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Cheaper input, higher prices!

Update: January, 28/2015 - 08:48

by Nguyen Khanh Chi

Fuel prices have dropped twice this month and for the 15th time since July. The move should mean good news for consumers, who expect a corresponding reduction in the price of most goods, especially as Tet approaches.

But the reality disappoints many when they go to the market to buy food and other essentials for Tet, which falls on February 19. Prices remain high, despite authorities promising to stabilise commodity prices during this time of year.

Fuel makes up a portion of input costs for most commodities, because they must be transported. Thus, changes in fuel prices means corresponding changes in the price of commodities. This rule always works properly when fuel prices go up. However, when they go down, manufacturers and businesses react slowly so they can benefit more from the price difference.

"It is a matter of fact that the price of goods often rises before Tet, but that's the case when fuel prices are high," said Pham Thi Nga, a resident of the Old Quarter in Ha Noi,. "I expected prices to go down because the price of petroleum had been dramatically reduced. Unfortunately, prices are even higher."

By January 21, the retail price of a litre of RON 92 petrol had dropped by VND1,900 to VND15,670, VND8,460 less than in November 2013.

"For a kilo of good-quality dried mushrooms I have to pay VND400,000 (US$19), VND100,000 more than last year," Nga said. "Meanwhile, dried wood ear mushroom prices also rose to VND350,000, when last year they were VND280,000."

Nga said the Dong Xuan Market vendors she normally buys dried goods from complained that they had to pay higher taxes this year.

Businesses always have a thousand reasons why they refuse to lower their prices. They should lower them, though, considering the drop in petroleum prices and authorities' requests that businesses keep prices stable so all people can fully enjoy Tet.

Ha Noi Supermarket Association Chairman Vu Vinh Phu said that although fuel prices had dropped sharply, the price of other commodities weren't following suit. The price of some foodstuff usually increases around Tet, he said.

Although the Finance Ministry's Department of Price Management asserted that there would not be sudden changes in nationwide prices, it did admit to a slight change in the price of certain commodities, such as high-quality rice and fresh seafood.

The Ha Noi Department of Commerce and Industry has said it expects a price increase of 1 to 3 per cent for high-quality rice, 8 to 10 per cent for beef, and 10 to 15 per cent for chicken and seafood.

The majority of produce vendors in markets around Ha Noi such as Nghia Tan, Cau Giay, Thanh Cong and Dong Xuan said they could not lower the price of commodities, because their products had been selling at a snail's pace.

"Consumption is quite slow, particularly during the winter when people go to the market less – for instance, only twice a week instead of daily," said Tran Hoa, who sells pork at Nghia Tan Market in Cau Giay District.

Another small-scale trader in Ba Dinh District's Thanh Cong Market, Nguyen Lan Phuong, said the high prices of wholesale fruits and vegetables forced vendors to maintain or even raise their own prices.

Nguyen Thanh Ha, deputy head of the Thu Duc Wholesale Market in HCM City, said she talked to the market's small-scale traders to learn more about the situation. They said the transport fees for goods from other localities hadn't decreased. That, in combination with slow sales, meant they couldn't reduce their prices.

Economists said that the business circle's lack of a response to the lowered fuel prices indicated that Viet Nam's economy had not operated adequately in accordance with market mechanisms.

Will the Ministry of Finance's vow that anyone who pushes prices up unreasonably and unexpectedly will be seriously punished help customers feel assured that they won't have to spend more this Tet?

In Viet Nam, customers are usually considered "God." Nevertheless, it seems that in this case it isn't always the customer who is right. — VNS

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