Economic growth and energy policy in Vietnam

Presented by Nguyen Kim Anh, Ph.DVietnam National University, Hanoi

February 2007

The Strategic Orientation for Sustainable Development in Vietnam (Vietnam’s National

Agenda 21)

1.Sustainable development, Vietnam's anticipated path.

2.Priority economic areas.

3.Priority social areas.

4.Priority areas in natural resource utilisation,

environmental protection and pollution control.

5.Sustainable development implementation arrangements.

No. Content unit 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006-2010 (planned)

1 Average annual population million people 72 73.2 74.3 75.5 76.6 77.6 78.7 79.7 80.9 82 83.1

Growth rate % 1.65 1.61 1.57 1.55 1.51 1.36 1.35 1.32 1.47 1.4 1.33

2 GDP growth rate (at constant 1994prices) % 9.54 9.34 8.15 5.76 4.77 6.79 6.89 7.08 7.34 7.79 8.43 8

of which:

Industry - Construction % 13.6 14.5 12.6 8.33 7.68 10.1 10.4 9.48 10.5 10.2 10.6 9.5 - 10.2

Agriculture, Fishery, Forestry % 4.8 4.4 4.33 3.53 5.23 4.63 2.98 4.17 3.62 4.36 4 3 - 3.2

Service % 9.83 8.8 7.14 5.08 2.25 5.32 6.1 6.54 6.45 7.26 8.5 7.7 - 8.2

3 GDP (at current price) ' 000 billion VND 229 272 314 361 400 442 481 536 613 715 838 1,690-1,760

Share in GDP by sector:

Industry and construction % 28.8 29.7 32.1 32.5 34.5 36.7 38.1 38.5 39.5 40.2 41 43 - 44

Agriculture, Fishery and Forestry % 27.2 27.8 25.8 25.8 25.4 24.5 23.3 23 22.5 21.8 20.9 15 - 16

Service % 44.1 42.5 42.2 41.7 40.1 38.7 38.6 38.5 38 38 38.1 40 -41

4 Inflation % 12.7 4.5 3.6 9 6.8 -0.6 -0.2 4 3 4.9 7.5

5 National Income (current price) 000 billion VND 226 268 308 354 395 435 475 527 604 702 825

6 Income per capita USD 289 295 402 413 440 492 556 637 720

7 Capital Formation 000 billion VND 108 117 131 151 171 199 232 275 324 2,200*

% of GDP % 34.6 32.4 32.8 34.2 35.4 37.2 37.8 38.4 38.7 40

FDI billion USD 7.7 9.7 6.1 4.9 2.3 2.7 3.2 3 3.1 4.2 5.8

8 Crude oil

Exploited million tons 10.1 12.5 15.2 16.3 16.8 16.9 17.6 20 18.5

Exported million tons 9.6 12.2 14.9 15.4 16.7 16.9 17.1 19.5 18.1

9 Imported Oil and Gas million tons 5.96 6.85 7.43 8.45 9.08 9.97 10.1 11.4 11.9

Source: Industry Ministry (2006) Note: *at 2005 constant price

Table 1: Vietnam’s Socio-Economic development in 1995-2005 and planned to 2010

Population Urbanization

million people

Change (people)

Annual Gowth Rate

(%)

Citizen (million people)

Share (%)

2010 87.77 5.19 1.23 28.24 32

2015 93.01 5.24 1.17 33.57 36

2020 97.85 4.84 1.02 39.1 40

2025 101.94 4.09 0.82 45.51 44.6

Year

Source: Industry Ministry, 2006

Table 2: Forecast of Population and Urbanization

Figure 1: Final Energy Consumption in Vietnam

0%

20%

40%

60%

80%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003

Figure 1. Final Energy Consumption in Vietnam, 1995-2003

Agriculture Industry Household and Trade Transport OthersSource:Vietnam Ministry of Industry, 2006

Figure 2: Type of Primary Energy Consumption in GMS (2004)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Myanmar Cambodia Laos Thailand Vietnam China Japan

Figure 2. Type of Primary Energy Consumed in GMS (2004)

