Advanced public finance - electricity in vietnam

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1. LOGO THI TRANG NHUNG NGUYEN ID: 15714 M-EF SS2013May 28th, 2014 RHEIN-WAAL UNIVERSITY OF APPLIED SCIENCES FACULTY OF SOCIAL SCIENCE AND ECONOMICS Advanced Public Finance 2. INTRODUCTION Geography: - Center of south-east Asia - Surrounding: many developing and developed countries - Strategic position in future development 3. INTRODUCTION Political issues: - Before 1990: closed economy, governmental-firms-centric, denies all the market rules. - Now: followed the market economy (socialism orientation) General behaviors of inhabitants: - Not aggressive in arguments - Accept the rule from above 4. INTRODUCTION Economics development: Fast growing, many opportunities Infrastructure: Underdeveloped. Especially for energy industry its normal to have electric cut, both preannounced and unexpected. 5. http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,contentMDK:22309013~menuPK:475 4051~pagePK:51236175~piPK:437394~theSitePK:73154,00.html INTRODUCTION Electricity: - Demand for electricity: grow 70% faster than GDP - Generation of power tends to follow the nations resource endowment. 6. APPLICATION OF THEORIES: Public goods Excludability: in modernizing society, it is not feasible to exclude anyone from the benefits of using electricity Rivalry in consumption: Big debate - Governmental construction of power plants and transmission network: MC = 0 - Lack of supply => could be some rivalry - Policy-makers: treated electricity as a public good Rivalry in consumption Yes No Exclusion from consump- tion Yes Private goods Toll goods No Common goods Public goods 7. APPLICATION OF THEORIES: Externalities Positive Externalities Substantially contribute to economic development Consumers surplus of using electricity: satisfy basic living requirements and standards Created jobs for citizens. Negative Externalities: Environmentally: - Thermal fuels: CO2 and SO2 emissions. - Nuclear power: radioactive risks. - Large hydro projects: disappearance of forests, loss of biodiversity, alter the river downstream. Social costs : - Changes in lifestyle and loss of livelihood - Rehabilitation compensation - Loss of jobs for farmers. 8. APPLICATION OF THEORIES: Natural monopoly For producing and distributing electricity firms: declining average and marginal costs public policy chose a regulated monopoly framework. Electricity should be affordable, reliable and available at reasonably stable and predictable price => doubt that open market would achieve these objectives 9. REALITY STORY: When government does things by halves 10. REALITY STORY: When government does things by halves 11. REALITY STORY: When government does things by halves 12. REALITY STORY: When government does things by halves 13. REALITY STORY: When government does things by halves 14. REALITY STORY: When government does things by halves 15. REALITY STORY: When government does things by halves 16. REALITY STORY: When government does things by halves 17. REALITY STORY: When government does things by halves 18. REALITY STORY: When government does things by halves 19. REALITY STORY: When government does things by halves 20. REALITY STORY: When government does things by halves 21. FURTHER QUESTIONS Whether this vital public service might be better supplied by a competitive commodity market than by the monopoly one we have relied on for decades? Should power plants be left in the hands of the government given the various market failure situations and the fact that it involves massive sunk costs which the private sector might not be able to handle? 22. REFERENCES http://www.geni.org/globalenergy/library/energy-issues/vietnam/index.shtml http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,contentMDK: 22309013~menuPK:4754051~pagePK:51236175~piPK:437394~theSitePK:73154,00 .html http://www.wutc.wa.gov/webdocs.nsf/b8da29aede8fdd67882571430005a9c1/23 ce15c1d6a0d32b882564970064d827!OpenDocument http://www.renewableenergyworld.com/rea/news/article/2007/07/is-energy-a- public-good-49201 http://www.teriin.org/ee/pdf/fcaoverview.pdf 23. THANK YOU FOR YOUR ATTENTION!