VNBusinessNews – The much-debated increase of 8.92% in electricity prices will materialize early next month. Unlike many firms that complain the move, Antonio Berenguer, trade counselor of the Delegation of the European Commission to Vietnam, talked about the positive side of the rise in an interview with the Daily. Excerpts:

What do you comment on the electricity price hike at such a difficult time in Vietnam?

A moderate increase in electricity prices is instrumental in guaranteeing a good business for suppliers like Electricity of Vietnam (EVN), without hampering a smooth continuation of economic activity for companies. We should not forget that ensuring economic viability and fair return for energy suppliers is of crucial importance for the development of the country’s economy. It is also worth mentioning that Vietnam’s power prices are generally lower than in the region and therefore a moderate rise in prices will not dramatically deteriorate Vietnam’s competitiveness. However, it should not be forgotten that while Vietnam has experienced economic growth, rural poverty still remains a challenging issue and I believe the impacts of the power price increase on welfare of the people have been carefully examined. I’m convinced that poorest households have been taken care of and should not be affected severely by the price rises.

How do you compare power prices in Vietnam with the countries you know?

Reportedly, Vietnam does charge comparatively less per kilowatt hour than most of its regional counterparts. According to EVN, Vietnam charges households more than five U.S. cents per kWh compared to the respective prices of between 14 and 15 U.S. cents in Thailand, Singapore, Malaysia and Indonesia. An increase in retail electricity prices is, I believe, aimed also at attracting more foreign investment in the energy sector. Because of Vietnam’s recent rapid development, the energy sector is struggling to meet booming demand. While Vietnam’s power demand increased 16% in 2008, the supply only rose for 12%, making importation of electricity (from China) indispensable and resulting in power cuts. To prevent this, Vietnam does need to improve its electricity capacity and I believe the Government needs to generate revenue in order to do so without creating major imbalances in the State budget. To my knowledge, one of the reasons the price of electricity has been maintained until now was to curb inflation, but inflation is beginning to fall.

But companies will have to cope with higher electricity prices in the wake of the global economic slowdown. What’s your view?

As indicated above, electricity prices in Vietnam are lower than in most regional countries. And companies should therefore be able to absorb the increase. A moderate price increase might result in greater efficiency of companies. They can do better in engaging in more energy-saving (greener) production techniques for long-run positive development.

Will the power price increase harm the competitiveness of Vietnamese-made products exported to the European Union, the United States and other markets?

It is very difficult to assess. I personally believe that many companies will get the incentive to be more energy efficient and, in doing so, they might be able to absorb some of the price increase. Vietnam has already experienced various production projects that are high in energy consumption or (and) are based on outdated technologies, being re-located to Vietnam due to the country’s low electricity prices. Obsolete technologies and inefficient production methods certainly go against Vietnam’s aims of generating further economic growth by producing goods that are competitive in the international and local markets and that are compatible with international standards. I believe that greater efficiency of companies, whether due to higher prices or due to any other factor, is a positive thing that undoubtedly increases a company’s competitiveness.

Do you think that the higher electricity price will affect the Government’s stimulus program?

Price increases, as long as they are reasonable, are necessary to generate revenues for further upgrades in the network and power generation facilities. Vietnam’s main problem regarding its power supply is not one that should be looked at from a short-term perspective, but one to be addressed from a medium to long-term one. Economic growth might indeed experience a slowdown in 2009, but, compared to other economies registering negative growth, Vietnam will still be better off. More importantly, Vietnam has an enormous potential to grow in the near future and it should be preparing for it by duly modernising and enlarging its capacity for power supply. These actions, while fundamental for future growth, should be implemented today in order to achieve desired outcomes tomorrow. The expected fall in the growth of energy demand in times of crises like today should be used to better prepare for the future, and Vietnam should seize this opportunity. Likewise, consumers and authorities should make sure that the extra revenues made with the announced price hikes in fact do go to a much needed electricity system upgrade.

What are your other proposals?

As I mentioned earlier, power supply is an issue that is, along with other infrastructure and human resources, crucial to ensuring Vietnam’s continuing position as a pole for investment within the region. The increase in the electricity rate may be, as I mentioned, an incentive for the beginning of a new thinking about industrial habits of power consumption. However, in the medium and long-run, I believe Vietnam should consider further diversifying its energy sources with a view to making it less dependent on fossil fuels. The parallel need to tackle the challenges of climate change and to protect the environment also militates in favour of a fast adoption of clean technologies and sources of energy. 2009 will be a year of intense activity regarding the challenges of tackling climate change and of environmental protection. (SGT)