Coal Petroleum Dry Natural Gas Hydro-Electricity Nuclear Power OthersSource: IEA, 2005

Table 3: Energy Elasticity to GDP in GMS (2000-2004)

Average Growth of Primary Energy Consumption (%)

(e)

Average GDP Growth (%)

(y)

Primary Energy Demand

Elasticity to GDP (e/y)

China 11.32 8.65 1.31

Cambodia 1.27 5.59 0.23

Laos 2.09 5.73 0.36

Myanmar 5.03 6.37 0.79

Thailand 7.36 5.09 1.45

Vietnam 6.11 7.27 0.84

Source: by author with reference to Statistical Yearbook of Vietnam, General Statistical Office (2005)

Table 4: Energy and GDP in Vietnam, 1991-2003

Source: Ministry of Planning and Investment (2006)

1991-1995 1996-2003 1991-2003

Averge GDP Growth (%) 8.18 6.99 7.45

Average Growth of Final Energy

Consumption (%)13.8 9.3 11

Energy Elasticity to GDP 1.68 1.33 1.48

Energy and GDP, 1991-2003

Energy intensity is higher than Thailand

Energy elasticity to GDP is reduced, still higher than in

Thailand (1.4)

Growth of final energy consumption speeds down, still

higher than GDP growth rate.

Energy Expense increase due to:

Energy prices increased higher than inflation rate

Energy consumption increased higher than GDP Growth

Table 5: Forecast of Energy Demand in Vietnam

Source: Industry Ministry, 2006

Base Level High Level

2010 2020 2030 2010 2020 2030

1 Energy demand by sector 32.14 100 (%) 59.71 100 (%) 95.5 100 (%) 33.19 100 (%) 66.31 100 (%) 110.93 100 (%)

Industry 13.32 41.4 24.95 41.8 43.44 45.5 13.89 43.2 27.87 46.7 50.31 52.7

Agriculture 1.02 3.2 1.6 2.3 1.91 2 1.05 3.3 1.48 2.5 2.17 2.3

Transportation 11.29 35.1 21.57 36.1 31.66 33.1 11.54 35.9 24.04 40.3 37.41 39.2

Service 2.16 6.7 3.72 6.2 6.6 6.9 2.32 7.2 4.3 7.2 8.08 8.5

Household 4.35 13.5 8.13 13.6 11.9 12.5 4.39 13.7 8.64 14.5 12.96 13.6

2 Demand by type of energy 32.14 100 (%) 59.72 100 (%) 95.5 100 (%) 33.19 100 (%) 66.31 100 (%) 110.93 100 (%)

Coal 6.03 18.8 7.72 12.9 13.98 14.6 6.23 19.4 8.28 13.9 15.48 16.2

Electricity 6.02 21.5 15.39 25.8 23.23 24.3 7.37 22.9 17.56 29.4 27.84 29.2

Petroleum Product 17.48 54.4 32.71 54.8 51.75 54.2 17.87 55.6 36.46 61.1 60.61 63.5

Gas 1.35 4.2 2.7 4.5 3.87 4.1 1.35 4.2 2.7 4.5 3.94 4.1

Renewable energy 0.36 1.1 1.2 2 2.66 2.8 0.37 1.1 1.31 2.2 3.03 3.2

No Demand

Table 6: Crude oil reserve and exploitation

CountryProved Oil

Reserve (Billion tons)

Share in the World Oil

Reserve (%)

Annual Oil Exploitation

(Million tons)

Share in the world Annual

Crude Oil Exploitation (%)

Proved Oil Reserve/Annual

Exploited Crude Oil

(year)

Australia 0.5 0.3 23.3 0.6 20

Bruney 0.2 0.1 10.1 0.3 14.9

China 2.2 1.3 180.8 4.6 12.1

India 0.8 0.5 36.2 0.9 20.7

Indonesia 0.6 0.4 55 1.4 10.4

Malaysia 0.5 0.3 36.8 0.9 13.9

Thailand 0.1 11.2 0.3 5.2

Vietnam 0.4 0.3 19 0.5 21.8

Other Asian Pacific Countries 0.1 0.1 9.2 0.2 13.2

All Asian Pacific Countries 5.4 3.4 381.7 9.8 13.8

World 163.6 3895 40.6

Source: Ministry of Industry (2006)

Energy Supply and Demand in Vietnam:

Energy reserves and production are lower as compared

with other countries in the region and in the world

Energy supply has been developed and sufficient to

demand for socio-economic development, nevertheless

it may not satisfy demand in the long-run.

