VietNamNet Bridge – The government has agreed to set up ceiling prices on formula products in an effort to control the formula market, in which prices have been uncontrollably escalating. But analysts don’t think this will help.

The Ministry of Finance (MOF) has found law violations on the part of five companies and forced them to pay VND10.2 billion in tax arrears.

MOF, in a press release just before the long 5-day holiday, announced that its two month-old proposal on setting up ceiling prices to control the formula market has received governmental approval.

However, MOF did not say exactly when the ceiling price mechanism would be applied nor how ceiling prices are to be calculated. It only said that the mechanism will be put into effect shortly after the government releases its official decision.

As such, when the decision takes effect, the manufacturers and distributors of formula products for children aged under six years, will have to register their selling prices with the appropriate agencies and must not sell at the prices higher than the ceiling prices.

Also according to MOF, the ministry has assigned relevant departments to compile the legal documents on guiding the implementation of the Pricing Law to submit to the ministry’s heads for approval.

Commenting about the decision, a representative of a foreign invested dairy firm said on Thoi bao Kinh te Saigon that MOF has resorted to an extreme measure, one which will create hardships for enterprises.

“I cannot imagine how MOF can calculate the ceiling prices for such a variety of formula products,” he said.

Representatives of other dairy firms have declined to comment on the decision. They only said that they will comply with the instructions of the watchdog agency.

Meanwhile, Dr Ngo Tri Long, a well-known pricing expert, has warned that it will be very difficult to impose ceiling prices on formula products. The MOF will have to define ceiling prices for hundreds of formula products.

The news about the ceiling price mechanism was released on the same day that MOF announced it had found violations committed by five dairy firms after a recent inspection tour. The companies either did not make accurate declarations about their selling prices, adjusted the selling prices many times during short periods, or spent more than was permitted on marketing and ad campaigns.

Four of the five were found as to have evaded taxes, and have been forced to pay arrears of VND10.2 billion.

The five include Vinamilk, the Vietnamese leading dairy producer, 3A Nutrition, Nestle Vietnam, Friesland Campina Vietnam and Mead Johnson Nutrition Vietnam. The big five are believed to control 90 percent of the formula market in Vietnam. Their products have been distributed through sales agents under the mode of definitive purchase.

Of these, three import finished products to sell domestically and two import material for domestic production.

VietNamNet/TBKTSG