Blog

Energy sector institutions are increasingly the determining factor in a country’s overall competitiveness.

Against the backdrop of a global energy transition, a country’s competitive advantage is shifting from ownership of natural resources toward its ability to efficiently convert those resources into value.

Energy remains fundamental to economic growth, industrialization, national defense and security, and quality of life. But its role is being reshaped by the energy transition, net-zero targets, global supply-chain competition, and geopolitical volatility. Rapid advances in AI, large-scale data centers, and semiconductor manufacturing, together with global electrification, are also putting unprecedented pressure on energy supply and demand.

Turning resources into value

Countries must now do more than ensure sufficient energy. They must deliver competitive prices, operational flexibility, reliability, and lower emissions. For high-tech industries, reliable supply is critical. The energy transition is therefore not simply a shift from conventional to renewable sources, but a comprehensive restructuring in which oil and gas, LNG, coal, hydropower, renewables, storage, transmission, and emerging technologies must work together to ensure energy security and support sustainable growth.

For Vietnam, these demands come alongside an ambition to sustain high growth and become a high-income country by 2045. Energy demand is expected to rise sharply, while requirements for reliability and compliance with international green standards will become increasingly stringent.

Vietnam has significant potential in oil and gas, hydropower, offshore wind, and emerging energy sources. Yet these are natural advantages, not competitive advantages in themselves. Resources become economically valuable only when institutions can convert them efficiently into investment, projects, capacity, and ultimately commercial output.

If any link in this chain is delayed, potential can remain trapped in planning documents or investor expectations. The central question for energy policy is therefore whether the institutional system can convert resources and capital into reliable, competitively-priced energy within a reasonable timeframe.

In the 20th century, energy advantages were largely based on resource ownership. In the 21st century, market organization and institutional quality are becoming equally important. Singapore and Denmark have shown that countries do not need abundant natural resources to build strong economic positions when they have effective coordination mechanisms and stable policies.

Policy predictability is another important competitive advantage. Large energy projects often have lifespans of several decades and require stable pricing mechanisms and long-term contractual commitments. Legal uncertainty increases risk premiums and financing costs, which ultimately feed into energy prices. Energy policy should therefore be viewed as part of a project’s cost structure and, more broadly, the competitiveness of the economy.

Institutional gap

Energy projects in Vietnam must navigate a complex chain of administrative procedures, from planning to commercial operation. Land, environmental, construction, and bidding regulations each serve legitimate purposes. The problem arises when these systems lack coordination, creating unnecessary costs for businesses and the wider economy.

Institutional costs can be divided into five main categories. The first is compliance costs, covering the resources that businesses devote to reporting and inspections. Second is waiting costs, which arise when procedures are processed sequentially rather than in parallel or when no lead agency is responsible for overall project progress. Third is coordination costs, which emerge when projects are governed by multiple laws and agencies without sufficient alignment. The fourth is uncertainty costs, resulting from unpredictable policies and contractual conditions. These directly affect investor and lender confidence. The fifth is inconsistency costs, which arise when the same regulation is interpreted or applied differently over time.

These costs reinforce one another. Delays increase financing costs; higher financing costs raise project costs; uncertainty increases risk premiums; and inconsistent application can make decision-makers overly cautious or reluctant to exercise their authority. When these costs accumulate across projects and spread throughout the value chain, they become economy-wide spillover costs.

Such losses may not appear in any specific budget line, but they are reflected in electricity and fuel prices, logistics and production costs, export capacity, and the attractiveness of the investment environment. Institutional reform in the energy sector should therefore be viewed not simply as business facilitation but as a means of reducing costs across the economy.

A core problem is the lack of clear ownership of risk. When risks arising from policy changes or infrastructure delays remain “floating” between parties, stakeholders tend to postpone decisions or avoid responsibility.

Risk allocation is therefore fundamental to unlocking capital and accelerating implementation. Each risk should be assigned to the party best able to control it at the lowest cost. Risks related to corporate governance or technology choices should remain with investors, while risks arising from public authority or sudden policy changes require mechanisms on the government side. Requiring investors to bear risks they cannot control can make projects unfinanceable.

The petroleum sector illustrates this through geological risk. Failure to discover oil or gas is an inherent industry risk and does not constitute misconduct if the decision-making process followed appropriate professional procedures.

