Doing Business in Vietnam vs. Spain:

After a recent trip to Vietnam, and given that I have never been in China, I was shocked to witness the growth potential from the region.

Comparing Vietnam with my experience in Cuba ten years ago, what I found was not as close to a communist country as I could have expected. Free market was open in any Vietnamese street in big cities and, surprisingly enough, The Financial Times and Warren Buffet’s biography could be easily found in local news agents. This used to be completely banned in Cuba at least ten years ago and I suspect that it may still be.

What I saw was a very young population eager to progress and able to combine their ancient traditions with the latest hi-tech gizmos and western style. But as usual, l will provide you with some fact-based analysis and will compare how easy or difficult it is doing business in Vietnam vs. Spain based on the Doing Business reports from The World Bank.

Doing Business sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and employing workers. The numbers considered for the analysis are the ranking positions of each country out of a total of 185 economies from Afghanistan to Zimbabwe (for more data details, see www.doingbusiness.org).

As we will see, there is still as much room for improvement for one country as for the other.

A.      Doing Business in Vietnam:

In the following table , we compare how Vietnam performs in the aforementioned categories compared to the regional average (East Asia & Pacific). On average, we see how Vietnam underperforms by 14% compared to its peer countries. In fact, the biggest concern to any entrepreneur in Vietnam should be “investor’s protection” and “getting electricity”. Access to reliable corporate data and as access to reliable and affordable electricity is vital for businesses. However, Vietnam is outperforming its peers in important areas such as “dealing with construction permits” and “getting credit”.

B.      Doing business in Spain:

  

Following the same methodology as of Vietnam, we can see how Spain underperforms by a 27% compared to the regional average (OECD high income). It is extremely worrying to realize how difficult it is to start a business in Spain, as it ranks 136 out of 185 countries. “Enforcing contracts” and “protecting investors” are the next worse categories in which Spain should really focus to become an attractive economy to investors.

C.      Doing business in Vietnam vs. Spain:

The following comparison is not purely academic as it could be easily argued that we are comparing oranges and apples. However, the exercise is interesting as we can see how a rich country such as Spain underperforms Vietnam in as much as 5 categories out of 11. In other words, doing business in Vietnam it is easier than in Spain in 45% of the total categories considered to determine the ease of doing business in an economy.

Overall, we see how Spain’s average position is 61, compared to Vietnam’s average position 95. However, as stated above, Vietnam outperforms Spain in “starting a business”, “dealing with construction permits”, “registering property”, “getting credit” and “enforcing contracts”. Although the differences in these categories are not too significant, Spain should seriously consider making things easier to entrepreneurs and get rid of much of the red tape needed. Another striking fact is that it is easier to enforce contracts in a communist country such as Vietnam than not in Spain.

This is not a complete analysis as we are only considering the ranking positions and disregarding the causes of such differences, be them political, geographical or economical. However, it seems quite clear that today, Spain is not the best (or at least the easiest) place to start a business.  And in a time when unemployment is at historical records, it is a shame that households cannot access to credit, get rid of bureaucracy and start a business with enough assurance regarding their property and interest.

We do need big corporates such as Inditex or Telefonica. But right now, what Spain is in desperate need of is small and medium-sized successful enterprises able to boost employment and consumption.

Sources:

“Doing Business 2013: Smarter Regulations for Small and Medium-size Enterprises”

“A heavy load” The Economist August 31st 2013

www.doingbusiness.org

http://www.worldbank.org/

The Electricity Market

ENGLISH BELOW

Hoy hablaremos sobre algunas particularidades del mercado eléctrico respecto al resto de commodities energéticos, y es que el hecho de que la electricidad no se pueda “almacenar” afecta decisivamente a su generación, comercialización, transporte y distribución. Eso lleva a que deba producirse prácticamente en cada momento la misma cantidad que se consume

Generación: La electricidad se produce en centrales de generación las cuales se clasifican según la tecnología de la que provenga la energía: renovables (hidráulica o eólica principalmente), centrales nucleares, centrales térmicas de carbón, centrales térmicas de gas, etc.

Comercialización: Es un mercado competitivo donde los comercializadores buscan e intentan diferenciarse mediante nuevos productos u ofertas innovadoras para la distribución de electricidad: oferta conjunta de gas y electricidad, servicio de mantenimiento, etc.

Distribución: Contrariamente a la generación y a la comercialización, las actividades de transporte y distribución son monopolios naturales.

Operador del Sistema: Gestiona los mercados de servicios complementarios y de balance. Es un monopolio natural.

Operador del Mercado: Mercado organizado.

Mercado mayorista: Generadores de electricidad (oferta).

Mercado minorista: Comercializadores (oferta) y clientes (demanda).

El diseño del mercado eléctrico puede ser un pool o un diseño basado en responsables de equilibrio. En un pool eléctrico, los agentes envían ofertas de venta al Operador del Mercado por cada una de sus centrales. Si el agente es además comercializador, deberá realizar una oferta de compra independiente de la venta de sus centrales. España e Italia son los dos países europeos más importantes con pool eléctrico.

Países como Alemania, Francia y Holanda optan por el diseño basado en la figura del responsable de equilibrio o balance responsible party: cada agente tiene un “perímetro de equilibrio” compuesto por entradas (producción de las centrales propias, importaciones) y salidas (venta a clientes, exportaciones,). Estos agentes envían al Operador del Mercado sus ofertas ya netas, sin necesidad de realizar ofertas individuales por cada una de sus centrales. Esta optimización lleva a que los agentes prefieran comprar energía en el mercado si el precio es menor que los costes de sus centrales o vender energía si el precio es superior al coste de producción.

