Electricity and telecommunications "huge profits": Mostly due to price increases

Opinions all say that the price increase roadmap needs to be reviewed. Some even say that the "huge profits" of these corporations are "bitter news".

The “huge profits” of Vietnam Electricity Group (EVN), Military Telecommunications Group (Viettel) and Vietnam Posts and Telecommunications Group (VNPT) may be a bright spot in the gloomy picture of the economy. However, many issues need to be clarified as the “huge profits” mostly come from price increases.

Economist Le Dang Doanh: Review the roadmap for increasing electricity prices.

Economist Le Dang Doanh

The news that EVN reported a profit of about 4,404 billion VND in 2012 at first sounds like good news. It is good because in the difficult economic context, this group has been profitable, the state capital has grown and multiplied. But can we really be happy like that, when there are still a series of questions for EVN and the state management agency about electricity prices originating from the profit figures of this group?

First of all, is EVN's profit really 4,404 billion VND or could it be much higher? Because in parallel with the announcement of the above profit, EVN also handled the accumulated loss from previous years (about 18,200 billion VND). So if this accumulated loss is not included in the electricity price in 2012, EVN could have made a profit of up to 22,600 billion VND? I think the information announced by EVN is still too vague. The auditing agency needs to clarify how much EVN's profit is. In particular, why did the profit soar in 2012? Did they make a profit due to their management and corporate governance or thanks to the increase in electricity prices?

Second, EVN is profitable, but how much is EVN's contribution to the state budget? If it makes a lot of profit and contributes a lot, while other state-owned enterprises such as Viettel and VNPT have just announced huge profits, why is the state budget in such difficulty?

I think it is necessary to recalculate the roadmap to increase electricity prices by 22% from now until 2015. The electricity industry uses the excuse that business is not profitable, so there is no investment capital, and it cannot attract investors, so it must increase electricity prices. But if the profit is enough to have a surplus of 4,404 billion VND after including the loss of about 18,200 billion VND in the cost price of previous years, then the current electricity price can actually bring huge profits to businesses. Therefore, there is no need to continue to increase electricity prices.

This is even more reasonable when considering the context that businesses in all production and business sectors are facing many difficulties, including the cause of input costs (high gasoline and electricity prices). It is unreasonable that businesses are operating stagnantly, without profit, and even increasingly losing money because of high input costs, while the electricity industry is making large profits. This is an industry that directly affects people's lives and the operation of production, and is being regulated and managed by the State, so sharing is necessary.

Dr. Nguyen Ngoc Son

EVN made a profit of 4,404 billion VND. Viettel had a pre-tax profit of 35,086 billion VND. VNPT made a profit of 9,265 billion VND... Three state-owned corporations have just announced profit figures that any business manager would dream of in the current gloomy economic context.

If we look at it from the perspective that these are state-owned enterprises, the state’s money is managed by them, they do business effectively, and they make high profits, then we should be happy! But I see this as good news in bitterness. Because these three enterprises are operating in monopolistic industries. And EVN makes big profits when electricity prices increase continuously. Viettel makes “huge” profits, VNPT too, when the telecommunications industry does not improve service quality but only increases prices.

The profits that these corporations announce show that the principle of monopoly is always profitable is always true. But the unreasonable thing is that this large profit and the origin of the large profit show the contradictions in economic management. In the world, no economic principle, no theory is acceptable for the economic management authorities to fear that monopolies will suffer losses.

But in our country, the state management agency has recently repeatedly explained to the network operators Viettel, MobiFone, Vinaphone that they are losing money and need to increase 3G rates, although they cannot say why they are losing money and find any other solution to fix it other than increasing the price. Even assuming that they are losing money on 3G services as they keep complaining, with the total profit of up to tens of thousands of billions of VND as it is now, they must have other services that are extremely profitable.

So if the State has spoken up to complain about losses on behalf of businesses and allowed them to increase prices, will the State now continue to speak up to require businesses to reduce prices on services that make huge profits for the benefit of consumers?

National Assembly Delegate Bui Thi An (Committee on Science, Technology and Environment): If there is already a profit, why increase the price?

As a National Assembly delegate, I am also concerned and curious about EVN's profits and losses. If EVN has made a high profit, the roadmap for increasing electricity prices must be reviewed. Why do I raise this issue? Because in the context of economic difficulties, a series of bankrupt enterprises, and a large number of people struggling with low incomes, why does the electricity industry, which has already made a profit, still want to increase prices?

The problem here is that electricity is an important input of the economy, electricity prices have an immediate impact on the prices of other goods, so EVN, as a state-owned enterprise, must be responsible for sharing the common difficulties of the country as well as the people. We talk about a market economy but there must be State management, and ultimately the ultimate goal is to improve the quality of life of the people. To do so, one of the current requirements is to closely inspect and monitor electricity prices. It is necessary to clarify and publicize production costs and prices to have policies that are in line with the people's wishes.

* Dr. Nguyen Son (Institute of World Political Economy, Vietnam Academy of Social Sciences): We cannot just increase prices if we lose money.

In competitive markets, corporations do not raise prices just because they are losing money. If they do, the corporation will most likely go bankrupt because people have a market to choose from. The solution, in my opinion, may be to consider dividing the corporations into smaller groups, creating a stronger competitive environment. It is also necessary to amend the Competition Law to prevent monopoly because the current Competition Law does not have much meaning... Determining and publicizing prices, as in the case of EVN, should be assigned to independent organizations, not to management ministries, such as the Ministry of Industry and Trade, which is the owner of EVN. "Father" examining his child and then publicizing it does not have much meaning...

According to vov