State-owned enterprises also carry strategic responsibilities related to energy security and national sovereignty that can extend beyond purely commercial considerations. Assigning such responsibilities without sufficient authority, financial mechanisms, or corresponding risk allocation only increases caution, prolongs decision-making, and weakens implementation.

Risk allocation is therefore not merely a contractual or financial issue. It is also a question of public authority, accountability, and policy implementation capacity.

Legal safe harbor

Persistent delays also reflect a lack of confidence among decision-makers. In many cases, the problem is not an absence of regulations but concerns that reasonable decisions made under current conditions could later face retrospective scrutiny.

A “legal safe harbor” for responsible decision-making could help address this. It should not provide unconditional immunity, but establish clear standards for distinguishing intentional misconduct from objective management risks.

A decision should fall within this safe harbor when it is made within proper authority. The process should be transparent, alternatives should be considered, and conflicts of interest should be controlled. Businesses should maintain comprehensive decision records, while regulators should establish independent appraisal mechanisms for high-risk projects.

When inspections and audits assess decisions in their historical context, officials can exercise their authority with greater confidence. This is essential to ensuring that decentralization and delegation translate into action rather than being undermined by fear of retrospective accountability.

In this context, four policy priorities are particularly important.

First, Vietnam needs greater policy continuity and predictability. The government and regulators should establish clear principles for impact assessments, transition periods, and the protection of existing rights and obligations when pricing mechanisms, investment conditions, grid connections, or contractual requirements change.

Second, strategic energy projects need coordination throughout their lifecycle. A clearly designated lead agency should oversee planning, investor selection, approvals, infrastructure and commercial operation. Procedures that can run in parallel should do so, requests for opinions should have clear deadlines, documentation requirements should be defined upfront, and differences in legal interpretation should have a clear resolution mechanism.

Third, authorities should develop risk-allocation matrices for major project categories, including oil and gas, LNG, offshore wind, transmission, storage, and emerging technologies. These should clearly define which risks belong to investors, public authorities, or insurers, or should be shared. The principles should be reflected consistently in sector-specific laws, tender documents, project contracts, pricing mechanisms, and government support arrangements, with results measured by financing capacity, negotiation times, risk premiums, final investment decisions, and project delivery.

Fourth, legal safe-harbor standards for responsible decisions should be embedded across sector-specific legislation, State capital management, corporate governance, inspection, auditing, and accountability rules. Decisions should be assessed based on the authority exercised, information available at the time, appraisal procedures, alternatives considered, conflict of interest controls, integrity, and accountability, rather than solely on the final outcome. Minimum requirements should also be established for decision records, expert consultation, and independent appraisal of high-risk decisions.

These four priorities are closely linked. Predictable policies reduce risk; effective coordination shortens timelines; clear risk allocation improves bankability; and legal safe harbors give decision-makers confidence to act. Reforming only one part of the system risks simply shifting institutional costs from one procedure or stakeholder to another.

For Vietnam, energy reform must build institutional infrastructure that creates confidence, mobilizes capital, allocates risk, and accelerates implementation. The legal framework is ultimately invisible infrastructure shaping how efficiently resources, capital, and technology become national competitive advantages.

Outstanding loans for urban area investment and housing development projects remained the largest category, reaching VNĐ833.6 trillion by the end of June, up 6.33 per cent from the end of March.

HÀ NỘI — Outstanding loans for real estate business activities rose to more than VNĐ2.5 quadrillion (nearly US$95 billion) as of June 30.

The Ministry of Construction's report on housing and the real estate market for the second quarter of 2026 showed that compared to the end of March 2026, the loans rose by more than VNĐ284 trillion. They were up more than VNĐ518 trillion compared to the end of 2025.

According to the report, outstanding loans for urban area investment and housing development projects remained the largest category, reaching VNĐ833.6 trillion by the end of June, up 6.33 per cent from the end of March.

Loans for land-use right acquisitions surged by more than 23 per cent to VNĐ314.5 trillion, while loans for industrial zone and export processing zone construction projects hit VNĐ184.2 trillion, an increase of over 32 per cent.

Conversely, loans for eco-tourism and resort projects declined by more than 4 per cent to VNĐ80.6 trillion.

According to the Ministry of Construction, real estate credit in the second quarter continued to be managed in a cautious and selective manner, prioritising capital for projects with full legal compliance and the capacity for implementation and completion, thus generating actual market supply.

