Alliance between 3 state energy giants raises specter of monopoly

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Three large state-owned energy companies have entered into a tie-up that could benefit the economy, but it has also raised concern about a monopoly that could harm the energy sector.

The National Oil and Gas Group (PetroVietnam), Electricity of Vietnam (EVN), and the Vietnam National Coal and Mineral Industries Group (Vinacomin) signed a strategic cooperation agreement on February 26 aimed at ensuring energy security.

They will compare notes, informing each other about their development plans every year, to enable them to avoid duplication of plans.

They will jointly build and operate power plants and mine and transport coal, share services, and coordinate communications.

But the three continue to have disagreements related to the pricing of coal and electricity and the interest on the debt owed by EVN to Vinacomin.

As of February 26 EVN owed around VND500 billion (US$23.8 million) to Vinacomin in addition to nearly VND14 trillion (US$666.66 million) it owes PetroVietnam.

Economist Le Dang Doanh said the cooperation would benefit the economy if it is carefully implemented and the groups make proper use of the advantages created by the alliance to operate more effectively.

In the past there have been issues between the three: For instance, Vinacomin complained that EVN bought its coal at low prices and still owed it money for buying coal and electricity; PetroVietnam said EVN bought its power at low prices but bought from China at higher prices, Doanh said.

"After they become strategic partners, the conflicts may be resolved in the interest of the economy."

It would be better if the three groups cooperate to develop an overall energy plan, not just power development plans like they are doing now, he added.

Economist Nguyen Minh Phong said it is common for companies, especially state-owned ones, in an industry to forge partnerships for better operations.

"If the cooperation helps them develop better, we should encourage it.

"This is also in line with the government's plan to boost cooperation between state-owned firms."

However, the tie-up has raised concerns about an even bigger monopoly by three companies that are the sole manufacturers and distributors in their respective fields.

Under the agreement, EVN will buy most of the power produced by PetroVietnam and Vinacomin. However, private electricity producers could be crowded out of the market by the alliance, Phong warned.

"This will affect the road map for developing a competitive power market."

Doanh said: "They will not complain about each other. Thus, actual information will not be revealed, negatively affecting consumers."

Doanh said the trio, as a group, could exert stronger influence on policy making.

Phong, warning the cooperation could foster the risk of monopoly and a strong interest group, said the government should bolster oversight.

"We should improve oversight to prevent a situation where they seek to hinder the participation of private firms in power production and distribution.

"Thus, we need to reviewing our competition and market management laws to prevent a monopoly."

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