How will Vietnam’s energy policies affect FDI attraction?
EuroCham, in its latest report about foreign investors’ views about Vietnam’s energy policies, pointed out that Vietnam’s ability to attract foreign direct investment (FDI) does not depend on the price of electricity.
Thus, it would be wrong for Vietnam to try to attract foreign investors by trying to subsidize the power price.
EuroCham, which conducted a survey of its member companies, has found that the electricity price was the least important factor out of the 10 factors affecting their investment decisions.
The investors attached much more importance to the investment rate, the readiness of skilled workers, domestic market conditions and the government’s development policies.
When asked about the importance of the power price on their investment decisions on a 1-10 scale, 72% of the surveyed companies said five and less.
The electricity price has been increasing under a government plan to create a competitive power market and gradually remove subsidization.
The surveyors found that 90% of foreign-invested enterprises operating in most production fields in Vietnam pay less than 10% of their total cost on electricity bill, while 60% pay less than 5%.
Many polled businesses said they would accept the nominal annual electricity price increase of 15%, while 65% said the annual 10% price increase was acceptable.
EuroCham said the government of Vietnam should not hesitate to reconsider the current power pricing policies.
The heads of EVN many times have warned that if the electricity price in Vietnam continues at below the production cost, Vietnam will not be able to attract foreign investors to the power sector.
Deputy Minister of MOIT Do Thang Hai talked to the local press on the sidelines of a recent conference, affirming that if EVN cannot raise electricity prices, it will go bankrupt.
The World Bank (WB), according to Hai, recommended that the retail electricity price in Vietnam be raised by 40% in the next three years to “save” Vietnam’s power sector.
WB is considering EVN’s financial situation, production costs and retail prices to decide whether to continue funding EVN’s power projects.
Vietnam has been advised to raise the retail price by 10% at least for every six months, from now to mid-2016.
EVN has been facing strong opposition from individual electricity consumers and Vietnamese businesses about electricity price increases, especially from steel mills and cement manufacturers, which are big consumers of power.
However, an official of the Ministry of Industry and Trade said that Vietnam still needs to be cautious about the power pricing policy, because the higher price will weaken domestic businesses’ competitiveness.
EuroCham, which conducted a survey of its member companies, has found that the electricity price was the least important factor out of the 10 factors affecting their investment decisions.
The investors attached much more importance to the investment rate, the readiness of skilled workers, domestic market conditions and the government’s development policies.
When asked about the importance of the power price on their investment decisions on a 1-10 scale, 72% of the surveyed companies said five and less.
The electricity price has been increasing under a government plan to create a competitive power market and gradually remove subsidization.
The surveyors found that 90% of foreign-invested enterprises operating in most production fields in Vietnam pay less than 10% of their total cost on electricity bill, while 60% pay less than 5%.
Many polled businesses said they would accept the nominal annual electricity price increase of 15%, while 65% said the annual 10% price increase was acceptable.
EuroCham said the government of Vietnam should not hesitate to reconsider the current power pricing policies.
The heads of EVN many times have warned that if the electricity price in Vietnam continues at below the production cost, Vietnam will not be able to attract foreign investors to the power sector.
Deputy Minister of MOIT Do Thang Hai talked to the local press on the sidelines of a recent conference, affirming that if EVN cannot raise electricity prices, it will go bankrupt.
The World Bank (WB), according to Hai, recommended that the retail electricity price in Vietnam be raised by 40% in the next three years to “save” Vietnam’s power sector.
WB is considering EVN’s financial situation, production costs and retail prices to decide whether to continue funding EVN’s power projects.
Vietnam has been advised to raise the retail price by 10% at least for every six months, from now to mid-2016.
EVN has been facing strong opposition from individual electricity consumers and Vietnamese businesses about electricity price increases, especially from steel mills and cement manufacturers, which are big consumers of power.
However, an official of the Ministry of Industry and Trade said that Vietnam still needs to be cautious about the power pricing policy, because the higher price will weaken domestic businesses’ competitiveness.