Foreign firms take over petroleum market, Ministry of Industry and Trade anticipates risk

The Ministry of Industry and Trade (MoIT) has proposed removing the rule in a decree that says foreign investors are allowed to hold no more than 35% of shares in petroleum trading businesses.

The rule is included in an amended draft Decree 83/2014. The Ministry said that it was necessary to do further research.

In its document recently submitted to the Government, MoIT further explained the regulations allow domestic petroleum trading firms involved in production activities to transfer their shares to foreign investors, but it cannot exceed 35%.

This is controversial content. The ministries of Public Security, Planning and Investment, and Finance believe that this is a new regulation, raising concerns about energy security, legality, and the actual benefits of opening up for foreign investment.

Đại gia ngoại thâu tóm thị trường xăng dầu: Bộ Công Thương lường trước nguy cơ

The amendment to the decree on petroleum trading has not been completed yet. Photo: L. Bang

According to MoIT, this regulation has recently been included in Decree 83, but in fact it has been implemented for many years for state-owned petroleum trading enterprises such as Petrolimex (with 20% of shares owned by foreign investors), PVOil (35%), BSR (49%), through equitization and mobilization of investment capital. This was also approved by the Prime Minister before implementation. These firms are still doing business and operating normally.

MoIT explained that the inclusion of this regulation in the amended draft Decree is to comply with the Government’s guidance issued in March 2016 on the issuance of shares to increase capital for strategic shareholders of Petrolimex.

In addition, the participation of foreign investors contributes significantly to improving governance, making financial statements more transparent, thereby improving efficiency and competitiveness, and helping increase the value of petroleum trading businesses through shares.

The Ministry said that foreign investors are very knowledgeable and abide by Vietnamese laws and regulations in petroleum trading. However, because of the absence of official and specific regulations on the shareholding ratio of foreign investors, domestic enterprises as well as state management agencies are very confused when negotiating with foreign investors on investment and capital increases, especially the lack of heterogeneity in the shareholding rate of this subject when these firms are listed on the stock exchange.

The Ministry said that when the Government Office consulted the Government members on the draft amended Decree, 24 of 25 members passed it. One did not agree with the content allowing petroleum traders to transfer no more than 35% of shares to foreign investors. Three members approved but had additional comments on some content of the amended draft decree.

For the needs of businesses?

According to MoIT, in fact, there are thousands of other companies involving in petroleum trading, including many listed joint stock companies which also need to attract foreign investment.

Foreign investors are also interested in the shares of those firms, but the lack of clear and specific regulations hinders them from investing in local petroleum trading firms. Therefore, MoIT believes that this regulation is consistent with the actual situation and the development needs of the petroleum industry.

 

“The rule on share transfer limitation at 35% helps solve the problem of capital, technology, and business management skill attraction while still restricting foreign investors' intervention in production and business activities of local enterprises,” the MoIT said.

Therefore, it is necessary to consider the benefits of not opening the door for foreign investors to buy shares of local petroleum trading companies with the early opening of the door for foreign capital and technology.

"The proposal to open the petroleum market comes from the needs of domestic petroleum trading businesses, not from foreign enterprises," the Ministry said. Most countries in the world and the region have opened their petroleum markets, such as China, Singapore, Thailand, and Japan.

The Ministry affirmed that petroleum enterprises, regardless of economic sector, when doing business in the Vietnamese market, must comply with the conditions and provisions of this Decree and other related legal documents. Therefore, businesses are controlled to ensure management of energy security, quality, fire safety and others.

Allowing share transfer in such cases is an indirect investment activity that does not allow foreign firms to directly exercise the right to distribute petroleum in Vietnam. The exercise of the right to distribute petroleum in Vietnam is only possible when a foreign company establishes its branch in Vietnam and directly conducts distribution activities.

The Ministry also added that if the Prime Minister thinks this content needs to be further researched and evaluated, MoIT will propose removing this content from the amended draft decree.

This decree has not been approved by the Government, so it will have to wait for the decision of the new Government.

Commenting on the draft decree, the Ministry of Finance proposed setting regulations to control the number of petroleum traders.

In response, MoIT said that the increase in the number of petroleum traders is consistent with actual conditions. Before 2015, there were 23 major traders nationwide, which has increased to about 40 at present. The Ministry emphasized that the increase is not high. China has nearly 500 and Singapore more than 500 petroleum traders.

MoIT promised to coordinate with the Ministry of Finance and relevant agencies to strengthen the post-inspection task to closely control the quality and number of petroleum distributors.

Luong Bang

Will foreigners dominate Vietnam’s petroleum distribution system?

Will foreigners dominate Vietnam’s petroleum distribution system?

Some experts have raised concerns that foreign investors with powerful financial capability may swallow up the domestic petroleum distribution system. If this happened, Vietnam’s energy security would be in danger, they say.

 
 

Other News

.
How can Bac Giang IZs battle the latest Covid-19 outbreak?
How can Bac Giang IZs battle the latest Covid-19 outbreak?
FEATUREicon  30/05/2021 

Soon after the first infection cases in the province were discovered, Bac Giang province immediately decided to test all the workers in IZs, trace and isolate high-risk cases, and implement medical quarantine and social distancing in at-risk areas.

Educators debate merits of using online exams
Educators debate merits of using online exams
FEATUREicon  29/05/2021 

At 8 am May 16, Hai Phong, a 12th grader at a Hanoi high school was sitting in front of his laptop, checking the internet, camera and headphone, waiting for his turn to be interviewed for admission to the Hanoi University of Science and Technology.

