VietNamNet Bridge - A ceiling price has been applied to formula milk for children aged below six for one year. Most recently, the government decided to continue it for one more year, until December 31, 2016.

Local newspapers have quoted market survey firms saying that the sales of formula milk had not increased as expected, despite lower selling prices. 

A report of Nielsen in February 2015 showed that formula milk sales have decreased by 9-10 percent in Hanoi and HCM City after ceiling prices were fixed. 

An enterprise which both imports and manufactures products confirmed its sales have reduced considerably compared with 2013.

While Vietnamese believe formula milk products in Vietnam are the most expensive in Asia, Nielsen said that prices in Vietnam are just at the medium level in the region.

One kilo of milk for children aged below six in Vietnam is priced at $16, while it is $41.8 in Hong Kong, $34.3 in China, $30.8 in Singapore, $14 in Thailand and $12.9 in the Philippines.

Milk products in Vietnam are more expensive than Thailand, the Philippines and other regional countries because they bear high import tariff and VAT.

A survey by Consumer Unity & Trust Society (CUTS International) also pointed out that the imported milk products in Vietnam have the highest import tariffs and VAT in the region.

The Philippines, for example, taxes 7 percent on imports, while Indonesia 5 percent and Thailand, Singapore, Malaysia and the Philippines, zero percent. Meanwhile, Vietnam imposes 10 percent on imports.

While Singapore and Thailand imposes the VAT rate of 7 percent and Malaysia 6 percent, Vietnam imposes 10 percent.

With the currently applied tax rates, one box of milk imported from Australia or New Zealand at $10 will be priced at $12.1 in Vietnam after tax. Meanwhile, it will be $10 only in Malaysia, $11.984 in the Philippines, $11.235 in Thailand and $11.55 in Indonesia.

The public’s repeated complaints about high milk prices have forced the government to apply the ceiling price. It wants to keep prices reasonably high to both ensure profits for manufacturers and make products affordable to Vietnamese.

In late 2014, milk manufacturers and suppliers met public criticism when the prices of finished products remained unchanged, though input material prices in the world market had decreased significantly.

However, a representative of a well-known milk brand argued that it was unreasonable to force enterprises to cut selling prices at the time. 

He said that the selling price is determined by manufacturers and distributors after considering production costs and other expenses, including R&D cost, quality examination costs, customer care service, taxes, adverts and labor costs.

DNSG