VietNamNet
Bridge – On the threshold of the 11^th Communist Party Congress,
coal, petroleum and electricity producers and distributors harshly proposed to
raise retail prices. If the prices of essential goods increase, Vietnam may
fail to curb the inflation rate. But if not, the producers will continue
incurring loss, which will badly affect the national economy.

Incurring
loss, raising retail prices

Though the Prime Minister has told coal, electricity and petroleum
producers and distributors not to increase prices from now until Tet, the
producers and distributors have been continuously mentioning the price
increases.

It seems that energy economic groups maintain a more peremptory tone this
year when proposing to increase retail prices of their products. The main reason that forces them to raise
prices is that they are incurring heavy losses.

The price of electricity is considered the most sensitive issue. The
Power Regulatory Unit, the Ministry of Industry and Trade and the Electricity
of Vietnam are brainstorming how to calculate the increase of electricity
price. Until now, all the projects on electricity price increases have been
kept secret.

Meanwhile, Tran Viet Ngai, Chair of the Energy Association, believes
that it is necessary to raise the electricity price by 48 percent to 1400-1500
dong per KWH, or 7-8 cent per KWH. Ngai believes that only such an electricity
price will be high enough to attract foreign investors to the power sector.

“The current price is 5.2 cent per KWH, or a little over 1000 dong. If
the price increases to 1100-1200 dong this year, miniscule increases will not
help settle the problem and power plants will still incur loss,” Ngai said.

Also according to Ngai, the price of electricity in Singapore and Malaysia
is over 14 cent per KWH, while the price is 18 cent in Cambodia, or three times higher than that in Vietnam.

Unlikelast year, when Vinacomin proposed a sharp price increase of 137
percent, the economic group has proposed a 2-stage price increase plan. For the
immediate time, Vinacomin has proposed a 40-45 percent increase.

Meanwhile, the price increase of 30 percent has been proposed for
cement, paper and fertilizer.

Explaining the price increase proposals, Vinacomin said that in
2010,Vincom sold coal to power plants at prices equal to 54-59 percent of the
domestic prices, 35-40 percent of export prices and 67-73 percent of the
production costs. Meanwhile, Vinacomin sold to cement to chemical and paper
producers at prices just equal to 60 percent of the export prices. As the
result, Vinacomin incurred a loss of three trillion dong.

Meanwhile, Petrolimex, the petroleum importer and distributor which now
holds 60 percent of the market share, reported a 700 billion dong loss last
year due to increases in the dong/dollar exchange rate.

Curbing
price increases or floating them?

It is not by chance that a series of general corporations have been
insisting on raising sale prices. Representatives of some economic groups said
that they hope to see something new after the 11^th Communist Party
Congress.

To date, there have been big gaps between the viewpoints about whether
to increase the prices of essential goods. Big general corporations always urge
the government to float the prices and “marketize” the prices. Meanwhile,
ministries always ask corporations to keep prices stable in order to curb
inflation.

Of course, businesses have to obey instructions from the ministries and
they have to endure loss. However, with the 11^th Party Congress, the
corporations hope to see changes in the viewpoints and methods of market
regulation.

Ngai from the Energy Association said that the high inflation rate has
been caused by many factors, not by the electricity price. He believes that the
solution for now is not to try to curb the electricity price at a low level,
but to set up a reasonable pricing mechanism. The electricity price should be
low for remote areas, but the price for other areas should be as high as the
regional levels.

The low electricity prices could hinder the development of the power
industry. A lot of licensed foreign invested projects have not kicked off the
project because they are still awaiting new policies on the electricity pricing
scheme. These include the Hai Duong thermopower plant funded by a Malaysian
investor under the mode of BOT, or Mong Duong 2 project funded by an US enterprise.

Pham
Huyen