VietNamNet Bridge – The Ministry of Finance expects to float the price of milk products for children under six years old by the beginning of next year after the price ceilings for the products are eliminated.

A customer shops for milk products at a supermarket in Ha Noi. The use of price ceilings for some products relating to health and nutrition for children should not be maintained over a long period, experts says. — Photo: VNS

Deputy Prime Minister Vu Van Ninh was quoted by online newspaper dantri.com.vn as saying that Viet Nam could no longer use administrative solutions in the market, since the country has signed a range of Free Trade Agreements (FTAs).

The management agencies had been set up to assure markets remain stable. In the future, markets could maintain their stability through the use of improved management and economics measures, he added.

Meanwhile, Dinh Tien Dung, minister of Finance, said that by the end of this year the decision to put in place price ceilings for milk products for children under six years old would have expired.

Officials have also considered economic solutions, in a bid to manage milk prices under market mechanism, Dung said.

Economists also agreed that the use of price ceilings for some products relating to health and nutrition for children should not be maintained over a long period.

Cao Si Kiem, chairman of Viet Nam Small-and-Medium Sized Enterprises, said price ceilings should be removed when the market has abundant supply.

Commenting on this idea, Tran Du Lich, a member of the National Assembly Economic Committee, said controlling milk prices has caused difficulties for the Government in creating policies. In addition, it has been unfair to businesses manufacturing at different scales.

The price ceilings were put in place in May 2014 under Decision No 1079/QD-BTC enacted by the ministry. At the end of the second quarter of 2015, the ministry issued the Decision No 758/QD-BTC to continue imposing the price ceiling through the end of this year.

Bruno Angelet, Ambassador, Head of Delegation of the European Union (EU) in Viet Nam, said Viet Nam has not been recognised as a market economy, since the country has reached one out of five economic factors. One of the remaining concerns was the Government's involvement in daily businesses activities. The policy to apply price ceilings on milk products for children less than six years old has also been one of the reasons the country is not seen as having a market economy.

In the launch of White Book 2016 in Ha Noi last week, the European Chamber of Commerce (EuroCham) said the price ceiling would create a warning about the investment environment in Viet Nam.

Eurocham added that a slight increase in milk prices in the middle-income segment has been seen since the policy was put in place, meaning that the policy has not benefited low-income people.

Eurocham further suggested that the Government be consistent in carrying out the Law on Prices to ensure a legal basis and realistic uses of the policy.

It added that the Government should not control prices on milk products in the middle and high end segments. Rather, the price stabilisation measure should be only applied in the low-income segment to ensure accessibility to milk products for low-income people.

Research about the milk market in 2015 was carried out by Nielsen in Ha Noi and HCM City, and indicated that milk products for children less than six years old were reduced 10 per cent and 9 per cent in terms of quantity and price, respectively against the previous year, after enacting the price ceiling.

Several milk businesses said their sales of powdered milk last year were also lower than the previous year.

Nielsen noted that milk prices in Viet Nam have been no higher than prices found in the middle group in Asia.

Its statistics in July 2015 revealed that average milk prices in the high end segment in Viet Nam were similar to those in other countries in the region, such as Malaysia, Thailand and Philippines.

VNS