Access to capital varies among real estate enterprises. Developers with strong financial standing, viable business plans and stable cash flows enjoy more favourable conditions for securing credit, whereas projects facing legal hurdles or low liquidity continue to struggle.

From an investment perspective, Tạ Mỹ Bách, head of property consulting firm Jones Lang Lasalle Vietnam’s capital markets division, noted a shift in investor appetite from strategies driven primarily by expectations of price hikes toward an emphasis on asset quality and actual operational performance. This indicates that an asset's cash-generating potential and operational efficiency are playing an increasingly critical role in investment decisions.

The developments in the first half of the year showed that bank capital continued to play a vital role in the real estate market, but access to such capital is becoming increasingly differentiated.

A developer's financial strength, a project's legal status, performance and ability to generate cash flow are emerging as key factors determining its appeal to both credit institutions and investors.

Vietnam’s energy sector has a substantial task ahead of it in ensuring that power supplies are commensurate with growing demand during the country’s new era of development.

As Vietnam enters a new phase of development targeting double-digit economic growth, its energy sector must go beyond ensuring adequate supplies to build a modern, competitive, and resilient system. It must adapt to the global energy transition and meet the country’s emissions commitments, creating both an opportunity to restructure the sector and a test of policymakers’ and businesses’ ability to deliver.

The sector has made significant strides forward over the last several years. The national power system has expanded rapidly, while oil and gas infrastructure has developed more systematically. Based on the revised National Power Development Plan for 2021-2030, with a vision to 2050 (PDP8), Vietnam faces enormous energy demand in the time ahead. By 2050, commercial electricity consumption is expected to exceed 1.23 trillion kWh, reflecting the scale of energy demand required to support national development.

National energy planning

The most significant change is the shift in the power generation mix. Whereas the national system once relied mainly on coal and hydropower, nowadays LNG-fired power, wind, solar, nuclear, pumped-storage hydropower, battery storage, and other emerging sources are reshaping the generation market.

The transition is also extending beyond generation into energy storage. Battery energy storage systems (BESS) are beginning to be deployed by businesses and power generators, signaling a new approach to energy management.

PDP8 identifies 13 LNG power projects with a combined capacity of about 22.4 GW, with the goal of making LNG a key source of baseload power. In practice, however, these projects face major obstacles.

Though 13 projects are planned through 2030, only Nhon Trach 3 and Nhon Trach 4 have been completed and brought into operation so far. Most of the remaining LNG projects remain only on paper, with investors and power generators still working through legal and regulatory procedures. The challenges include fragmented investment mechanisms, difficulties arranging financing and, particularly, obstacles in negotiating power purchase agreements (PPAs), all of which are slowing investment across the sector.

Nuclear energy has also returned to the policy agenda, with the Ninh Thuan 1 and Ninh Thuan 2 projects included in development plans through 2030-2035. Both remain at the investment preparation stage, however. Policies covering regulatory mechanisms, environmental safety, special incentives, and power purchase arrangements are still under study, with no specific framework yet in place to support implementation.

This shows that while Vietnam is seeking to build one of Southeast Asia’s largest energy systems, planning is only the necessary condition. The sufficient condition is a strong policy framework that allows resources to be mobilized efficiently once projects come online, minimizes waste, and ensures viable returns for investors.

Core bottlenecks

A closer look at the sector shows that institutional reform is a critical prerequisite for development. Four major bottlenecks are constraining investment and project implementation: an inconsistent legal and policy framework; an incomplete and insufficiently competitive energy market; a mismatch between power generation and transmission infrastructure; and shortcomings in policies for emerging energy sectors.

The lack of policy coordination is particularly problematic. Energy projects are subject to multiple laws, including the Law on Petroleum, the Law on Electricity, the Law on Investment, the Land Law, the Law on Environmental Protection, and the Law on Marine Resources, alongside numerous implementing decrees. This creates a complex legal framework that businesses must navigate simultaneously.

A delay at any single stage can have knock-on effects across the entire project timeline. Electricity pricing and PPAs also remain challenging.

For offshore wind, though the government has issued Decree No. 11 on surveying and development, several key mechanisms are still missing. These include a clear methodology for determining electricity prices, standardized PPA templates, risk-sharing arrangements between the government and investors, and foreign-currency payment guarantees. These factors are critical for international lenders assessing project financing. Without adequate payment security and dispatch commitments, projects will struggle to secure financing, directly affecting their timelines and viability.

