sector must face up to deregulation: MoI
HA NOI — Viet Nam’s
energy sector must move towards relying on competitive markets to regulate
prices, as the country becomes a full member of the world’s most powerful
trade organisation, according to the Ministry of Industry (MoI).
This is believed to be the
only way for the sector which dominates the entire national economy to further
develop, as the economy stands on the threshold of the World Trade Organisation.
One of the biggest
advantages that the current energy regulatory mechanism has brought to the
country has been stability in terms of price and supply.
The economy would suffer
shocks if energy prices fluctuated on the basis of the international market
price, without the State’s regulation. Despite increases in revenue for the
power and coal sector, fluctuating prices would raise the costs of crucial
economic products including cement, iron and chemicals as well as other
industrial products, thus reducing their competitiveness.
Director of the MoI’s
Energy and Petroleum Department Ta Van Huong said that becoming the 150th member
of the WTO would mean the country would have to take a new tack on the question
of power energy regulation, namely relying on the market mechanism to set energy
"If we do not take
this trend, it will be difficult to attract foreign investment in the energy
sector. It will be a disadvantage for the sector in the context of limited
capital and technology of domestic investors," Huong said.
He evaluated the ability
of the sector to make this transition.
"Luckily, the oil and
gas industries have got the ball rolling towards the market mechanism. Crude oil
has been bought at international prices. A similar situation has come about for
petroleum and oil imports," he said.
"However, it will be
much more difficult for power and coal industries to switch to a new mechanism
as the State’s regulatory role in these industries has been
According to Huong, the
sector’s transition towards a competitive market-based price structure would
need a gradual road map to avoid a shock to the whole economy, as it may suffer
from the "domino effect" of energy price fluctuations.
To develop the sector in
this way, it would be necessary to change the mind of policymakers and market
participants. They should banish their worries over foreign investors
benefiting, and instead consider this a good signal of Vietnamese market quality
and potential, Huong said.
Another urgent issue in
preparation for the trend is a legal system that can take the energy sector
towards a competitive market mechanism. Such legislation would need to be
Investment in alternative
energy sources would be a sustainable way of developing competitive energy
The Institute of Energy
considers developing atomic energy a feasible solution to compensate for the
shortage of traditional energy resources. An atomic power plant is expected to
be built in central Viet Nam by 2017.
Once the country’s
energy sector moves towards a competitive market mechanism, a demand-supply
balance would be established, thus reducing the State’s burden of management
and investment in the sector. — VNS