VietNamNet Bridge – How to maintain normal
production when the electricity price keeps rising is really a headache to
enterprises. They have been advised to use modern technologies which allow saving
energy. However, this proves to be out of the reach of small enterprises.

It remains
unclear if the electricity price would increase after June 1, 2011, but
businesses have been warned that the electricity will keep rising in accordance
with a plan on power price adjustment.

Vu Van
Hien, Deputy General Director of Sadakim in Bien Hoa 1 Industrial Zone in Dong
Nai province, said on Dau tu that he feels worried stiff.

“The
electricity price now accounts for 10-15 percent of the total production cost
in the mechanical engineering production,” he said. “If enterprises cannot
receive exact information about the electricity price increase plan, it will be
very difficult for them to define the sale prices of their products”.

He has also
revealed that some foreign partners have complained that the mechanical
engineering products of Vietnam
are relatively high if compared with the products of the same kinds made in Thailand and Malaysia.

Nguyen Tri
Kien, Director of Minh Tien Company, also said he now has to think about how to
keep the production in the normal track, once the electricity bill makes up
10-12 percent of the production costs.

Kien said
that after the electricity price increase in early March, the company still
does not have to raise the sale prices of its products. However, it will have
to raise the prices if the electricity price increases again as of June 1.

“We are
considering upgrading the machines and equipments which consume much energy. Of
course, this will require a heavy investment, but this proves to be the best
solution which allows us to take initiative in the production, when the
electricity price is on the rise,” he said.

Backward
energy consuming technologies have been cited as the main reason that hinders
the productivity of enterprises. Deputy Minister of Industry and Trade, Tran
Anh Tuan said at a workshop held recently, that the technologies used by
Vietnamese enterprises prove to be more outdated than the world’s currently
used technologies for 2-3 generations.

76 percent
of machines and production lines in Vietnam are the ones which were
manufactured in 1950-1960, while 75 percent of equipments were fully
depreciated and 50 percent of equipments are refurbished ones.

“In
general, only 10 percent of machines and equipments being used at factories are
modern, 38 percent at “average level”, while 52 percent are backward,” he said.

In Vietnam, only two percent of enterprises are
using new technologies, while the proportion is 31 percent in Thailand, 51 percent in Malaysia and 73 percent in Singapore.

Also
according to Anh, Vietnamese enterprises only use 0.2-0.3 percent of their
total turnover to renovate technologies.

There are
two choices for enterprises to deal with the backward equipments, either to
upgrade the equipments or replace them with new ones. However, Hien said that
both the solutions will require big sums of investment money.

“The
lending interest rates now are overly high; therefore, it is really difficult
to think of renovating technologies at this moment. Meanwhile, it is also not
easy to upgrade the equipments, because of no spare parts,” he complained.

According
to Do Duy Thai, Chair of Viet Steel Corporation, the Decision No 24 stipulates
that the electricity prices will be defined based on the market supply and
demand, and that the prices may increase four times a year at maximum. He said
that if the price increases are too big, steel manufacturers will heavy suffer.

Meanwhile,
the information that the power price at which Vietnam
purchases from China
has increased by 13 percent, from 5.1 cent per kwh to 5.8 cent since January
2011. This has given enterprises a start. Once the electricity purchase price
increases, the retail price would also have to increase.

In
principle, the Electricity of Vietnam has the right to raise the electricity
price again from June 1, 2011 (three months after the previous increase).
However, Tien phong has quoted officials as saying, that “it is still unclear
if the price increase will happen.”

C. V