ADB Expert: Focused reforms in key sectors can sustain Vietnam's high growth

Shantanu Chakraborty, the Asian Development Bank (ADB) Country Director for Vietnam, said Vietnam’s growth outlook for 2026 and 2027 remains strong despite global economic volatility. He also outlined policy priorities aimed at sustaining high growth while improving productivity, strengthening financing channels, and accelerating the energy transition.

Vietnam’s growth outlook for 2026–2027

ADB forecasts Vietnam’s GDP growth at about 7.2% in 2026 and about 7% in 2027. Chakraborty said these rates are among the highest in Southeast Asia and reflect the economy’s resilience in a challenging external environment.

He attributed the outlook to solid macroeconomic fundamentals, strong momentum from public investment, and an export-led development strategy that has supported growth over the past year.

Policy priorities to sustain high and sustainable growth

To maintain a high-growth trajectory, Chakraborty said Vietnam needs to raise productivity and improve production efficiency. He also emphasized the importance of strengthening the financial system and capital markets to improve access to long-term financing for investors.

He further recommended prioritizing energy security and accelerating the transition to green, clean energy using domestic sources to reduce exposure to external shocks. He said reforms in these areas will be decisive for Vietnam’s growth going forward.

Upgrading Vietnam’s role in global supply chains

Chakraborty said Vietnam is deeply integrated into global value chains, supported by a robust manufacturing base—particularly in export-oriented industries—that has attracted foreign direct investment. However, he noted that domestic value-added content remains relatively low, and that low labor costs are no longer a sustainable long-term competitive advantage.

He said Vietnam should move up the value ladder by increasing value-creating activities. He outlined four core enablers:

• Improve the business environment through greater transparency and smoother procedures to attract high-quality investors.
• Expand access to long-term funds by deepening capital markets, including equity and bond markets, alongside appropriate institutional reforms.
• Enhance infrastructure quality, which he described as decisive for maintaining investment attractiveness across the supply chain.
• Develop a high-skilled workforce, especially for advanced fields such as artificial intelligence, fintech, and green growth.

Green growth and the energy transition in Southeast Asia

Chakraborty said Vietnam plays an important role in Southeast Asia’s transition to a greener growth model. He pointed to ADB’s National Partnership Strategy with Vietnam, built since 2023, which identifies green growth as a priority pillar.

He noted Vietnam’s target of net-zero emissions by 2050 and its participation in the Energy Transition Partnership (JETP), saying early signals are emerging as more projects become financially viable. However, he said Vietnam still needs to improve the bankability of projects, adding that government and state-owned enterprises remain central for development partners and investors when project financial viability is not yet assured.

He also cited ADB’s announcement of a $10 billion package for the ASEAN Power Grid, a regional initiative intended to promote renewable energy development and strengthen transmission and distribution networks across ASEAN. He said Vietnam stands to benefit significantly from the initiative.

Bottlenecks slowing the energy transition

Chakraborty said major challenges include policy and regulatory uncertainty, along with infrastructure and financing constraints.

He highlighted that most renewable capacity is concentrated in the southern region while demand is higher in the north, requiring strong transmission and distribution systems to move power efficiently across regions. He said this underscores the urgent need for high-quality transmission infrastructure.

He also said the deployment pace of green technologies has been slower in recent periods. While investment accelerated during the PDP7 era—especially in solar and wind and floating solar—momentum has slowed, making it essential to unlock and accelerate capital flows into clean energy.

To accelerate the transition while keeping costs competitive, he said Vietnam needs stronger planning frameworks and a stable, predictable legal environment. He added that mobilizing private capital will be crucial given the scale of financial needs, which depends on creating an environment that makes projects attractive and financeable for investors.

He further said diversifying energy sources and improving energy efficiency are important. He pointed to offshore wind and energy storage systems as potential complements to existing renewables to improve system stability. He also said energy efficiency improvements in industry, buildings, and residential sectors can reduce emissions and, in many cases, may be more economical than building new power generation.

Attracting private capital: project preparation and risk allocation

Chakraborty said institutional and regulatory bottlenecks continue to hinder private sector participation. He identified strengthening project ownership and improving the quality of project preparation as key priorities.

He said that while many projects have been announced and implemented, challenges remain in ensuring bankability and applying best practices in risk allocation and project structuring. He recommended accelerating project preparation and raising project readiness, noting that progress has slowed in recent years but could accelerate again with new leadership and ambitious growth targets.

He also said Vietnam should shorten the time from concept to implementation so projects are thoroughly prepared and ready to begin early, helping unlock financing. He added that the government, together with development partners such as ADB, should prioritize both the speed and quality of project preparation to facilitate private sector participation.

Reforms to raise productivity and growth quality

Chakraborty said 2025 marked an important milestone in Vietnam’s reform journey, particularly in improving the business environment. He cited Resolution 68, which affirmed the central role of the private sector in growth, and Decree 114, which he said helped simplify the process of borrowing from ODA.

He said these reforms reduced regulatory overlap, streamlined dispersed funding processes, and improved the phased approach to project preparation. He also noted that decentralization has intensified, granting more authority to localities and increasing the number of projects initiated at the provincial level—creating an urgent need to strengthen local capacity for preparing high-quality projects attractive to international capital.

He added that administrative reform toward a lean two-tier model has begun to improve decision-making and is expected to further enhance implementation efficiency.

On human resources, he said Vietnam needs to expand training and skills development, particularly in artificial intelligence, science and technology, biotechnology, and fintech. He also said building international financial centers is a step in the right direction for developing an ecosystem that can attract long-term private capital.

He said investors—especially the private sector—tend to prefer markets with transparent risk allocation mechanisms and closer alignment with international practice. He recommended moving toward best practices and learning from more successful regional peers in structuring projects and distributing risks.

Finally, he said public-private partnerships (PPP) will continue to play an important role in mobilizing private resources in sectors such as ports, metro systems, roads, and airports. He said reforms to remove bottlenecks within the PPP framework will be decisive for Vietnam’s growth going forward.

ADB forecasts Vietnam GDP growth of 7.2% in 2026.