An analytical note, Infrastructure Development in Vietnam: Achievements So Far and Challenges Ahead, from the ASEAN+3 Macroeconomic Research Office (AMRO) raises some interesting points and observations with respect to infrastructure investment in Vietnam.
Here’s a quick rundown of the main noteworthy points.
Logistics costs are high
Vietnam has achieved near-universal electrification and significant transport improvements, supporting export-oriented manufacturing and foreign direct investment.
However, firms still cite power reliability and transport infrastructure as major constraints, and logistics costs remain high at about 16.8 percent of GDP, well above the global average of 10.6 percent.
DPPAs as private sector solution
Electricity Vietnam (EVN), the dominant state utility, suffered heavy losses due to fuel price increases and regulated electricity tariffs.
Reforms such as regular tariff reviews and the Direct Power Purchase Agreement (DPPA) scheme aim to allow private producers to sell directly to large corporate buyers, reducing EVN’s financial burden and attracting private investment.
Transport infrastructure is stretched thin
Passenger and cargo transport have grown roughly 10 percent annually over several decades.
Roads dominate transport but suffer from congestion and poor maintenance, railways are outdated and underfunded, and airports are operating beyond capacity, prompting major projects such as the North–South expressway and Long Thanh International Airport.
Investment needs are significant
AMRO estimates Vietnam must invest about 8.2 percent of GDP annually to meet infrastructure targets through 2050.
This exceeds the historical public investment level of around 6–7 percent of GDP, implying the need for higher spending and more efficient project execution.
Financing is a structural bottleneck
Vietnam’s shallow domestic bond market may constrain the government’s ability to finance large infrastructure programmes.
While public debt remains relatively low at just over 30 percent of gross domestic product, achieving infrastructure targets will require higher public spending and therefore greater government borrowing.
As of the second quarter of 2025, the combined outstanding value of government and corporate bonds was about 29 percent of gross domestic product, significantly below regional peers.
Low government bond yields, long maturity structures, and a concentrated investor base dominated by Vietnam Social Security have limited investor demand, highlighting the need to broaden the investor base to deepen the capital market.
Investment through PPPs is limited
Vietnam introduced a unified legal framework for public-private partnerships through the 2020 PPP Law and subsequent amendments, but the system is still seen as weaker than those in countries such as Indonesia and the Philippines.
As a result, many projects struggle to meet the “bankability” standards required by international investors and lenders.
A key concern is the limited availability of government guarantees to mitigate currency and credit risk.
Vietnam generally does not provide sovereign guarantees for foreign-currency convertibility or transfer, offering only discretionary foreign-exchange support capped at about 30 percent of project revenues for priority projects.
This can create currency mismatches when projects are financed in foreign currency but generate revenue in Vietnamese Dong, increasing repayment risks.
By contrast, countries such as Indonesia and the Philippines provide stronger mechanisms, including tariff indexation and sovereign guarantee schemes.
Policy reform impacts take time
Vietnam’s relatively high incremental capital-output ratio indicates that investment is not being used efficiently, meaning more capital is required to generate economic growth.
This reflects weaknesses in budget allocation, the balance between capital spending and maintenance, and institutional gaps in project selection and implementation.
The government has introduced reforms to improve efficiency, including restructuring ministries, decentralising authority and revising the Land Law to allow market-based land pricing and faster land compensation.
However, the impact of these reforms will take time, and implementation challenges remain. Public investment disbursement reached only 83.7 percent of the budget in late 2025, showing persistent constraints in mobilising and deploying funds.
Food for thought
The government of Vietnam expects public spending on infrastructure to be a key growth driver for the economy moving forward.
It does, however, tend to frame the main obstacles as institutional complexity, administrative delays, governance risks, coordination problems, and energy supply pressures.
The AMRO report, in contrast, places much greater emphasis on financing constraints, capital market depth and investment efficiency.
That is to say, the report adds an important dimension that often seems to be overlooked in domestic commentary.