Vietnam’s GDP growth for 2021-2030 is forecasted to reach an average of 6.6%/year and an average of 5.7% for 2031-2045. Correspondingly, the Institute of Energy has calculated that commercial electricity will reach 491 billion kWh by 2030, and 877 billion kWh by 2045. By 2030, the total installed capacity of Vietnam’s electricity sources is predicted to be at 137.2 GW (of which coal-fired power: 27%, gas thermal power: 21%, hydroelectricity: 18%, renewable energy: 29%, imported energy about 4%, pumped hydroelectricity and other energy storage devices about 1%).
Foreign investors should take advantage of the booming energy sector in Vietnam and understand their benefits, and limitations, under free trade agreements that may affect them. In this article, we examine Vietnam’s commitments with regard to energy development under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA).
The CPTPP came into force on 14 January 2019 for Vietnam and currently include the following signatories: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. In addition, China, Ecuador, Taiwan and United Kingdom applied and awaiting result on their accession to the CPTPP. The EVFTA came into force on 1 August 2020 between the European Union countries and Vietnam.
EVFTA:
Under Chapter 7 on Non-tariff barriers to trade and investment in renewable energy generation, Vietnam commits to promoting, developing and increasing the generation of energy from renewable and sustainable sources, particularly through facilitating trade and investment. Specific commitments include:
(a) refrain from adopting measures providing for local content requirements or any other offset affecting the other Party’s products, service suppliers, investors or enterprises;
(b) refrain from adopting measures requiring to form a partnership with local companies, unless those partnerships are deemed necessary for technical reasons and that Vietnam can demonstrate those reasons upon request of the other Party;
(c) ensure that any measures concerning the authorization, certification and licensing procedures that are applied, in particular, to equipment, plants and associated transmission network infrastructures, are objective, transparent, non-arbitrary and do not discriminate among applicants from the Parties;
(d) ensure that administrative fees and charges are transparent and non-discriminating
Vietnam has not made any commitments in the EVFTA on:
- production, transmission and distribution of electricity on private-owned line;
- production of gas and transmission of gas through a private-owned tube; and
- production of hot water and steam, distribution of hot water and steam through private-owned line.
For all service and non-service lines related to energy, at least 20% of managers, executives and specialists must be Vietnamese citizens, unless those positions cannot be replaced by Vietnamese citizens. However, a minimum of three non-Vietnamese managers, executives and experts are allowed per business.
CPTPP
Under the CPTPP, Vietnam commits its transition to a low emissions and resilient economy. Vietnam shall cooperate with other CPTPPP countries to address energy efficiency, development of cost-effective, low emissions technologies and alternative, clean and renewable energy sources; sustainable transport and sustainable urban infrastructure development; addressing deforestation and forest degradation; emissions monitoring; market and nonmarket mechanisms; low emissions, resilient development and sharing of information and experiences.
Regarding Power development, foreign investment to own or operate power transmission facilities in Vietnam may not be permitted. Vietnam Electricity Corporation (EVN) is currently the sole authorized owner and operator of power transmission facilities in Vietnam.
In addition, Vietnam reserves the right to adopt or maintain any measure with respect to investment in hydroelectricity and nuclear power.
Regarding Services incidental to energy distribution (CPC 887), Vietnam does not allow foreign services suppliers to supply such services cross-border and Vietnam also does not allow foreign investment in this sector.
Please do not hesitate to contact Dr. Oliver Massmann under [email protected] if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
