With the government set to license foreign companies to distribute oil products for the first time, economists are hopeful it will herald the elimination of what is virtually a state monopoly.
Vietnam’s retail fuel market, more than 75 percent of which is controlled by state businesses Petrolimex, PV Oil and Saigon Petro, would become “more competitive” and “transparent” with the entry of Japan’s Idemitsu Kosan and Kuwait Petroleum International, they told Thanh Nien.
The companies’ joint venture, Idemitsu Q8, is awaiting licenses to import, wholesale and retail oil products, possibly by next year.
Pham Chi Lan, one of the economists, said foreign businesses’ entry could only be a change for the better since the fuel retail market has been monopolized by a group of businesses for too long.
The government has often made interventions in an effort to improve the market’s transparency, but without much success, and so competition from foreign rivals would help, she said.
The Ministry of Industry and Trade and the Ministry of Finance adjust basic fuel prices every 15 days depending on import prices. Businesses who calculate their retail prices based on the basic prices have to seek the ministries’ permission for making price adjustments.
Regardless of all this, fuel companies have faced public criticism for years for dubious pricing.
In the latest scandal, the businesses allegedly made at least VND3.5 trillion (US$156.89 million) from the ministries’ pricing mistakes last year.
According to the finance ministry’s report last month, since May 2015 petroleum products imported from ASEAN countries and South Korea have been taxed at 5-10 percent, but the businesses were allowed to calculate retail prices based on a 10-20 percent rate.
Nguyen Mai, a former deputy minister of planning and investment, said such problems are likely to end when more strong distributors enter the market.
The market would become transparent and competitive, meaning fuel retail prices are likely to become cheaper, he said.
More to come
In a comment on the upcoming joint-venture between Idemitsu Kosan and Kuwait’s state-owned energy company, the Ministry of Industry and Trade said Vietnam is obliged to allow foreign investors in refineries to distribute oil products here.
The Japanese and Kuwaiti companies have a combined stake of 70.2 percent in the country’s second refinery, Nghi Son, in the central province of Thanh Hoa.
State energy giant PetroVietnam, which owns the first refinery, Dung Quat, has a stake of 25.1 percent in the $9-billion Nghi Son refinery, and Japanese chemicals firm Mitsui owns the rest.
Petrolimex has been looking for foreign investors to build an $8-billion refinery in the central province of Khanh Hoa since 2014. JX Nippon Oil & Energy, another Japanese energy company, is reportedly considering the project after acquiring an 8 percent stake in Petrolimex.
Some local companies have expressed concern that the market would be controlled by foreign companies, thus affecting the country’s energy security.
But economists like Ngo Tri Long allay such concerns.
Vietnam has its own refineries and reserves, and so there is no need to worry that its energy security would be at risk if the petroleum market is opened to foreign businesses, he said.