Realizing the potential of Viet Nam’s capital markets is a central goal of the Sustainable Finance Facility (SFF). The SFF, supported by the Swiss development agency’s State Secretariate for Economic Affairs (SECO), helps governments in developing and emerging economies create conditions for enabling and mobilizing private capital, especially for sectors that require long-term financial investments, to tackle pressing global challenges.
The World Bank’s work in Viet Nam takes place against the backdrop of relative macroeconomic stability but significant challenges to creating a vibrant capital market that can channel savings into productive, sustainable enterprises. Stable frameworks for institutional investors, government capacity for sound regulation, and demonstration transactions will be essential to unlocking Viet Nam’s promise.
To that end, the World Bank, under the SFF, supports major projects, vital technical assistance, and important research in the Southeast Asian nation. The largest domestic institutional investor, the Viet Nam Social Security Fund, now faces the challenge of diversifying its portfolio to anchor a more active bond market. A test for SFF work in Viet Nam – the first green and sustainability bonds issued by a commercial bank in the country – demonstrated great promise.
Viet Nam already has decent economic growth and fiscal stability, but the country needs financing for long-term projects, especially in infrastructure, for sustainable development. At most, the government can only provide two-thirds of the US$25 billion per year (7 percent of GDP) the country needs. The remainder must come from private-sector banks and, for longer-term financing, capital markets.
Viet Nam is behind most ASEAN-5 countries in some areas of capital market development. Domestic enterprises face constricted access to foreign capital and the domestic investor base is still developing. The right reforms to promote corporate bond and equity market development, including an Emerging Market upgrade of the stock market, could bring more than US$78 billion in new funding and investment in a 6-8-year horizon, primarily for the corporate sector.
BIDV Green and Sustainability Bonds
The World Bank provided technical assistance to the state-owned Bank for Investment and Development of Vietnam (BIDV) to issue its inaugural, US$104 million green bond and US$120 million sustainability bond in 2023 and 2024, respectively. These transactions are the first senior, unsecured, and unguaranteed green and sustainability bonds issued by a local commercial bank in Vietnam. Other banks, such as Vietcombank, HDBank and SeABank, have since issued green bonds as a result.
As the oldest financial institution in Viet Nam and one of the top three hundred largest banks in the world, BIDV is focusing on tailoring green financial products and services as well as adjusting its structure and organizational model towards green banking, a priority goal in its business strategy through 2030.