VietNamNet Bridge - The Price Control Agency under the Ministry of Finance (MOF) has confirmed that  formula milk companies are not conducting transfer pricing, vowing to clarify the problem.

Nguyen Anh Tuan, head of the agency, said at a press conference in mid-May that there were signs of dairy manufacturers and distributors committing transfer pricing. 

The majority of materials and finished dairy products are imported from overseas for domestic production and distribution as directed by the foreign partners. Therefore, Vietnamese watchdog agencies encounter difficulties in controlling the input materials.

“The prices of dairy materials and finished products have decreased in the world market. However, the import prices reported by importers in customs declarations are still the same,” Tuan said.

“Therefore, we have reasons to doubt that businesses have conducted transfer pricing,” he added.

An analyst noted that transfer pricing is one of the major reasons behind the sky-high dairy prices in the domestic market.

Tuan admitted that the powdered milk products for children aged below six in Vietnam are more expensive than other regional countries.

The price is $16 per kilo in Vietnam, while figures are between $9.5 and $14 per kilo in Thailand, the Philippines, Malaysia and Indonesia.

However, transfer pricing is just “suspected”. Tuan said that though MOF has reasons to raise doubts, it will still need much more time to conduct a probe and look for more information before a final conclusion is made.

A lawyer noted that it is difficult to prove the behavior of transfer pricing conducted by businesses. It is necessary to collect information from different sources to show that prices of imported materials and finished products declared by businesses are higher than market prices.

He said he appreciated the MOF’s measure of imposing ceiling prices on dairy products for children below six years old, which has been in effect for a year.

The watchdog agency said the measure has brought the desired effects: the formula prices are under control. Manufacturers and distributors have registered the selling prices for 708 products. 

The average retail price has decreased by 0.1-34 percent from the price levels seen before the time the measure was applied. Most of the products saw a drop of 10-15 percent in price.

The regulation on prohibiting the advertising of products to replace breast milk for children under 24 months old has also forced selling prices down. Five companies have re-registered their selling prices for 50 products with prices decreasing by 0.4-14 percent.

A representative from MOF said the ceiling price will continue until the end of 2016.

Pham Huyen