PSIRU - Electricity Sector in Vietnam: Is Competition the answer?

http://www.psiru.org/reports/electricity-sector-vietnam-competition-answer  Rapid economic growth has increased demand for electricity in Vietnam, but the generating capacity, transmission and distribution system has been unable to meet that demand. Government policy proposals are based on liberalization to induce competition into wholesale or retail markets, but these policies have been inconsistent and contradictory, heavily influenced by World Bank conditionalities linked to hundreds of million dollars in loans, and still rely on the existing under-performing management of EVN. There is also no evidence that liberalisation will deal with the three main problems: the inefficiency of EVN arising from bad management, technical problems, and corruption will remain ; there will be no real competitive incentives or opportunities for new investment in generating capacity; and the affordability of electricity will be worsened by the policy of increasing prices towards full cost recovery. The experience of the UK, the country which led global privatization and liberalization, demonstrates that competition does not happen in wholesale markets; underinvestment means that the UK now risks blackouts, and cannot deliver the required growth in renewable energy; while consumer prices, even under regulation, have risen sharply so that there is a serious problem of fuel poverty. The UK government has now re-established central planning of the development of the industry.

(This paper is confirmed to be published in Vietnam Trade Research Review in April 2013 issue. The published Vietnamese version is based on this original English version) - English version at http://www.psiru.org/sites/default/files/Electricity%20Sector%20Vietnam%200313.pdf