Call for international cooperation, particularly with GMS

Rationaly and efficiently exploite and consume energy resourcesSufficiently satisfy the energy demand with increasingly high quality and at reasonable prices

Diversify patterns of business and investment

Gradually establish a competitive energy market

Sustainably develop energy industry

Implement social progress and equality,

environment protection

Main points of Vietnam’s energy strategy and policies:

General view of current energy system:

Though energy system has making progress, yet it still underdeveloped Primary energy resource is of various types but lack of a comprehensive strategy for exploitation and utilizationLow efficient expolitation and utilization Lack of adequate management skill Energy demand forecast is not precise and investment decision is not of timing

Strategy for electricity generation:

Establish thermo-electricity plants with suitable ratio in accordance with supply capability of material resources. Investigate, research and prepare to build the first nuclear power plant after 2015.Electricity import: firstly 2,000 MW from Laos, plan to import from electricity from Cambodia and China.Establish plants using renewable energy

Strategy for electricity generation (Cont.)

For grid development: develop 220, 500 KV power grids, upgrade safety and precision of the grid to reduce loss and waste, widen grids to the farmost areasFor electricity development in mountainous and suburbant areas: utilize renewable energy to supply electrcity to farmost and island areas; control electricity tariff and diversify modes of investment and management in suburbant electricity grid.

Major solutionｓ to develop Petroleum and Gas Industry :

Attract capital and advanced technology from foreign countriesCooperate in multiforms, and comply with Vietnam’s legislation.

Develop human resource sufficiently and of well-qualified

Make a good use of opportunities to invest abroad since 2001 in order to develop petroleum and gas industry

International cooperation for petroleum and gas industry:

In exploration field: – maily in the form of business cooperation contract or joint-venture – for 25 years or to be expired for 5 more years. – priority is given to tenders using Vietnam’s service

In the middle stream: – take part in gas pipe network project interconnecting ASEAN countries

In the down stream: – foreign investors investing in oil refining are allowed to participate in distribution of petroleum products.

Major policies for coal industry:

Increase rapidly and stably coal output. Increase productivity by mechanizing longwall mining, Strengthen mine safety by modernizing underground systemsDevelop the coal industry together with – environment protection, and – avoiding problem of coal exhaustion

Finance and capital mobilization:

Ensure EVN to play a key role in solving development targets of electricity industry.Attract investment in the form of BOT, BOO or Joint-venture Mobilize domestic funds for electricity developmentStrengthen cooperation with international financial authorities and banks Participate in domestic and foreign stock markets Reform electricity tariff– close to long-term marginal cost, – reducing large compensation among electricity consumption

sectors

Development of renewable energy:

Expected: renewable energy share 2% of total primary energy by 2010; 3% by 2020Promote small hydropower station. Expected to have capacity of 1,000 MW by 2010; 2,000 MW by 2020.Utilize wind and sun power, and develop biomass gas

Others development strategy

Science and technologyElectricity engineeringConsultant for power plants and grid constructionHuman resourceElectricity market

Endowed with various primary energy

Eneregy sector has gained many achievement and successes and sufficiently satisfied domestic demand

Energy consumption/capita is still low and on growing. This requires energy sector to be further developed.

Still lack of a national energy management authority to manipulate the industry rationally.

Conclusion

Increasing demand for energy, Environment protection under consideration.Energy security is significant for maintaining sustainable development. The international cooperation is promoted at first with GMS likeLaos, Cambodia, China, Thailand.More opportunities for foreign investors

Conclusion

Thank you for your attention!