Richard Hoang Quan - Founder & Chairman of Aplus Fund & Amber Green Fund

Q: Could you explain how circular economy differs from the traditional linear economic model?

Richard Hoang Quan: The term “circular economy” was first formally used in an economic model by Pearce and Turner in their 1990 book “Economics of Natural Resources and the Environment,” but the concept was written about as early as 1966. However, only in recent decades has the concept developed and gained prominence. A circular economy is an economic system designed to eliminate waste and the continual use of resources. There are three key principles of a circular economy:

1. Circulate products and materials: Products and materials are kept in use for as long as possible through processes like maintenance, reuse, refurbishment, remanufacturing, and of course recycling.
2. Eliminate waste and pollution: A circular economy model aims to design out waste and pollution from the start, rather than managing it after the fact.
3. Regenerate nature: This is crucial; the circular economy seeks to regenerate natural systems by returning valuable nutrients to the soil and preserving renewable resources.

The circular economy contrasts with the traditional and linear “take-make-waste” economic model. It is a more sustainable and resilient system that benefits people, businesses, and the environment.

The circular economy diagram

Q: About green finance, how does it specifically support small and medium-sized enterprises (SMEs) in Vietnam in adopting circular economy practices?

Richard Hoang Quan: Green finance refers to financial investments flowing into sustainable development projects and initiatives that encourage the development of a more sustainable economy. In Vietnam, several banks offer SMEs circular economy loan schemes. One such bank is MSB. MSB and the Dutch Entrepreneurial Development Bank have signed a letter of intent to cooperate on a US$100 million term loan. MSB has also secured US$30 million from Proparco to finance renewable energy and energy efficiency projects. Additionally, MSB secured US$40 million from the OPEC Fund as part of their shared goal of promoting financial inclusion and sustainable economic growth to 80 local small and medium-sized enterprises in Vietnam.

Other financial institutions in Vietnam have also secured substantial loan facilities. The Vietnam Development Bank (VDB) secured US$270 million from Japan, Techcombank secured US$800 million from a syndicated loan facility, and VPBank secured a total of US$800 million from two separate facilities from DFC and an ADB consortium in 2022 and 2023. OCB secured US$100 million from IFC and US$55 million from DEG (German KfW Development Bank), while HDBank secured US$300 million from DEG in 2021. SeABank secured US$200 million from DFC and US$150 million from IFC for sustainable financing activities, and LPBank secured US$80 million from an ADB consortium in June 2024.

As we can see, there are plenty of funding sources for Vietnam SMEs via domestic banks. All these development finance facilities are there for domestic banks to facilitate a push towards green finance, circular economy, financial inclusiveness, better agriculture development, and assist women-owned businesses in accessing growth capital.

Q: How are Vietnamese entrepreneurs and business leaders leveraging the circular economy movement to create sustainable business models?

Richard Hoang Quan: In my opinion, there are three main stakeholders in a circular economy, as there are in any economy: customers, businesses, and government. The value creation and proposition may need to be nudged by government policies to incentivize businesses that adopt new systems and business models, perhaps through tax incentives, lowering VAT, or less tax on labor.

On the other hand, consumers play a critical role in encouraging businesses to change due to consumer demand and willingness to pay for circular economy system products. For example, better agriculture methods, regenerative soil, and organic fertilizer adoption tend to add additional costs to production. Greener energy is a higher cost to society as we move away from fossil fuels. Electrification of motor vehicles is currently more costly and burdensome in some cases. However, as battery storage, data center costs, and charging stations become more readily accessible, these new circular economy products and services will demand businesses to change.

Look at the GSM Green taxi in Vietnam. I predict that over the next several years, Green taxi will be a leading player in Vietnam and perhaps in the region as consumer demand for greener transport grows. The cost of a green taxi ride is equivalent to that of traditional taxis and Grab and Be. Even taxi drivers are switching to drive for GSM as their children demand a greener economy, and of course, the labor market would move to a business model that generates better income.

Q: Is green finance generally more efficient and less costly for SMEs, and what factors influence the cost of green financing?

Richard Hoang Quan: The journey for green finance, development finance, and circular economy financing has hurdles, but it is not impossible. Entrepreneurs are always the forerunners of creativity, resilience, and perseverance. It is these take-charge attitudes that get leaders and founders funded and access to capital for their corporate success.

The last hurdle is the question of the cost of financing. Is green finance costly or efficient for SMEs? There is no quick answer, unfortunately. There are funding sources out there. The cost equation comes as a business decision, not a financing decision. Entrepreneurs decide their path forward and then seek the necessary resources to achieve those goals. I believe that whatever the immediate cost of green capital is, it will pay many times over in the long run as customers will recognize and appreciate the work of founders, leaders, and entrepreneurs who deliver products and services with a keen eye on a more sustainable and resilient circular system than the outdated “take-make-waste” model. Businesses will be handsomely rewarded for these efforts. We see examples all around us. Look at Tesla in the US, BYD in China, and GSM Green Taxi and VinFast in Vietnam as very small examples.
Q: Thank you for your time! 

 

Mr. Richard Hoang Quan, a pioneering entrepreneur and educator, has been influential in Vietnam and Southeast Asia since 1994. Starting with Banque Indosuez and Standard Chartered Bank, he established the first Montessori kindergarten chain in Hanoi in 2003. With over 30 years of experience, he has built a vast network, working with international and local banks and advising several of Vietnam’s billionaires. Born in Saigon and raised in Paris and Brooklyn, he now leads wealth management initiatives like A+ Advisors, managing Vietnam’s first Private Credit Fund with FPT Capital.

 

Bao Loan