Market forces to dictate consumer pricing by 2010
Vietnam is to gradually let market forces regulate prices to 2010, in line with the country’s commitments to the WTO charter, said the Ministry of Finance.
In 2007, Vietnam will begin floating cement, steel and fertilizer prices, allowing market forces to drive the prices, and ease subsidies on petrol tariffs and oil.
Only coal supplied for generating energy in the power industry would continue to enjoy preferential treatment.
Under a recent government decision, power tariffs are scheduled to increase 7.6 percent January 1, 2006 with an additional hike planned for the following year.
By 2010, the price of electricity would be determined by the market, in contrast to the current government policy of reserving the right to set prices in key sectors including electricity and petroleum.
It has also oriented the state coal producer to negotiate tariffs with the national’s four major industrial consumers including power, cement, fertilizer and paper, all heavily dependent on coal costs for production.
According to Nguyen Tien Thoa, deputy director of the finance ministry’s price management department, the pricing structure conforms to WTO rules.
However, the WTO requires Vietnam to adjust its pricing mechanism to ensure that the economy performs in tune with market principles, without trade distorting measures.
Coal dependence
The January increase in the power sector is forecast by experts to drive up the consumer price index by 0.25 percent and push up production costs of some industries.
The Vietnam Coal and Mineral Industries Group said coal tariffs would surge 20 percent in 2007, an increase that would affect production costs of industrial products such as paper and steel.
The steel sector planned to levy a 0.6-1 percent price increase, subject to the scheduled increases in power and coal in 2007.
However, steel prices may remain stable as local makers still face fierce competition from imports of cheaper Chinese products.
The paper industry has already forecast that the cost of producing paper would increase 6.5-8 percent in the coming time due to the rising cost of electricity.
Coal price hikes could be put off in the event they are deemed to be damaging to the economy, or drive up inflation beyond what the market can withstand, the group said.
Inputs for coal account for 6-12 percent of cement production costs, and 44 percent in urea production. |
