% surge in Vietnam’s exports to the US last year. Other recent, infrastructure-related updates include:

- Several large projects were initiated/approved over the last two months, including a $67 billion high-speed rail line that would span the length of the country and the $8 billion Lao Cai-Hanoi-Hai Phong railway.

- The first section of Ho Chi Minh City’s long awaited metro line opened in December 2024, which we believe is helping to support enthusiasm/momentum for accelerated infrastructure development going forward.

- Three major laws came into effect last month that are directly aimed at accelerating project approvals, streamlining investment disbursements, and driving greater private sector participation in infrastructure projects (other new laws should also help support energy and transportation infrastructure development.

Further to that last point, Vietnam’s Government has ample fiscal resources to ramp up spending. Government debt is well below 40%/GDP, and we estimate that the Government has over $40 billion of undisbursed funds previously earmarked for infrastructure spending.

The primary bottleneck to increasing infrastructure spending (or to achieving annual spending targets) have been bureaucratic issues impeding the project approvals and other processes entailed in large-scale project development.

The new laws mentioned above should help expedite progress and insure that spending targets are achieved (infrastructure spending often undershoots the Government’s annual spending targets).

Finally, those new infrastructure-related laws should also be viewed in the context of another plan that the National Assembly also passed last week to shrink the size of the country’s Government by roughly one-fifth – which will have wide-ranging, positive impacts on Vietnam’s economy going forward, including easing the bureaucratic obstacles that impeded infrastructure development in recent years.

Top priorities: transportation & electricity

More than 80% of planned infrastructure spending this year is earmarked for boosting Vietnam’s electricity generation and distribution capacity, and for improving Vietnam’s transportation network.

By 2030, Vietnam aims to double the total length of its highway network, to double airport passenger capacity and to increase the country’s seaport capacity by 50%. The Government aims to double Vietnam’s electricity generation and transmission capacity over 2021-2030. The largest on-going projects are listed below, although many smaller-scale projects are also underway.

Major Infrastructure projects. Unit: billion U.S. dollar.

Major Infrastructure projects. Unit: billion U.S. dollar.

In early 2025, the Government announced additional public investments into large infrastructure projects related to railways and ports (and earlier construction timelines for certain projects, as noted previously). Investments into railways and ports aim to further streamline freight movement, improve workforce mobility, and facilitate more FDI inflows into Vietnam.

For example, expanding Vietnam’s highway/railway network would enable FDI companies to locate their factories in a wider range of areas to access a deeper labour pool (note that 80% of freight volume in Vietnam is transported by road).

The Lao Cai-Hanoi-Hai Phong railway (and other 2 lines of Lang Son-Hanoi and Mong Cai-Ha Long-Hai Phong) would link nine provinces in Vietnam to China’s Yunnan province, enabling a more efficient flow of goods across the two countries (about 40% of Vietnam’s imports come from China). This railway may also facilitate transit of Vietnamese goods to Europe through China.

Furthermore, the launch of new metro lines in Hanoi and HCMC would improve workforce mobility by connecting cities and its outskirts with key industrial hubs. For that reason, Metro expansion in Hanoi and HCMC is set to accelerate under a fast-track mechanism, with a resolution approved at the extraordinary National Assembly meeting last week granting city officials the authority to streamline the approval of new projects. As a result, construction of Hanoi’s Metro Line 2, linking Noi Bai Airport, and a new metro line to Can Gio in HCMC are expected to begin this year.

Regarding Vietnam’s ports, the Government’s recent revision of its seaport development plan added the Can Gio port project, which would accommodate larger vessels, supporting Vietnam’s goal of increasing its seaport capacity by 50% by 2030.

We believe that the Government could further increase cargo handling efficiency by encouraging investments into digitalization and automation at Vietnam’s ports to reduce turnaround times and to increase the logistics sector's productivity.

Electricity generation

Vietnam’s Power Development Plan VIII (PDP8), approved in May 2023, anticipates 9% annual electricity consumption growth for the foreseeable future (which is comparable to recent, growth rates). The plan anticipates $135 billion of expenditures to double Vietnam’s electricity generation capacity over 2021-2030 with most of that growth expected to come from gas & LNG (37% of the total planned capacity growth), renewables (27% of the growth), and coal (19%/growth).

Note that hydropower generation capacity has been nearly maxed out for years, and that a revision to PDP8 expected by March 2025 is likely to include the revival of two proposed nuclear power plant projects. Finally, we are aware of four large LNG projects that are expected within the next five years, including a $3.0 billion project that VinaCapital is actively involved in Long An. We are also aware of six large renewable energy projects, including the Ba Ria Vung-Tau Offshore Wind Farm, a 1.6 GW project that is expected to be operational by 2028.

Summary

Vietnam’s Government aims to accelerate the country’s GDP growth from 7.1% in 2024 to 8% in 2025 despite the fact that export growth to the US is almost certain to slow from last year’s heady 23% surge. Extraordinary measures will be needed to achieve that goal, but the near 40% surge in infrastructure investment that the Government is now planning would add about 2% pts to Vietnam’s 2025 GDP growth – if the Government manages to hit its disbursement targets this year.

Comments (0)
  • Read More
Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Authorities in the central province of Quang Tri are evaluating a proposal from Power Generation JSC 1 (EVNGENCO 1), a subsidiary of state utility Vietnam Electricity (EVN), to take over the Quang Tri thermal power plant project, following the withdrawal of Thai investor EGATi.

