Appropriate financing

As Vietnam enters a new phase of development, it is accelerating investment in strategic transport networks, urban infrastructure, energy, and the digital economy. Under the 2026-2030 medium-term public investment plan, the National Assembly approved total funding of VND8,220 trillion ($316.2 billion), laying the foundation for further infrastructure development. But the growing scale of projects is also increasing demand for medium and long-term capital to finance assets with lifespans of decades.

Bankability gap

Substantial capital continues to flow into Vietnam. According to the National Statistics Office at the Ministry of Finance, registered FDI reached $40.63 billion in the first eight months of 2026, up 55.4 per cent year-on-year. Yet turning investor interest into financing remains a challenge. The issue is not simply how much capital is available, but whether projects are structured clearly enough for banks, bond investors, and long-term financial institutions to assess and price their risks.

Bank credit remains the economy’s primary source of financing. According to the State Bank of Vietnam, credit growth this year stood at 9.71 per cent as of August 22, with outstanding credit at around VND20,400 trillion ($784.6 billion), up 14.7 per cent year-on-year. The central bank is targeting credit growth of around 15 per cent for the full year.

This reliance on bank credit creates constraints for long-life projects such as infrastructure. Most bank funding remains relatively short term, while infrastructure projects typically require financing with maturities of 15-20 years or longer. The mismatch between deposit and lending maturities makes it difficult for banks alone to meet these needs.

According to calculations by the BIDV Institute for Economic Research, the economy’s total funding needs are expected to grow by an average of around 13 per cent annually through 2030 and roughly 10 per cent annually during 2031-2045. Credit currently accounts for around 50-51 per cent of total funding, compared with about 6.4 per cent for the stock market, 7 per cent for corporate bonds, 12-15 per cent for public investment, and around 12 per cent for FDI. The structure highlights the growing need to diversify funding channels.

Cost of uncertainty

Infrastructure projects seeking long-term financing must show how debt will be repaid, what could weaken cash flows, and who will bear the risks. This remains a challenge in Vietnam. Banks and investors look beyond project size to cash flow visibility and risk. Projects with uncertain revenues, volatile repayment assumptions, or unclear risk allocation will struggle to attract long-term funding.

International experience shows that each risk should be assigned to the party best able to manage it or transfer it elsewhere. In Vietnam, however, this allocation is not always clear. Some risks continue to fall on project sponsors and banks, while in many markets, policy-related or otherwise uncontrollable risks are addressed through mechanisms under which the State shares the burden.

According to Mr. Abhishek Dangra, Managing Director and Analytical Manager, Corporate & Infrastructure Ratings, at S&P Global, risk allocation alone does not improve a project’s ability to raise capital. The priority is first to reduce the project’s overall risk, then allocate the remaining risks to the parties best equipped to bear them.

This is particularly important for multibillion-dollar projects. Major changes in revenue, costs, interest rates, or exchange rates can quickly affect debt servicing capacity. Major risks therefore need to be identified and addressed from the outset. Otherwise, projects may struggle to attract banks or financial institutions capable of providing or guaranteeing the required funding.

The challenge is greater as the cost of capital rises. According to a FiinRatings survey, around 60 per cent of experts and senior executives at major financial institutions expect domestic funding costs to continue increasing over the next two years. Higher funding costs can quickly change a project’s viability.

Risks such as revenue volatility and raw material prices therefore need to be addressed when the financial structure is designed. If all volatility is transferred to the project, debt servicing capacity becomes overly dependent on factors the company cannot control. Appropriate risk-sharing mechanisms are needed to help projects maintain stable cash flows through market fluctuations.

For projects involving foreign capital, issues such as foreign currency convertibility, fund transfers, and exchange rate hedging also need to be considered from the outset. The more clearly a project defines its cash flows, obligations, and risk management mechanisms, the greater its ability to access long-term capital.

Vietnam’s experience shows that international capital can be mobilized for large projects. According to Mr. Tran Tuan Phong, Senior Partner at the Vietnam International Law Firm (VILAF), international lenders have participated in projects based on clearly-defined risk-allocation agreements approved by relevant authorities.

This shows that financing capacity does not depend solely on how much money is available in the market. It also depends on whether a project is structured well enough for investors to see a credible path to recovering their capital. In this sense, financing capacity can be created through project design and contractual structures.

Contract design, risk allocation, and the handling of lenders’ conditions are therefore areas that need improvement. If these requirements are identified and negotiated early, alongside clear approval procedures, the time needed to arrange financing can be shortened.

Bankable assets

Once project risks are identified, the next step is choosing the right financing tools. Project bonds face higher requirements than bank loans: while banks can assess a company’s financial health and credit relationship, bond investors focus primarily on the project’s ability to generate cash to repay debt. Cash flows therefore need to be ring-fenced, contractual rights secured, payment priorities clearly defined, and the project sufficiently independent from its parent company.

These remain weaknesses in the market. Many infrastructure-related bonds are issued by parent companies, lack credit ratings, and have maturities of just two to three years, with pricing tied heavily to 12-month deposit rates. Yet infrastructure assets can operate for decades, creating refinancing pressure and limiting access to long-term investors.

The structure of the bond can therefore make a significant difference. Those backed by dedicated cash flows, credit ratings, scheduled repayment, and contracted revenues are more likely to attract long-term investors than short-term parent-company bonds with repayment at maturity.

Experts at FiinRatings believe the market needs a yield curve benchmarked by maturity and credit quality, rather than relying primarily on short-term deposit rates. This would allow higher-quality assets to raise capital at more stable cost.

A secondary market for infrastructure loans and bonds could also be developed once projects enter operation. After an asset passes the construction phase and establishes a cash flow track record, its risk falls and it becomes easier to value. According to FiinRatings, banks could finance projects during construction and later transfer part of those investments to the bond market or long-term investors. This would allow banks to recover capital and redeploy it into new projects.

According to Ms. Nguyen Thi Lan, Head of Portfolio Management Unit at PVI Asset Management, the key to infrastructure capital markets is not nominal yield but predictable cash flows and effective investor protection. “A bond linked to an infrastructure project requires buyers to assess technical, legal, and financial factors, as well as investor protection provisions,” she said. “For most individual investors, this is beyond their capacity to assess. Asset management companies can therefore bridge long-term capital and public-private partnership (PPP) projects, conducting due diligence while diversifying risk across investment portfolios.”

The challenge, then, is not simply to open more funding channels. The market needs assets that are transparent enough to value, stable enough to hold, and secure enough for financial institutions to participate. Only then can bank credit, bonds, insurance capital, investment funds, international capital, and public investment complement one another.