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Milk prices spiral out of control

Update: October, 04/2013 - 09:52

Vu Vinh Phu, vice chairman of the Viet Nam Retailers' Association, spoke with Kinh te&Do thi (Economy &Urban Affairs) newspaper about the milk industry.

Milk enterprises have changed the name of milk products by labelling them "supplementary nutrients" or "milk powder for children under six months of age" - and then unreasonably boosting the prices. In the meantime, the Ministry of Health and the Ministry of Finance are still in debate on the responsibilities of price management. From your point of view, what is the root of the matter?

It's true there are many reasons for the price hike of powdered milk. However, the weak co-operation of the two ministries has allowed milk enterprises to take advantage of a legal loophole to increase prices. I don't agree with the explanation of the Finance Ministry that the ministry could not intervene as milk product labels are licensed by the Health Ministry.

Powdered milk prices have been increasing from 2009 when the practice of changing the name began to emerge. There have been an average of two or three price hikes annually. In this year alone, consumers have had to pay for three price increases. Each one was an increase of five to 10 per cent.

The reason for lack of controls, in my opinion, is the insufficient management. There are a lot of legal documents on milk price management such as Price Law, Competition Law and Law on Consumer Protection, but most overlap and are also inadequate.

For example, one regulation stipulates that enterprises will be fined if they increase prices by 20 per cent within 15 days. If I were them, I would wait until the sixteenth day!

As a result, price stability is always a thorny problem and consumers suffer the most. Imported powdered milk makes up more than 70 per cent of the market share. Foreign enterprises usually sign an exclusive contract with only one importer and therefore it is easy to increase prices.

The cost of advertising and the commission for distributors have pushed milk prices up unreasonably. How can the authorities control this issue?

According to the current law, enterprises can only spend a maximum of 10 per cent of their total expenses for advertising. But in fact, many spend four times of that. This is the consequence of weakness and incomprehensive management by the authorities.

It's possible to control milk price. If the cost of advertising is over-the-top, we should add that amount of money to taxable income.

In China and some other countries, they inspect exclusive milk importers and regulate profits to control prices - and they are successful. When China announced that milk price faced scrutiny, a mass of milk enterprises instantly reduced their retail prices. One month later, six milk companies were fined up to US$108 million for price manipulation.

I think we should do it now. We have all tools to do it. We have custom, tax, market watch for domestic problems and embassies and business groups abroad. Why don't we investigate the differences between milk prices abroad and domestically?

Of the 500 types of powdered now on offer in Viet Nam, why don't we find the best and start again.It's time relevant authorities joined hands to do it instead of passing the buck to each other.

The Ministry of Finance has proposed to put nutrient products and formula supplements on the list of products under price stabilisation. Would this help in any way?

It's not enough. The State should try other ways, such as encouraging State-owned enterprises to import milk to create a competitive environment.

Viet Nam needs a comprehensive strategy to develop the fresh and powdered milk industry. Domestic milk accounts for 60 per cent of market share. Powdered milk occupies only 20 per cent of this amount. Taxes could be reduced to help domestic products. — VNS


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