Outcry for protectionism in the Vietnam coal segment heats up

Nguyen Khac Tho, who serves on the board of the General Directorate of Energy of the Ministry of Industry and Trade, said that local utilities and policy makers need to adjust to the new reality that the cost of coal production must come down.

Imported is cheaper than domestic coal, he said. If the government followed open market rules and purchased the lower priced imports that would result in thousands of job losses at the Vietnam National Coal-Mineral Industries Holding Corporation Limited.

This is going to play out of the next few weeks and months—maybe even years, Mr Tho told the audience.

The country had decades of closed markets that stifled competition and the drive for competitiveness and earnings in the market, now riddled with production inefficiencies, cost ineffectiveness and mismanagement.

These problems aren’t going to be reversed overnight, and may just result in the phasing out of coal production in Vietnam entirely.

Nguyen Van Bien, who serves on the board of the Vietnam National Coal and Mineral Group in turn agreed. Local coal producers haven’t kept pace with their international counterparts and can’t compete on any level with them.

Imports of coal from Russia, Indonesia and China are on the rise because costs of local production are out of control and management lacks the ability to seize the helm and control spending.

Deputy Minster Do Hoang Anh Tuan of the Ministry of Finance also recently noted that costs of domestically produced coal are pricing local producers right out of the market and handing the segment over to foreigners.

As evidence, he cited an example of one type of coal that costs the National Coal and Mineral Group US$88 (VND2 million) per metric ton to produce. However, foreign companies sell that same dust at a profit for on average US$22 per metric less.

If the government through its state-run power monopoly Electricity of Vietnam made its purchasing decision based solely on cost— it would cancel more than two million metric tons on order for later this year and replace it with imported coal.

However, that would result in the National Coal and Mineral Group laying off some 4,000 workers this year.

On the other hand, Minister and Chair of the Government Office Mai Tien Dung, an avid protectionist, said he believed that the government should put the 4,000 jobs first and foremost.

In a somewhat confusing statement, he said, that while abiding by open market rules and the commitment made to the World Trade Organization to open its markets, the government should still give a higher priority to protection of the domestic economy and jobs.

Mr Dung added that his office had submitted requests of the National Coal and Mineral Group to proactively take the necessary steps to reduce its production costs and sales price to ensure they are competitive with imported coal.

At the same time, he noted, that the Ministry of Industry and Trade had been asked to look at long-term measures to protect domestic coal production, while the group works through its internal problems to resolve its inept management problems and inability to compete in its home market.