The latest report by the Taskforce on Domestic Market Regulation proclaimed the new price increase wave. The prices of foodstuffs, gas and construction steel keep rising, though the government has cut taxes on imports.
Import and export prices have also been increasing due to the increased prices of input materials in the world’s market. The rice price, for example, has increased by 17% compared to the same period last year, while the coffee price by 29%, pepper 104%, fertiliser 10%, ingot steel 28%, finished steel 16%, pulp 19%, and plastics materials 11%.
On the domestic market, dairy products are witnessing another sharp price increase wave of 3.6-11.2%. Steel producers, blaming the increased ingot steel price, have raised selling prices by VND200/kg. The price is expected to see further increases in October, despite the big stocks of 140,000 tonnes of finished steel and 290,000 tonnes of ingot steel imported before.
Food and foodstuff prices keep rising. Pork, the main foodstuff for Vietnamese people, has increased by VND1-2,000/kg in price, while seafood prices have increased by VND1-3,000/kg.
By the end of September, foodstuff prices had increased by 12.18%. Meanwhile, foodstuff products account for 25% of the basket of commodities used for calculating CPI.
The Taskforce on Domestic Market Regulation predicts that the CPI will increase by 0.4% in October over last month. If the prediction comes true, the CPI will have grown by 7.72% in the first ten months of the year. If the CPI grows by 0.4% per month in the last three months of the year, the CPI increase for the whole year of 2007 will exceed the targeted level of 8%.
An official from the Ministry of Finance said that the price increases proved to be higher than forecast; therefore, it was very difficult to curb inflation. He said that even the 8.2% threshold could be exceeded.
The taskforce has warned that there exist factors that threaten to make prices increase further, such as bad weather, epidemics, high world input material prices (crude oil and petrol), and the high demand for materials and commodities as the disbursement for investment projects will be carried out towards the year’s end.
The Ministry of Finance (MOF) has reported to the Prime Minister the results of the inspection tours of dairy and steel companies. Dairy products saw the price increase of 4-11% in the first half of the year. The inspections showed that dairy companies spend too much on sale and marketing. The expenses for sale account for 5-27% of the prime cost, while the expenses for advertisement and promotion campaigns, between 1-19.2%. The companies have expenses for advertisement higher than the allowed level (under the current regulations, the expenses must not be higher than 10% of total expenses): Dutch Lady (19.2%), and Vinamilk (12.9%). Dutch Lady, Tien Tien and 3A products have seen selling price increases of 9%, 6.5% and 6%, respectively. Enfagrow Vanilla has seen the dramatic increase of 30% (Tien Tien), and Ensure liquid 250 ml 43% (3A). Meanwhile, according to Nguyen Tien Thoa, Head of the Price Control Department under the Ministry of Finance, dairy producers could cut selling prices after the tax reduction. He said that the import tax accounted for 11.54% of the prime cost; therefore, when the import tax is cut by 50%, the company can reduce selling prices by 5-5.2%. Meanwhile, sharper price decreases could be seen in dairy products with sugar thanks to the sharper tax cut (from 30% to 15%). As for the companies that use imported materials and locally made materials (Dutch Lady, Vinamilk), the selling price could be reduced by 3-4% as the import tax on materials accounts for 6.4-7% of the prime cost. MOF has proposed that the Prime Minister promulgate the frame list of construction steel prices in case the import ingot steel price exceeds the $600/tonne threshold and finished steel price exceeds the VND11mil/tonne threshold. |