VietNamNet Bridge – Formula manufacturers and distributors have laughed scornfully at the statement by the Ministry of Finance (MOF) to set ceiling for the formula selling prices, believing that this is unfeasible.

Controlling formula prices out of MOF’s reach

“The Price Control Law shows seven measures we can apply to stabilize the prices. We are considering imposing the ceiling prices on the formula products designed for the children aged under 6,” stated Nguyen Anh Tuan, Head of the Price Control Agency, an arm of MOF, when asked about the measures to control the formula prices.

The ceiling price mechanism is believed to be the hardest method to “suppress” the formula market which has become “scorching hot” with the prices escalating everyday. However, it is doubtful if the MOF’s statement can be realistic.

Imposing the ceiling prices for formula products is the dream the management agencies once nurtured in 2009.

However, the ministry “forgot” the dream later when it was told that it is nearly impossible to fix the profits and the selling prices for enterprises in a market economy. It was also warned that it was nearly impossible to set ceiling prices on hundreds of product lines.

An expert said that in order to calculate the ceiling prices for a product, MOF would have to find out the production costs, import costs, tax and targeted profits. How can it seek the information about so many formula products for reference and how can it find out a standard formula to calculate the average prices?

There are 54 dairy producers, importers and traders in Vietnam, hundreds of general distributors, while 70 percent of the products available in the market are the imports.

Meanwhile, every producer and every country applies its own standards, and recipe, which makes different price levels for different products.

“MOF will not be able to find a formula to calculate the average prices for all kinds of products, once it still not sure about the input costs of the products,” he said.

This could be the reason explaining why formula producers and distributors remain unruffled amid the MOF’s statement on the possibility of imposing ceiling prices. If MOF really tries to set ceiling prices on formula prices, it would just bring trouble upon itself.

The Ministry of Finance now imposes the ceiling prices on petroleum products and electricity. However, the same mechanism proves to be unreasonable for the formula market.

MOF’s statement just idle threat?

Competent agencies, which bear the heavy criticism from the public for the failure in controlling the formula prices, all tried to think of the measures to punish formula companies.

The Ministry of Industry and Trade reportedly prepares for an investigation on the anti-competition behaviors, while the MOF’s inspectors would try to find out if there is the behavior of transfer pricing.

However, analysts commented that the measures would not help, because they could not help in the past.

The Competition Administration Department has not found any evidences about the collusion of formula companies to control the market prices. Meanwhile, enterprises always can show the documents to prove their cost prices.

Pham Huyen