VEPR

VIETNAM BUSINESS FINANCE- The research team at the Center for Economic and Policy Research (CEPR), a part of Hanoi National University, has released the results of a study on the projected impacts of the proposed electricity price increases on households’ spending and the national economy as a whole. It says that a price increase will lead to a GDP decrease.

EVN suggests adjusting electricity price when inflation over 5%

According to Nguyen Duc Thanh, director of the center and head of the team, the researchers considered three scenarios corresponding to the three price increases for the production consumption of 0%, 10% and 20%. All three scenarios showed the same result: the GDP will decrease and the consumer price index (CPI) will increase.

According to the research team, the Electricity of Vietnam (EVN) company accounts for 74% of electricity output and holds 94% of the electricity transmission market – therefore, EVN controls the energy market. EVN does not lack capital, although it complains that it does and its profits are not low. EVN still has money to inject in business fields that require significant sums of capital like telecommunications and finance.


The fact that the electricity output does not increase rapidly enough to satisfy the increasingly high demand and production expansion may originate from problems in management, but not from low electricity prices.

CEPR’s report has also pointed out that it would be unreasonable to push the electricity price up to the regional level, since many types of expenses in Vietnam prove to be lower than in other regional countries (e.g. labor cost, materials).

The research team affirmed that if productivity increased by 2%, Vietnam would not need to increase electricity prices, it could even lower prices by 2%. Therefore, according to Dr Thanh, Vietnam needs to improve supply instead of raising prices.

Nguyen Trung, a senior economist, also said that in principle, producers must not say they need to increase prices to cover production and business expenses. Trung said that before attempting to raise electricity prices, EVN should say what it has been doing to increase productivity.

Dr Nguyen Quang A, Head of the Institute for Development Studies, said that people cannot see convincing proof that shows the necessity of raising electricity prices. “EVN needs to publicize the figures about productivity and profit in recent years. In the long term, the electricity distribution unit needs to be split from EVN,” he added.