From Bloomberg News
Vietnam ’s success in attracting investment, generating growth and adding jobs is under threat from looming shortages of what keeps modern economies running: electricity.
Price chart for CHEVRON CORP.
The risk of shortages took a turn for the worse last week when state-owned Vietnam Oil & Gas Group said talks with Chevron Corp. (CVX) to develop a natural gas field had failed due to price disputes, which will delay supply of the fuel to electricity generators. Consultant IHS Energy said last month that demand in the country may exceed gas supply by 2015.
“The main problem is that Vietnam has a cumbersome consensus-based decision-making system that slows down the whole process of getting new power projects up and running,” said Graham Tyler, the Singapore-based manager of Southeast Asian gas and power at energy consultant Wood Mackenzie .
While the government is raising electricity prices to make power projects a more attractive investment, they may not be in time to prevent shortages in southern Vietnam. The region is home to the country’s largest city, more than half of the biggest listed companies, and industries from garments to oil.
Part of the problem is retail electricity prices are not attractive enough to draw investors to the power industry, said Minister of Planning & Investment Bui Quang Vinh. Vietnam is looking to foreign investment to help revive the country’s $153 billion economy, which grew last year at the slowest pace since 1999.
“When you have such low retail power prices, it will lure investment into industries that consume lots of electricity, such as cement and steel plants,” said Vinh. “So we are in a situation in which we can’t attract electricity producers while there are more and more power consumers coming in, and that has worsened our power shortage.”
Read the full story from Bloomberg News.
