Allow foreign ownership in fuel distribution, ministry proposes
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The Ministry of Industry and Trade has proposed that fuel distributors be allowed to sell a maximum of 35 percent of their stake to foreign investors.
The ministry rationalized that several exceptions the government has allowed so far, such as 20 percent foreign ownership in Petrolimex and 35 percent in Petrovietnam Oil, have considerably improved the performance, competitiveness and value of these fuel distributors.
Vietnam joined the World Trade Organization in 2007 but did not open the market to foreign investors in order to allow local companies to grow and secure key positions in fuel distribution, the ministry said.
Now, after 13 years, local companies have achieved the target and need more capital to invest in storage and port infrastructure to improve production to meet domestic demand, and for this, they need foreign investment, it said.
The ministry added that the 35 percent cap will keep foreign investors from taking complete control of the sector, which is key to the nation’s economy.
Petrolimex and Petrovietnam Oil are the two main fuel distributors in Vietnam and the government holds a majority stake in both companies. Japan’s Idemitsu Q8 is the only foreign-owned petrol chain in Vietnam with four outlets since entering the market in 2017.
Idemitsu Kosan Co., Ltd is one of the four investors behind the Nghi Son Refinery and Petrochemical LLC in the central province of Thanh Hoa.
Officials had said earlier that 70-75 percent of fuel consumed in Vietnam is being produced locally and the rest imported from several countries including South Korea, Malaysia and Singapore.
Questions & Answers
Q.What is the main reason for the proposed change in foreign ownership limits for fuel distributors?
What is the main reason for the proposed change in foreign ownership limits for fuel distributors?
The ministry believes local companies have achieved their growth targets since Vietnam joined the WTO. They now need foreign investment to secure capital for infrastructure improvements, such as storage and port facilities, to boost production and meet domestic demand.
Q.Which specific companies have previously benefited from foreign investment in Vietnam's fuel distribution sector?
Which specific companies have previously benefited from foreign investment in Vietnam's fuel distribution sector?
Petrolimex and Petrovietnam Oil have both seen improved performance, competitiveness, and value following earlier exceptions. Petrolimex allowed 20 percent foreign ownership, while Petrovietnam Oil permitted 35 percent.
Q.Why is there a cap of 35 percent proposed for foreign ownership in fuel distribution companies?
Why is there a cap of 35 percent proposed for foreign ownership in fuel distribution companies?
The ministry has proposed a 35 percent cap to prevent foreign investors from gaining complete control of the fuel distribution sector. This sector is considered key to the nation’s economy.
Q.How much of Vietnam's fuel consumption is currently met by local production?
How much of Vietnam's fuel consumption is currently met by local production?
Officials previously stated that 70-75 percent of the fuel consumed in Vietnam is produced domestically. The remaining amount is imported from various countries, including South Korea, Malaysia, and Singapore.