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Supply chain flaws cost consumers

Update: July, 03/2014 - 10:02
Vu Vinh Phu, Chairman of the Ha Noi Supermarket Association, told the Customs online newspaper that consumers are paying prices that far exceed the market value of daily commodities.

How do you think the consumer price index (CPI) will perform in the rest of 2014?

I think that if there is no big change in the price of raw materials on the international market or any political unrest in the world, our CPI will hover around 5 per cent in the second half of the year. However, I think domestic factors, including the price of health care, transportation, water and natural calamities may affect the CPI a bit. However, I'm confident that this year the CPI will be lower than the 7 per cent projected by the National Assembly.

What has captured our attention is that prices - in general, remain high. For example, one kilogram of sugar in the free market is sold at VND16,000 ($0.8) while in supermarkets it is sold for between VND 21,000 - 24,000 ($1 - 1.2). Or one kilogram of pork is sold at VND 85,000, while at the supermarket, the price is more than VND 100,000.

These two examples lead to the conclusion that prices in supermarkets are much higher than those at outdoor markets. A key factor leading to the problem is that our distribution system is not efficient and involves many middle men. There also might be problems with speculation, increasing transport costs or losses in transportation.

CPI in the first six months of this year was 4.77 per cent - almost on par with the first half of 2013. It is still higher than other countries in the region.

It is high time for producers to sit together with distributors to discuss how they should share benefits, particularly the producers' benefits.

Even though CPI has gone down people are still worried about their "pocket." What's your position?

I can't agree more! People are happy that the prices these days are rather stable. Yet, they remain very concerned about how it affects their income.

I don't think the CPI reflects the true price of the commodities value. There are three key factors distorting the true cost of a product. They are: the producers are forced to sell at lower price; the weak distribution system and the weak supervision system. If these three factors are addressed, I think consumers will end up paying less.

In your opinion, what are the weakest parts of our distribution system?

By now I can say our distribution system is in its infancy. It has not received enough attention from the authorities. I think at the ministerial level, we have to take a more active role in keeping prices stable, particularly for essential commodities like, sugar, meat, food, vegetables, medicinal drugs and others.

A market based mechanism has been applied to how many commodities are price. So why do you keep saying that ministries should intervene in the market price?

Under the Price Law, when irrational price hikes are detected in the market, the government has to intervene to bring them under control. For example, if the production cost of one kilo of sugar is VND 12,000, but it is sold in the super market VND 21,000. Who will take responsibility for such a price hike? In our country, sugar plant owners have refused to sell sugar directly to supermarkets.

The sugar has to go through the middle men before reaching the supermarkets. This round abound makes the sugar sold in the supermarket almost double that in smaller markets.

What can we do to improve the situation?

We need to have "a conductor" from either the State Bank of Viet Nam, the Ministry of Finance or the Ministry of Industry and Trade.

The "conductor" will then be the focal point and co-ordinate between producers and suppliers nationwide. — VNS

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