Prices would rise from an average of 970.9 dong (5.1 US cents) to 1,019 dong per kilowatt hour beginning in March, Deputy Minister of Industry and Trade Bui Xuan Khu said.

"This price hike is part of the roadmap to reform Vietnam's electricity sector, in order attract more foreign investors," said Pham Manh Thang, head of the Electricity Regulatory Authority of Vietnam (ERAV), which proposed the hike.

Vietnamese electricity prices are well below those in regional countries such as China and Thailand. They have fallen in dollar terms from 5.7 US cents per kilowatt hour in 1995, due to currency depreciation.

Prices have been held low to benefit poor consumers and export industries.

Tran Viet Ngai, chairman of the Vietnam Energy Association, said the price hike "won't shock consumers."

Ngai said the proposal would allow coal prices to rise by 15 per cent.

Vietnam's state-owned coal and mining company, Vinacomin, asked in December for permission to raise its government-set domestic coal prices by up to 149 per cent. Vinacomin said its production costs had risen, and the below-market domestic coal price was insufficient to support investment in new mines.

Some experts criticized the proposal, saying rising coal prices would hurt consumers and manufacturing and drive up inflation.

Ngai said the government would continue raising electricity prices until rates matched those of other countries in the region.

But Khu said it might take 30 years before Vietnam's electricity prices rose to world levels.

The government expects demand for electricity in Vietnam to grow 14 per cent this year.

Deutsche Presse Agentur - January 29, 2010