Viet Nam

This report assesses Viet Nam’s agricultural sector through the lens of the OECD Agro-food Productivity-Sustainability-Resilience (PSR) Policy Framework. Agriculture has played an important role in Viet Nam’s remarkable economic growth over the past thirty years. In the 1990s, government policies contributed to strong agricultural productivity growth, but this has since fallen. OECD Agri-Environmental indicators also reveal weaknesses in the environmental footprint of growth, notably with respect to nutrient balances, as a result of the excessive use of agro-chemicals and poor animal waste management practices. The agricultural sector faces significant resilience challenges from climate change impacts, including sea level rises and more frequent and severe storm events. Although the level of agricultural support provided to farmers is relatively low, policies such as land use regulations are skewed in favour of rice production, thereby maintaining a production structure dominated by small part-time household farms that limit innovation. Viet Nam’s support for general services for agriculture (GSSE) was equivalent to 2.5% of agricultural value added in 2018-20, well below the OECD average. Shifting the focus of support towards research, development, and innovation partnerships with the private sector will contribute to improving the agri-environmental performance of agriculture in Viet Nam. This should ideally be accompanied by a reform of land use regulations.

The Economic Outlook for Southeast Asia, China and India is a regular publication on regional economic growth and development in Emerging Asia. It focuses on the economic conditions of Association of Southeast Asian Nations (ASEAN) members: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam, as well as China and India. It comprises two main parts. The first part presents the regional economic monitor, depicting the economic outlook and macroeconomic challenges in the region. The second part consists of special thematic chapters addressing a major issue facing the region. The 2022 edition addresses financing sustainable recovery from the COVID-19 pandemic. The COVID-19 pandemic is proving to be extremely costly, both economically and socially and sustainable financing solutions are crucial for an equitable and inclusive recovery. The report explores how governments can obtain additional financing by harnessing bond markets, and use green, social and sustainability bonds to achieve policy objectives.

Today, the global youth population is at its highest ever and still growing, with the highest proportion of youth living in Africa and Asia, and a majority of them in rural areas. Young people in rural areas face the double challenge of age-specific vulnerabilities and underdevelopment of rural areas. While agriculture absorbs the majority of rural workers in developing countries, low pay and poor working conditions make it difficult to sustain rural livelihoods. Potential job opportunities for rural youth exist in agriculture and along the agri-food value chain, however. Growing populations, urbanisation and rising incomes of the working class are increasing demand for more diverse and higher value added agricultural and food products in Africa and developing Asia. This demand will create a need for off-farm labour, especially in agribusinesses, which tends to be better paid and located in rural areas and secondary towns. It could boost job creation in the food economy provided that local food systems were mobilised to take up the challenge of higher and changing domestic demand for food.

Viet Nam has become a leading regional market for renewable energy in a short space of time led by private sector investment facilitated by favourable support mechanisms. Maintaining market growth sustainably while integrating higher shares of variable generation will be a key challenge for Viet Nam’s policy makers over the next decade as the post-pandemic economic recovery builds momentum. Viet Nam's economy also remains highly energy intensive and energy efficiency improvement has the potential to unlock multiple economic benefits with further market interventions. The Clean Energy Finance and Investment Policy Review of Viet Nam provides a comprehensive overview of the current policy framework, highlighting progress and identifying untapped opportunities for strengthening policy interventions that can help scale up clean energy finance and investment. It also provides a number of tailored recommendations for the Government of Viet Nam and development partners. The Review was undertaken within the OECD Clean Energy Finance and Investment Mobilisation (CEFIM) Programme, which supports governments in emerging economies to unlock finance and investment in clean energy.

Viet Nam’s sustained economic development is driving increasing demand for electricity with generation capacity predicted to nearly double over the next decade. With the majority of economic hydropower resources utilised, delays in coal power pipelines, and increasing energy insecurity, Viet Nam has pivoted its electricity sector development plans to further prioritize the deployment of wind and solar generation. A clean energy transition such as this can deliver multiple social and economic benefits related to cost reductions, improved energy security, and public health. This working paper was prepared to support least-cost energy sector planning in Viet Nam particularly for the upcoming Viet Nam Energy Outlook 2021 (VEO21) being prepared in partnership between Viet Nam’s Ministry of Industry and Trade (MOIT) and the Danish Energy Agency (DEA). This working paper discusses the use of discounting in energy models and the potential impact discount rate selection may have on a model’s cost-optimised technology selections. The paper also analyses the clean energy finance environment in Viet Nam to identify opportunities for policy levers to reduce the prevailing cost of capital and how these cost implications can be tested in the VEO21 modelling exercise. The main outputs of this working paper are two sets of model inputs, an estimate for an appropriate social discount rate and secondly a set of high and low financial hurdle rates for renewable energy technologies for use in sensitivity or scenario analysis.