Vietnam’s energy market also remains incomplete. The gas and LNG markets, in particular, have yet to fully develop. Electricity prices remain insufficiently attractive to major investors, while the power market is still evolving and commitments on maximum dispatch volumes have not been applied consistently.

This is especially important for LNG, which requires substantial capital and involves a long value chain from import terminals to power plants. Without mechanisms to guarantee offtake and capacity dispatch, investors will remain reluctant to commit. This helps explain why many LNG projects planned for 2025-2030, including Ninh Thuan, Ca Na, Quynh Lap, and Quang Ninh, remain at the investment solicitation stage.

The mismatch between generation and transmission infrastructure is another major bottleneck. Though regulations on direct power purchase agreements (DPPAs) have been issued, generators cannot effectively mobilize their resources without adequate transmission lines and grid connections. PDP8 sets targets for smart grids and energy storage, but mechanisms to attract private investment in the power grid remain limited.

Many businesses have invested in rooftop solar systems but have been unable to feed excess electricity into the national grid, leaving them to use the power internally and resulting in significant underutilization of resources.

Emerging sectors such as green hydrogen, green ammonia, and carbon capture, utilization, and storage (CCUS) also lack clear technical standards and specific incentives. While neighboring countries have developed national strategies for hydrogen and carbon markets, Vietnam remains largely at the research stage.

The absence of pricing mechanisms and viable markets discourages investment, while financial institutions lack sufficient grounds to assess project viability. The main constraints facing Vietnam’s energy sector therefore lie not in a lack of resources or demand, but in institutional barriers and an incomplete investment environment.

Strengthening institutions

Vietnam needs to review relevant regulations and ensure consistency among the Law on Electricity, the Law on Petroleum, the Law on Investment, and the Land Law. Simplifying investment procedures and shortening project preparation timelines would also help unlock capital. The revised Law on Electricity, in particular, needs clearer mechanisms for electricity pricing for renewable energy and LNG projects rather than leaving them at the level of broad proposals or ongoing studies.

One notable development in recent legal reforms is the proposed delegation of authority to the Vietnam National Industry-Energy Group (PetroVietnam) under the new draft Law on Petroleum. Allowing PetroVietnam to directly negotiate, sign contracts, and select contractors for petroleum exploration and production projects, rather than requiring multiple layers of approval, would represent a significant step forward.

The reform could shorten project timelines while facilitating the development of small and marginal fields as fossil fuel resources decline. Greater consistency across legislation, connecting onshore and offshore projects, would also help eliminate legal gaps that have historically complicated cost approvals and project implementation.

Vietnam also needs to develop a fully-competitive energy market under State regulation. Transparent electricity pricing and gas-market mechanisms, together with long-term PPAs and clear risk-sharing arrangements, are essential to attracting international financial institutions. With borrowing costs rising, businesses will struggle to finance investments of $1.2 billion-$1.4 billion for each gas-fired power complex without dedicated financial incentives or specialized energy banks.

The government must play a leading role in creating a level playing field and avoiding fragmented investment that wastes national resources.

Developing an integrated energy industrial ecosystem is equally important. Vietnam cannot focus solely on power generation; it must also invest in transmission infrastructure, energy storage and, particularly, domestic manufacturing and supporting technical services. Specific policies are needed to help domestic companies participate more deeply in global value chains for emerging energy industries.

Companies such as the PetroVietnam Technical Services Corporation (PTSC), Vietsovpetro, and Dai Dung have already begun establishing positions in offshore wind technical services. Maintaining and expanding this market share would not only generate significant revenue - foreign services and offshore wind account for 60-80 per cent of PTSC’s revenue structure - but also strengthen competitiveness and localization across the wider economy.

Finally, amid increasingly complex geopolitical conditions and disruptions in areas such as the Red Sea and the Strait of Hormuz, national energy security has become more important than ever. External shocks have highlighted the need for Vietnam to strengthen energy storage and diversify supply sources to improve resilience.

The fact that refineries such as Dung Quat and Nghi Son have had to operate at 110-120 per cent capacity during recent periods of disruption is a warning of the risks to system security. Vietnam therefore needs an energy market capable of adapting to shocks, supported by a robust legal framework and a strong domestic industrial ecosystem. Together, these elements will be essential if the energy sector is to become a genuine engine of growth for Vietnam’s next stage of economic development.