“After the government announced the petrol price adjustment, I had to pay VND170,000 to go from Noi Bai Airport to here (to Lac Long Quan street, reporter) instead of VND150,000 as previously. As such, the taxi fee has risen by 13%. The prices of gas, power, coal and many other commodities will increase. The market effects of the petrol price hike will be shown in three months. I can say for sure that the CPI will go higher than the Ministry of Finance’s forecast level, and inflation will be two-digit this year,” Mr Doanh said.

“I believe that the government has to raise the retail petrol price because it has no other choice. The world’s oil price keeps increasing and it has, as it said, ‘been pushed to the wall’. The government cannot subsidise petroleum prices any more, as the subsidisation would make illegal petrol trading through border gates uncontrollable. Finally, the government has to raise the price of the key product, kicking off the new price storm.”

As such, the petrol price increase is now not the story, but the national economy in the new period, which needs new management techniques.

What does Vietnam need to do to deal with the new price storm?

The world’s oil price increases have not caused shocks to other economies. The inflation rate is 5.4% only for China, while the rate is 3% for Singapore. These countries remain unruffled, because they do not rely too much on oil. They have atomic power, hydropower, they create power from wind and sun energy. Their efficiency level in using power is very high.

Citizens in other countries are conscious about saving energy when oil prices go up. In Laos, for example, in order to deal with the oil price increase, police in Vientiane go on patrol on bicycles. Meanwhile, in Vietnam, state authorities go everywhere by car despite the price increase.

What would you say about the efficiency of the measures applied so far to deal with price increases?

Thirty years ago, Japan was miserable because it also relied on petroleum. The country then built up an overall plan on using and developing energy. The plan brought about good effects after three years: the energy consumption per product unit decreased by 50%. I mean that there should be an overall national strategy on fighting price increases and curbing inflation.

Do you think that such a strategy is needed for Vietnam? Could you please tell me some points of such a strategy?

First of all, the government should give information about the world’s and domestic prices, and give forecasts about price fluctuations. People should also be informed about the steps of the long-term strategy on removing the subsidisation mechanism.

The state needs also to build up a long-term strategy on using energy, which points out the targets and detailed plans on saving energy.

We may set a target that we will reduce the energy consumption level by 30% per product unit. In order to do that, we should think of upgrading technology and changing the production management that increases production of more value added products.

In order to create $500, Japanese people make cameras, Canon 500gr, while American people make 200gr software. Meanwhile, in order to create $500, Vietnamese people have to work hard to grow several tonnes of rice.

What do you think are suitable measures that help stabilise prices while removing petroleum price subsidisation scheme?

Currently, Vietnam uses money from crude oil exports to compensate for petrol losses, and uses profit from hydropower plants to offset thermo-power plants. I think the state should stand aside and not control the two products any more. The state should let companies trade themselves with the existence of a stabilisation fund. The fund will take shape with the earnings from oil exports.

It is also necessary to build up a flexible mechanism which allows enterprises to raise or lower prices gradually, while not causing shocks to the market.

But, will we be able to control the market and control inflation if we control power prices?

In order to curb inflation, I think, it is necessary to use monetary policies as well. We may consider raising deposit interest rates in order to attract money from the public through commercial banks. The money attracted would be lent to feasible projects.

I do not like using government bond issuance as a measure to curb inflation. In this case, the government can withdraw cash from circulation, but the money will be lent to state owned enterprises’ projects, which prove to have low feasibility.

Besides, I think that Vietnam should also have a flexible exchange rate policy which allows it to avoid bad impacts on import-export activities.

Source: Tuoi tre.