Precio

El precio que pagan los consumidores finales se descompone en dos tramos: el precio de la energía (procedente de las actividades en competencia) y las tarifas o peajes de acceso (retribuye las actividades reguladas). En algunos países, como en España, a la tarifa de acceso se incluyen sobrecostes para incentivar las renovables. Las eléctricas convencionales acusan a la multimillonaria factura de las subvenciones a las renovables, y en especial a las fotovoltaicas. Por su parte, las empresas de renovables cargan contra las eléctricas tradicionales y les acusan de tener beneficios millonarios por plantas que, como las nucleares o las hidráulicas, estarían amortizadas, o que se aprovechan de un mercado mayorista (pool) al alza.

El precio es muy volátil y está influenciado por factores como: meteorología (las bajas temperaturas en invierno y las altas temperaturas en verano provocan un aumento de la demanda de electricidad), hidraulicidad, actividad económica, precio del carbón y gas en los mercados internacionales, capacidad de intercambio con los países vecinos, entre otros.

En concreto, según las estadísticas de Eurostat, los precios de la luz, sin impuestos, han subido entre 2004 y 2011 un 80%. El sistema eléctrico en España lleva más de una década generando lo que se denomina déficit de tarifa. Los precios, por mucho que hayan subido, son insuficientes para cubrir los costes.

 

	Household* electricity prices including all taxes
	Average price per 100 kWh in 2nd half of 2011
		in €				in €
1	Denmark	29.8		18	United Kingdom	15.8
2	Germany	25.3		19	Hungary	15.5
3	Cyprus	24.1		20	Slovenia	14.9
4	Belgium	21.2		21	Czech Republic	14.7
5	Spain	20.9		22	France	14.2
6	Ireland	20.9		23	Finland	13.7
7	Italy	20.8		24	Poland	13.5
8	Sweden	20.4		25	Latvia	13.4
9	Austria	19.7		26	Greece	12.4
10	Euro area	19.3		27	Lithuania	12.2
11	Portugal	18.8		28	Albania	11.6
12	Norway	18.7		29	Turkey	11.5
13	EU27	18.4		30	Croatia	11.5
14	Netherlands	18.4		31	Romania	10.9
15	Slovakia	17.1		32	Estonia	10.4
16	Malta	17		33	Bulgaria	8.7
17	Luxembourg	16.6		34	Bosnia & Herzegovina	7.9
	Elaboración propia con datos de Eurostat

Fuentes: Expansion.com, Eurostat “Mercados de Electricidad en Europa”, J.L. Rios, J.L Rapun, G.Relano, A.Chiarri

ENGLISH

Today we will talk about some peculiarities of the electricity market comp

ared to other energy commodities. The fact that electricity cannot be "stored" decisively affects its generation, marketing, transportation and distribution. That leads to a need to produce virtually the same amount it is consumed.

Generation: Electricity is produced in power stations classified according to the technology where the energy comes from: renewables (mainly hydro and wind), nuclear power, coal power plants, gas power plants, etc.

Marketing: It is a competitive market where traders seek and try to differentiate themselves through innovative new products or offers for electricity distribution: joint supply of gas and electricity, maintenance, etc.

Distribution: Contrary to the generation and marketing, transportation and distribution activities are natural monopolies.

System Operator: Manages ancillary services markets. It is a natural monopoly.

Market Operator: Organised market.

Wholesale Market: Electricity generators (supply).

Retail market: Traders (supply) and customers (demand).

The design of the electricity market can be a pool or a design based on a responsible party. In a power pool, the agents send selling offers to the Market Operator for each of its plants. If the agent is also a marketer, it must make an offer to buy independently from the sale of their plants. Spain and Italy are the two biggest European countries with electricity pool. Countries like Germany, France and the Netherlands opt for a market based on the responsible party: each agent has a "perimeter balance" of inputs (own power production, imports) and outputs (sales to customers, exports). These agents send to the Market Operator net bids, without the need for individual bids for each of their plants. This optimisation leads the agents to prefer to buy power on the market if the price is less than the cost of their power plants or to sell if the price is above the production cost.

Price
Price paid by final consumers is divided into two sections: the price of energy (from competing activities) and fees or access fees (rewards regulated activities). In some countries, such as Spain, there are extra fees to encourage the production of renewables. Conventional power suppliers accuse the billionaire bill caused by subsidies to renewables, especially photovoltaic. Meanwhile, renewable companies accuse traditional suppliers of having millionaire benefits from plants, such as nuclear or hydro, that are completely amortised.

Price volatility is influenced by factors such as weather (low temperatures in winter and high temperatures in summer lead to increased demand for electricity), water availability, economic activity, coal and gas prices in international markets, exchange capacity with neighboring countries, among others.
Specifically, according to Eurostat statistics, household electricity prices, no taxes included, have risen between 2004 and 2011 by 80%. The electrical system in Spain has been creating what is called tariff deficit for longer than a decade. Prices, however much they have risen, are insufficient to cover costs.

Sources: Expansion.com, Eurostat “Mercados de Electricidad en Europa”, J.L. Rios, J.L Rapun, G.Relano, A.Chiarri