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Right to know

Released at: 15:19, 24/03/2014

Right to know

Consumers are entitled to receive full and transparent information on price rises in the dairy sector. Anh Ngoc reports.

by Anh Ngoc

Milk prices rose yet again just after the lunar new year holiday, consumers complain, with virtually no announcements coming from manufacturers. Several traders in Hanoi’s Hang Buom Street said they were notified prior to the holiday of a 7 per cent price increase to be applied from March 1, while others had been notified of 5 per cent increases starting from February 18. Ms Hong Anh, who owns a shop selling dairy products in the capital, said that some prices rose before the holiday, with distributors pointing to higher raw material costs.

According to information from one dairy company, since early this year the price for main raw materials (milk powder and butter oil) in global markets rose between 30 and 57 per cent compared to the same period last year. Skimmed milk powder, for example, is now $4,900 per ton against $3,650 previously, for a rise of 34 per cent year-on-year, fat milk powder stands at $5,155 per ton compared to $3,600 previously and 43 per cent higher than in the same period last year, and butter oil rose from $3,650 per ton to $5,746. Domestically, the purchasing price to farmers for raw milk is also higher, increasing by an average of 22.6 per cent in early 2014 compared to early in 2013.

While a few companies, such as Vinamilk, NutiFood, and Mead Johnson, were given permission by authorities to raise their prices by around 7 - 10 per cent, all producers increased their prices. Oddly, there were companies who announced price increases to shops in writing while others, contrary to what’s considered normal practice, simply told shops about the higher prices. Consumers were therefore caught completely unaware.

Transparency needed

There are tools available to authorities to manage the milk price, including Circular No 30 from the Ministry of Finance on price management and nutrition levels for children under 6 years of age that took effect from November 20 last year. But analysts say the circular only requires that enterprises register their product prices and provides little in the way of actual price control. Moreover, the Price Law allows milk manufacturers to increase their prices from 15 to 20 per cent, with at least 15 days between any increases. Milk companies can therefore increase prices lawfully twice every month.

A representative from the Price Management Department told local media recently that, since December, two companies had sought permission to raise their milk prices by 5 to 10 per cent. One asked to increase its prices by 5 to 9 per cent on eleven of its 27 items, but was told it needed to provide further information. Senior officials at the Ministry of Finance said that foreign milk companies seeking price increases and citing losses is simply unreasonable. The ministry ordered customs to make a “post-clearance check” on any transfer pricing abuse by one of the companies that sought permission to raise their prices. The results showed that there was no difference between the price of the parent company and the company in Vietnam. Other cases have revealed negligible differences in price, primarily due to freight and other costs.

Mr Tran Quang Thang, Director of the Ho Chi Minh Institute of Economics and Management, said that with over 90 million people Vietnam is a very attractive market for the more than 200 foreign milk importers. Consumers should be benefiting from the competition brought by so many companies being in the market, but milk remains expensive in the country.

According to Mr Nguyen Manh Hung, Vice President and General Secretary of the Standards and Consumer Protection Association, being fully informed of price increases is a consumer right under the Price Law. In the case of milk prices, however, this right is often not respected. The problem is determining what a “fair” increase is, and the reasons behind any increases must be transparent. Information needs to be fully provided to consumers so that they have the right to make a fully-informed choice. This may mean boycotting milk brands that use all sorts of justifications to increase their prices.

In order to better control price rises, Mr Thang said that Vietnam must be active in accessing alternative dairy sources, for example bolstering the supply and quality of local milk. “State-owned enterprises in the sector must stake out a greater presence in the market to break the monopoly,” he said.

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