Illustrative image (Source: congan.com.vn) Hanoi (VNA) - The European Chamber of Commerce in Vietnam’s NutritionalFoods Group (NFG) recommended that the Government remove the price ceiling onmilk products for children under six years.
The NFG suggested that the State allows thereturn to market-based pricing. This proposal is a part of the 2017 White Bookreleased in Hanoi last week.
Under decisions 1079/QD-BTC and 857/QD-BTCissued by the finance ministry in 2014 and 2015, respectively, a price ceilingwas imposed on milk products for children under six years of age from June 1,2014, to December 31, 2016.
The NFG has proposed that the Government refrainfrom controlling the prices of these products by extending the existing priceceiling or through additional controls. The State’s intervention in thebusiness activities of enterprises through administrative measures such asprice ceiling run counter to its aspiration to achieve a full market economy,it said.
“We are concerned that such measures not onlyimpact the business performance of enterprises in the short- to medium-term,but also affect long-term trade and investment prospects in general. TheGovernment’s interference in the business decisions of enterprises sends anegative signal to investors that Vietnam’s investment climate is not genuinelystable, open or integrated,” the NFG said.
As per data released by market research companyAC Nielsen in July 2015, the market for formula milk for children under sixshrunk by 11 percent in the 12 months after Decision 1079 was implemented.“This might have been caused by the negative psychological impact the priceceiling had on consumer behaviour. Furthermore, up to 60 percent of the publicreport that they have experienced moderate to no benefit from the State’s priceintervention measures,” the AC Nielsen report said.
According to the NFG, since the price ceilingregulation was put in place in 2014, many costs have increased, such as Vietnam’s dong exchangerate and the cost of electricity and labour, all of which impact milkmanufacturers and distributors. In this context, one of the biggestinternational milk companies decided to exit the Vietnamese market in 2016.
The group said the Government should clarify theobjectives and the intended beneficiaries of its price control measures. Whennecessary, it should impose price stabilisation measures for a restrictedperiod of time and only on essential products that are needed to ‘meet thebasic needs of the people’, as stipulated in the Law on Pricing.
“With regard to the milk formula market, theGovernment should not control the prices of products in the mid-tier andpremium segments. It should impose price stabilisation measures only on theeconomy segment to improve low-income consumers’ access to these products,” theNFG said.
The State must consider lowering price-composingfactors such as import tariffs (5 percent for imports from ASEAN and 10 percentfor other countries, which is higher than in other countries in the region) andvalue added tax rates to reduce the price of milk formula products for childrenunder six years of age, it advised.
There are an estimated 888 milk products acrossthe premium, mid-tier and economy segments, offering an incredibly diverseselection of products to meet the diverse needs of Vietnamese consumers.-VNA
The NFG suggested that the State allows thereturn to market-based pricing. This proposal is a part of the 2017 White Bookreleased in Hanoi last week.
Under decisions 1079/QD-BTC and 857/QD-BTCissued by the finance ministry in 2014 and 2015, respectively, a price ceilingwas imposed on milk products for children under six years of age from June 1,2014, to December 31, 2016.
The NFG has proposed that the Government refrainfrom controlling the prices of these products by extending the existing priceceiling or through additional controls. The State’s intervention in thebusiness activities of enterprises through administrative measures such asprice ceiling run counter to its aspiration to achieve a full market economy,it said.
“We are concerned that such measures not onlyimpact the business performance of enterprises in the short- to medium-term,but also affect long-term trade and investment prospects in general. TheGovernment’s interference in the business decisions of enterprises sends anegative signal to investors that Vietnam’s investment climate is not genuinelystable, open or integrated,” the NFG said.
As per data released by market research companyAC Nielsen in July 2015, the market for formula milk for children under sixshrunk by 11 percent in the 12 months after Decision 1079 was implemented.“This might have been caused by the negative psychological impact the priceceiling had on consumer behaviour. Furthermore, up to 60 percent of the publicreport that they have experienced moderate to no benefit from the State’s priceintervention measures,” the AC Nielsen report said.
According to the NFG, since the price ceilingregulation was put in place in 2014, many costs have increased, such as Vietnam’s dong exchangerate and the cost of electricity and labour, all of which impact milkmanufacturers and distributors. In this context, one of the biggestinternational milk companies decided to exit the Vietnamese market in 2016.
The group said the Government should clarify theobjectives and the intended beneficiaries of its price control measures. Whennecessary, it should impose price stabilisation measures for a restrictedperiod of time and only on essential products that are needed to ‘meet thebasic needs of the people’, as stipulated in the Law on Pricing.
“With regard to the milk formula market, theGovernment should not control the prices of products in the mid-tier andpremium segments. It should impose price stabilisation measures only on theeconomy segment to improve low-income consumers’ access to these products,” theNFG said.
The State must consider lowering price-composingfactors such as import tariffs (5 percent for imports from ASEAN and 10 percentfor other countries, which is higher than in other countries in the region) andvalue added tax rates to reduce the price of milk formula products for childrenunder six years of age, it advised.
There are an estimated 888 milk products acrossthe premium, mid-tier and economy segments, offering an incredibly diverseselection of products to meet the diverse needs of Vietnamese consumers.-VNA
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