Mar 17, 2013

Vietnam - Big guys’ alliance causes worry about monopoly in energy sector

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VietNamNet Bridge – The strategic cooperation of the three big guys in the energy sector is believed to harm the national economy because it would make the market monopoly become more serious.

Three most powerful groups in the energy sector, namely the Electricity of Vietnam (EVN), PetroVietnam (PVN) and the Vietnam Coal and Mineral Industries Group (Vinacomin) have signed a strategic cooperation agreement, aiming to form up an alliance to better manage the electricity production and distribution.

The appearance of an alliance of the giants has raised big worries among the public. The three big guys are all the exclusive manufacturers and distributors in their fields. What will happen if they join forces and control the domestic power market?

Pham Chi Lan, a well-known Vietnamese economist, has pointed out that the cooperation of the three power groups would create a bigger monopoly. More dangerously, the monopoly would exist in the energy sector, which has big impacts on all other business fields of the national economy.

She has also warned that with the monopoly to be created by the three big groups, it would be even more difficult for the State to manage the enterprises.

The three big guys explained that their cooperation would help better manage the power production and distribution. However, they cannot convince people that the cooperation would be for the sake of the national economy.

Will the cooperation help reduce the electricity shortage? Will the electricity cuts occur? Will Vietnam have to import electricity? Will domestic power plants be able to sell electricity to EVN, or will EVN continue buying electricity from China? No one can say for sure that the current existing problems would be settled once the three big guys cooperate with each other.

While it’s still unclear about the benefits the alliance can bring to the national economy, a worry has been raised that the alliance would deprive the opportunities of other businesses to join the market.

What will happen if EVN, the only electricity wholesale buyer, prioritizes to buy electricity from PetroVietnam’s or Vinacomin’s power plants? If so, no other enterprise would have the opportunity to sell electricity to EVN. This would not only lead to the collapse of the power plants, but also make the national plan on developing a competitive power market fail completely.

Also according to Lan, the Competition Administration Department (CAD) has the right the ask the three power groups to show their business strategy and the way the three groups would cooperate. To date, EVN still has been controlling the power distribution market.

However, the problem is that CAD is not an independent agency, but it is an arm of the Ministry of Industry and Trade, which is the governing body of EVN, Vinacomin and PetroVietnam.

Le Dang Doanh, a well-known economist, has also warned that if the three power groups join forces to strengthen their monopoly, this would be a big threat to the national economy. It may happen that the alliance of the three groups would control the electricity price, while the electricity price would keep escalating and become unbearable for businesses.

Doanh has stressed that Vietnam now is very bad at controlling the monopoly. Therefore, the situation may become even worse if the three groups join forces to control the power market.


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