Doing business with China could increase energy security risks
Doing business with China could increase energy security risks
Economists have urged the government to take actions to ensure Vietnam’s energy security in case tensions escalate in the East Sea, stressing that this is the biggest danger to the country if the situation gets worse.
Dr. Pham Sy Thanh, director of the Chinese Studies Program under the Vietnam Economics Policy Research Center (VEPR), said that energy security is a matter Vietnam should think about first when preparing economic scenarios in case the Vietnam-China territorial dispute worsens.
“If Chinese contractors stop executing the construction works in Vietnam and return to China, tens of power projects capitalized at billions of dollars would be left idle,” Thanh said in an interview given to Thoi Bao Kinh Te Saigon.
“This would lead to a great waste of money because the projects’ implementation would be more costly,” he explained.
Meanwhile, Vietnam would find it difficult to invite other contractors to replace the Chinese contractors, simply because all the machines, equipment and technologies used to build and operate the power plants are all made in China.
What will happen if the power plants cannot be implemented as scheduled? According to Thanh, Vietnam may face an electricity shortage.
Businesses could seek input material supplies from other non-Chinese sources if they cannot import the materials from China. And they would be able to find solutions to cut down expenses in case the imports from other sources led to higher production costs, but this would be a risk if they don’t have electricity to maintain production.
As China has become involved too deeply in Vietnam’s power and infrastructure development, any changes to be made by China would have a negative impact on the Vietnam’s national economy.
Thanh went on to say that the most important economic corridors of Vietnam would be affected. These include the Hanoi-Hai Phong backbone economic corridor and two important subordinate ones – Hanoi-Lao Cai and Hanoi-Lang Son in the north.
Some highway projects within the economic corridor are being built by Chinese contractors.
When asked about the solutions to minimize the risks in case the Chinese withdraw from the projects once the political situation gets worse, Thanh said this is a very thorny problem.
As Vietnam lacks an excellent legal framework on bidding, its competent agencies cannot mete out punishments with a heavy hand to the contractors who implement projects slowly or break their contracts.
Most of the large-scale key projects have been undertaken by Chinese contractors and Chinese subcontractors. Therefore, Vietnam would meet a lot of trouble, including legal matters, design and technology, if it hires other contractors.
In order to minimize the risks in the future, Vietnam needs to amend the laws on bidding with the focus on two important issues. First, it is necessary to set up the minimum localization ratio in construction works. Second, Vietnamese investors, when selecting tenderers, need to pay more attention to the projects’ technical life circle rather than the costs of the projects.
In addition, Thanh believes that Vietnam needs to remain skeptical when inviting bids for energy, telecom or mining projects because of security matters.
“It would be better to release a list of projects prohibited from hiring foreign contractors,” he suggested.
vietnamnet
