In the late 1980s and earlier, the national economy, including the agricultural economy, ran under a planned, centralized and subsidized mechanism. Agricultural production was almost stagnant, while the country suffered from serious shortages of food and foodstuff.

In such circumstances, on April 5, 1988, the Politburo issued Resolution 10-NQ/TW (called ‘Contract 10’ in Vietnam) on ‘renovation in agricultural economy management’. The most important content of the resolution is that households were recognized as an autonomous economic unit and farmers were granted long-term land-use rights and contracts. 

The issuance of the resolution is described as an action of demolishing the wall that hindered the agricultural production for several decades and created a breakthrough in management mechanism, paving the way for agricultural production to develop.

Thanks to the new policy, Vietnam, from a country which constantly lacked food, has become a food self-sufficient country. In 1989, or just one year after implementing Contract 10, Vietnam produced 21.5 million tons of rice and exported 1.2 million tons. Since then, Vietnam has been one of the biggest rice exporters in the world.

Scholars note that Contract 10 acts as the theoretical and practical basis for the Party to carried out the renovation of the economic management mechanism, paving the way for the market economy to develop in Vietnam and gain important socio-economic achievements.

However, in some sectors, including the power sectors, the planned, centralized and subsidized management mechanism still exists, causing serious consequences to the society and economy.

The electricity shortages and its impact on production, business and people’s daily lives in the 2023 summer is a manifestation of the problems.

One of the typical examples of the mechanism is that only one power plant with a high capacity, Thai Binh 2, which kicked off in March 2011, has been put into operation over the last five years.

This is a result of the limited vision leading to the unsystematic development of the power sector which has not followed the socio-economic development needs of the country.

Vietnam plans to develop green power sources to protect the environment and adapt to climate change, so it calls on investors to inject money into renewables projects. Local authorities licensed a series of wind and solar projects, but ‘forgot’ to build electricity transmission lines. As a result, power has been generated, but still cannot be used.

Meanwhile, the wind and solar power purchase mechanism stipulated in Decision 13/2020/QD-TTg on encouraging solar power development is also unreasonable. Because of this, since 2021 enterprises developing solar and wind power projects and the Ministry of Industry and Trade (MOIT) still have not reached an agreement on electricity pricing.

Because of the lack of transmission lines and the disagreement in electricity pricing, a number of solar and wind power plants that completed construction after 2020 with total capacity of 4,700MW, or 2.5 times higher than the capacity of Hoa Binh thermal power plant, could not provide electricity to the national grid, which is a waste of national resources and enterprises’ assets.

The fact that power plants have been left idle has been reported by mass media and power plant investors, but no measure has been taken to solve the problem. Only in mid-summer 2023, when Hanoi and northern provinces incurred serious electricity shortages, which led to outages, did MOIT use a part of the electricity of the solar and wind projects.   

In theory, if the electricity transmission network cannot be built by state-owned enterprises in synchronization with electricity generation network development, the state should encourage private investment in the field. However, the current management mechanism is not encouraging enough.

Above all, the state still holds the right to determine electricity prices, which is an obstacle to the development of the competitive electricity market. Vietnam still doesn’t have a competitive electricity market. 

While Electricity of Vietnam (EVN) has to buy electricity from solar and wind power plants at high prices, it has to retail electricity at prices lower than production costs, which is against the law of value.

Nguyen Huy Vien