If Viet Nam does not resolve benefit conflicts in power management at EVN, the country would not have a truly competitive power market and will thus be unable to attract investors. — VNA/VNS Photo Ngoc Ha

HA NOI (Biz Hub) — Viet Nam should build a market institution for the electricity sector if the country wants to build a competitive power market, experts said.

The biggest barrier for Viet Nam in developing a competitive power market was mechanism, institution and benefit conflict, said Nguyen Dinh Cung, director of the Central Institute for Economic Development (CIEM), at the conference on competitive energy market held in Ha Noi on Wednesday.

Cung said the electricity industry has played two roles of producer, trader and distributor. If the country did not change the issues relating to price of Electricity of Viet Nam (EVN), it could not resolve the monopoly.

He gave an example of China, which has been successful in developing such a market when establishing three independent committees including co-ordinating, regulating and supervising to manage electricity from producers, traders and distributors.

He added that if Viet Nam did not resolve benefit conflicts in power management at EVN, the country would not have a true competitive power market and not attract businesses into investing in the power sector.

Economist Le Dang Doanh agreed, saying that the country should quickly separate the electricity regulatory authority from management agencies such as the Ministry of Industry and Trade. An independent authority should be built to ensure strict supervision of the sector's operations.

Julian Scarff, a specialist from Australia Aid said reforms in the market would help clarify the strengths of price mechanism by promoting competitiveness and effectiveness.

Scarff said the experiences from Brazil showed that the electricity distribution market which was privatised the 1995-2000 period created an income equal to 2.5 per cent of the country's GDP. In developed countries, the removal of power price subsidiary was estimated to increase GDP 0.5 per cent on 2010.

The competitive power market has been established in July 2012. However, its results have not met the expectations of businesses, consumers and the market.

According to a development roadmap, Viet Nam's electricity market would be built and developed under three levels of competitive generation. The first, in the 2005-14 period, then competitive wholesale in the 2015-22 period and finally a competitive power retail market after 2022.

In the first period, Viet Nam had seen barriers as it needed a real competitive playground to attract all power plants joining in the market. More than 50 units participating in the market accounted for around 43 per cent of the country's power system. — VNS