Energy - Tue, September 16, 2025 | 1:44 pm GMT+7

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata VN, the Vietnam arm of Thailand’s leading industrial park developer Amata, has approved a plan for its subsidiary Amata City Long Thanh Urban JSC (ACLT) to sell its remaining 51% stakes in two entities to local developer Novaland-linked buyers.

Real Estate - Tue, September 16, 2025 | 12:19 pm GMT+7

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam has fulfilled the criteria for a stock market status upgrade by FTSE Russell through reforms aimed at facilitating foreign investment inflows into its market, said Minister of Finance Nguyen Van Thang.

Economy - Tue, September 16, 2025 | 9:36 am GMT+7

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

The Ministry of Finance is proposing a key reform that would allow commercial banks to invest in and distribute mutual fund certificates, as part of a broader plan to restructure the investor base and foster the development of Vietnam’s fund management industry.

Finance - Tue, September 16, 2025 | 8:00 am GMT+7

E-commerce boom a major driver of Vietnam's packaging paper industry growth

E-commerce boom a major driver of Vietnam's packaging paper industry growth

Vietnam's paper packaging industry is entering a period of strong growth, with an average annual growth rate forecasted at 10% until 2030.

Companies - Mon, September 15, 2025 | 10:20 pm GMT+7

Vietnam needs support from UK in developing international financial center: Deputy PM

Vietnam needs support from UK in developing international financial center: Deputy PM

Permanent Deputy Prime Minister Nguyen Hoa Binh has called on the UK and the City of London to continue supporting and accompanying Vietnam in promoting and introducing its international financial center (IFC).

Finance - Mon, September 15, 2025 | 10:12 pm GMT+7

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Commercial banks and foreign bank branches in Vietnam must maintain a minimum capital adequacy ratio (CAR) of 8%, including at least 4.5% in Tier 1 core capital and 6% in Tier 1 capital, starting from September 15.

Banking - Mon, September 15, 2025 | 10:04 pm GMT+7

Tool for wood traceability management debuts in Vietnam

Tool for wood traceability management debuts in Vietnam

The Vn-WoodID application has been officially launched in Vietnam, becoming a key tool contributing to wood traceability.

Companies - Mon, September 15, 2025 | 10:00 pm GMT+7

Sun Group, US Embassy foster aviation-hospitality cooperation

Sun Group, US Embassy foster aviation-hospitality cooperation

Sun Group, in collaboration with the US Embassy in Vietnam, hosted the US – Vietnam Aviation Partnership Roundtable on September 12, bringing together 15 leading American corporations in aviation, technology, and financial services, opening up opportunities to position Phu Quoc as a new aviation and tourism hub in the region.

Companies - Mon, September 15, 2025 | 9:54 pm GMT+7

Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1

Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1

Vietnam remained the largest overseas market for Thailand’s Siam Cement Group (SCG) in the first half of 2025, contributing 9% of consolidated sales.

Companies - Mon, September 15, 2025 | 8:10 pm GMT+7

Central Vietnam to have new airport Mang Den

Central Vietnam to have new airport Mang Den

Procedures to adjust Vietnam's airport system planning, including the addition of Mang Den Airport in central Vietnam, are being proceeded, according to the Ministry of Construction.

Infrastructure - Mon, September 15, 2025 | 5:16 pm GMT+7

Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital

Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital

The Vietnamese Government has advanced the regulation of digital assets, with a resolution launching a five-year pilot framework for issuance and trading. This framework signals the Government’s intent to position the country as a regulated hub for digital assets in Asia, which could attract new capital inflows, write Dragon Capital analysts.

Economy - Mon, September 15, 2025 | 2:20 pm GMT+7

Agribank introduces sizable $4.17 bln preferential credit package

Agribank introduces sizable $4.17 bln preferential credit package

Right from the beginning of 2025, Agribank launched a substantial preferential credit package worth VND110 trillion ($4.17 billion) to support individual customers.

Companies - Mon, September 15, 2025 | 1:32 pm GMT+7

'Precious space' in Vietnam's monetary policy

'Precious space' in Vietnam's monetary policy

The Federal Reserve's continued cuts in 2025, with the most recent in September, are considered a valuable policy "space" for the State Bank of Vietnam (SBV) to maintain low interest rates to support growth without having to worry too much about exchange rates.

Economy - Mon, September 15, 2025 | 10:15 am GMT+7

Vietnam’s central bank sells $1.5 bln to stabilize currency: broker MBS

Vietnam’s central bank sells $1.5 bln to stabilize currency: broker MBS

The State Bank of Vietnam (SBV) intervened in the foreign exchange market by selling approximately $1.5 billion via 180-day cancelable forward contracts from August 25-26, in an effort to ease pressure on the Vietnamese dong, according to a recent report by MB Securities (MBS).

Banking - Mon, September 15, 2025 | 8:04 am GMT+7

Hanoi aims to break ground on $11.4 bln Red River Boulevard & Landscape project by Jan 2026

Hanoi aims to break ground on $11.4 bln Red River Boulevard & Landscape project by Jan 2026

A consortium of “tunnel king” Deo Ca Group and real estate developer Van Phu Invest has been assigned by the Hanoi People’s Committe to prepare an investment proposal for the VND300 trillion ($11.37 billion) Red River Boulevard & Landscape project.

Real Estate - Mon, September 15, 2025 | 7:55 am GMT+7