Vietnam should restructure its petroleum distribution network in order to compete with foreign rivals once the country opens this energy sector, officials said.
The Southeast Asian nation should set up a petroleum group or several strong groups to beat future foreign firms when it fully opens its closing petroleum market as a part of commitments to enter the World Trade Organization (WTO), said an official from Petrolimex.
The streamlined network will boost the operational efficiency and sharpen the competitive edge of Vietnamese energy firms, he added.
“For example, China and Malaysia need only two and one petroleum importer, respectively, but the distribution networks in these nations still run smoothly,” he explained.
For the time being, Vietnam has nine oil importers, all State-run, with 290 general sales agents and nearly 9,000 filling stations and each import has its own distribution network.
In 2004, the Ministry of Trade used to show its determinations to halve the number of general agents and pumping stations to 150 and 5,000, respectively, Deputy of Trade Phan The Rue said. However, the plan is still on the paper and the number of agents and stations is increasing.
According to an official of Petrolimex, which is holding 60 per cent of the Vietnamese petroleum sales market share, the number of petroleum importers must be reduced to streamline the distribution system.
Further, after joining the WTO, Vietnam must gradually remove subsidies to its petroleum sales.
This will be a real challenge for domestic oil trading firms, the Ministry of Trade official said.
Vietnamese oil importers lack financial accumulations and have weak response to the world price movements because they have got used to subsidies from the State Budget, he added.
In the second half of 2006 alone, the State Budget is estimated to disburse VND8,000 (US$501 million) to VND9,000 billion (US$564.26 million) to subsidize sales of petroleum products in the country, Deputy Ministry of Finance Tran Van Ta said.
The continuous subsidy makes retail prices of petroleum products in Vietnam some 20 per cent lower than neighboring countries and it, in turn, causes rampant illegal exportation.
Paradoxically, Vietnam is totally reliant on petroleum imports as it has no oil refining facilities. Its first refineries are expected to begin operation by 2009 when Vietnam opens its petroleum market for foreign investors.
This year, Vietnam, the 6th largest crude oil producer in Asia, plans to import 13 million tons of refined oil, up from last year’s 11.3 million tons. In the first half of this year, it imported 5.6 million tons of petroleum products worth US$3 billion, down 7.1 per cent in volume but up 23.8 per cent in value.
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