According to Nguyen Tien Thoa, Head of the Price Control Department under the Ministry of Finance (MOF), inspectors found out that the main reason behind the sharp price increases in the last time was the increase in the prices of input materials.

The ingot steel price rose by nearly 20%, powder milk price soared by 25-97%, while gas price by 8%. No company has been found as having made corrupt use of the input material price fluctuations to raise selling prices illegally.

However, Mr Thoa said that the expenses companies have entered in their accounts are high, and, according to him, they could be cut in order to help lower production costs.

What have enterprises promised?

The enterprises to which the inspectors went all have promised to cut expenses in order to keep prices stable, at least until the end of 2007. Of course, the price stabilisation will be feasible only if the world’s prices do not skyrocket any more, or just increase slightly, at an ‘acceptable’ level.

The inspected companies have had positive responses. For example, gas trading companies have committed to reduce selling prices by VND2-3,000/gas tank. The Vietnam-Australia Steel Company has promised to cut its prices by VND200/kg, while Thai Nguyen steel agreed to cut VND100-200/kg. The dairy products made by 3A Food Company have been reduced by 4-8%.

Will enterprises be able to raise selling prices in the time to come without reporting to the Ministry of Finance, if the world’s prices increase? What did steel mills say about the fact that they still increased selling prices despite the big stocks?

Enterprises will have to report to the ministry if they plan to raise selling prices. They have to make reports, so that the government can consider applying supportive measures. For example, the government may consider lowering taxes.

Regarding steel stocks, the consumption was slow in the last time as the south has entered the rainy season. Meanwhile, the demand for construction material is always low in July of the Lunar Year. The high inventory level did not mean an excess of products; it just exists for a short term. In the long term, the demand for steel will not decrease as the disbursement for investment projects will be big towards the year end, especially when the construction season nears.

Food and foodstuff prices still saw sharp increases in the last months. What will the ministries do to keep the prices stable for the remaining months of the year and the months just before Tet?

Among food and foodstuff products, the government just keeps price control over rice. However, it is still necessary to keep watch over the price tendency of other items and ministries will apply necessary measures to keep the prices stable. What we should think about is which measures to be applied.

The rice price increased in the last time because of the high rice exports. From now until the year’s end, Vietnam should keep the exports at 4.4mil tonnes at maximum, and no more new export contracts should be signed. We also have to extend the export process, i.e. the remaining 1.7mil tonnes should be shipped from now until the year’s end instead of in a short time.

In fact, food prices seem to be okay. The import tax reduction on food products has helped improve the supply and demand imbalance caused by the domestic epidemics. The Ministry of Finance has asked the Ministry of Agriculture and Rural Development to control the prices of foodstuff for cattle. The price reductions will help encourage husbandry, and develop the herd of cattle to serve the demand at the year’s end. The northern provinces have entered the winter production crop, which means a more profuse supply of fruits and vegetables.

As far as I know, the Ministry of Industry and Trade has had meetings with ministries and associations, discussing the supply and demand balance for the remaining months of the year and the months just before Tet. Key products and materials will be in adequate supply.

The government’s decision on import tax cuts has been effective for one month, but the prices of many products have not decreased yet. How would you deal with this problem?

As you know, the price inspection has been taken with the items which saw the signs of sharp price increases over the last time. Currently, local authorities are still carrying out inspections of products which are put under their management. It should be seen as a good sign that no item among the inspected ones increased in prices.

One thing we can do now is to examine the impact of the tax reduction on enterprises, especially big enterprises. If necessary, the government may remove the decision on tax cuts.

If the examination finds out that enterprises can get big profit from the tax reduction while they are deliberately not lowering selling prices we will take necessary measures. We must not waste several thousand billion dong (from tax reduction).

However, the biggest problem is that we depend much on the world’s prices. The import tax decreased a little, but the world’s price then increased a bit. Enterprises fear that if the world’s prices keep rising, they would find it very hard to cut selling prices. Most recently, steel companies have expressed their concern about the possible continued increases of ingot steel prices in October and November.

I think that all the ministries need to get involved in the work of stabilising the market. Ministries have promulgated documents on stabilising prices, but they have not supervised the implementation. For example, the Ministry of Finance has asked MARD why the prices of the foodstuff for cattle have not decreased despite the tax cuts.

What are your forecasts about the price movement for the time to come?

I don’t think there will be big changes from now till the end of the year. It is predictable that the consumer price index will be around 8% for 2007. The CPI of August was 0.55%. I think the index will be lower in September, which, according to the taskforce on domestic market regulation, may be 0.2-0.3%. If drastic measures are taken, the index would be 1.5 in the last four months of the year at maximum.

Source: VietnamNet.