'Black-credit' lenders pose serious threat to borrowers
'Black-credit' lenders pose serious threat to borrowers
FEATUREicon  28/05/2021 

Experts have repeatedly rung the alarm bell over black credit, which is causing serious consequences to families and society.

Vietnam needs new requirements for foreign investors
Vietnam needs new requirements for foreign investors
FEATUREicon  31/05/2021 

Vietnam needs to be more selective when receiving foreign direct investment  (FDI), and should set requirements, just as foreign investors do in exchange for being able to invest in Vietnam, experts say.

Former maize fields turn out to be worth millions
Former maize fields turn out to be worth millions
FEATUREicon  31/05/2021 

The solitary out-of-the-way hills, where people cultivated maize and cassava, have turned out to be land areas worth millions of dollars since the day people shifted to grow other crops more than a decade ago.

Hue physician in the US shares her experiences with online Vietnamese medical community
Hue physician in the US shares her experiences with online Vietnamese medical community
FEATUREicon  29/05/2021 

When she just came to the US, Nguyen Ngoc Trang was surprised when realizing her English pronunciation was not correct. But four years later, she was the best student at her high school.

Electricity prices still not falling despite oversupply
Electricity prices still not falling despite oversupply
FEATUREicon  27/05/2021 

The Electricity of Vietnam’s (EVN) latest report showed that the Covid-19 pandemic has led to a decrease in electricity demand. The real electricity output in 2020 was 247 billion kwh and the additional charge growth rate was 3 percent.

Goods face strict customs inspections as smugglers continue to violate laws
Goods face strict customs inspections as smugglers continue to violate laws
FEATUREicon  27/05/2021 

The General Department of Customs (GDC) said that risks in transit services continue to exist as smugglers try to carry prohibited goods into Vietnam.

Economist proposes measures to support enterprises in tough times
Economist proposes measures to support enterprises in tough times
FEATUREicon  28/05/2021 

Pham The Anh, chief economist at the Vietnam Institute for Economic Policy Research (VEPR), believes that social security support must be given to people who have had to shut down their business or have lost jobs because of lockdowns.

San Diu ethnic farmer grows the most expensive litchis in Vietnam
San Diu ethnic farmer grows the most expensive litchis in Vietnam
FEATUREicon  28/05/2021 

Tran Van Hanh, who lives in Chao hamlet, Luc Ngan district, Bac Giang province, one of the two largest litchi growing areas in Vietnam, owns an orchard that grows the most expensive litchis in the country.

Vietnam's post-pandemic economy
Vietnam's post-pandemic economy
FEATUREicon  27/05/2021 

As the Covid-19 pandemic persists, Vietnam's economy will still face many difficulties, but the country has the potential to increase productivity and develop at a higher rate than many other countries.

Share prices rise, strong cash flow emerges
Share prices rise, strong cash flow emerges
FEATUREicon  26/05/2021 

Vietnam’s stock market made a spectacular breakthrough in the first months of the year with the VN Index staying at the 1,200 point threshold and some blue-chip prices strongly increasing.

Vietnam loses 3% GDP from not employing people with disabilities
Vietnam loses 3% GDP from not employing people with disabilities
FEATUREicon  31/05/2021 

An International Labour Organization (ILO) report shows that Vietnam loses 3 percent of GDP by not employing people with disabilities in the labor market.

Vietnam considers tracking bracelets for quarantined persons
Vietnam considers tracking bracelets for quarantined persons
FEATUREicon  26/05/2021 

The Ministry of Information and Communications (MIC) wants people to wear a tracking wristband during and after their concentrated quarantine period. The estimated production cost is $35.

Taxing unoccupied villas: one solution for creating fair housing market
Taxing unoccupied villas: one solution for creating fair housing market
FEATUREicon  26/05/2021 

A reasonable taxation policy is expected to help settle several problems, including excessive investment in high-end apartment and villa projects, and speculation buying.

Hard-hit bsinesses still paying high interest on loans
Hard-hit bsinesses still paying high interest on loans
FEATUREicon  25/05/2021 

The latest Covid-19 outbreak has pushed enterprises into new difficulties at a time when it is nearly impossible to access cheap capital sources.

Litchis sell well on e-commerce sites
Litchis sell well on e-commerce sites
FEATUREicon  26/05/2021 

Nguyen Van Lan’s 2-hectare litchi orchard in Luc Ngan district in Bac Giang province is ready for harvest. However, he still doesn’t know what to do to sell all the 40-50 tons of litchis amid the Covid-19 outbreak.

Tourism sector suffers another hit from recent Covid outbreak
Tourism sector suffers another hit from recent Covid outbreak
FEATUREicon  25/05/2021 

Businesses have sustained a new blow from the fourth recurrence of Covid-19.

People's spirit in fighting Covid-19
People's spirit in fighting Covid-19
FEATUREicon  25/05/2021 

Recently, some businessmen told me that they are willing to contribute money to the Government to buy vaccines against the SARS-CoV-2 virus if the Government launches a fund to supplement the budget shortage.

KPIs for National Assembly deputies considered
KPIs for National Assembly deputies considered
FEATUREicon  24/05/2021 

The National Assembly should study and develop a set of key performance indicators (KPIs) of delegates, including qualitative and quantitative values.

 
 
 
Leave your comment on an article

OR QUICK LOGIN