Illustrative image (Source: congan.com.vn)
 
Hanoi (VNA) - The European Chamber of Commerce in Vietnam’s Nutritional Foods Group (NFG) recommended that the Government remove the price ceiling on milk products for children under six years.

The NFG suggested that the State allows the return to market-based pricing. This proposal is a part of the 2017 White Book released in Hanoi last week.

Under decisions 1079/QD-BTC and 857/QD-BTC issued by the finance ministry in 2014 and 2015, respectively, a price ceiling was imposed on milk products for children under six years of age from June 1, 2014, to December 31, 2016.

The NFG has proposed that the Government refrain from controlling the prices of these products by extending the existing price ceiling or through additional controls. The State’s intervention in the business activities of enterprises through administrative measures such as price ceiling run counter to its aspiration to achieve a full market economy, it said.

“We are concerned that such measures not only impact the business performance of enterprises in the short- to medium-term, but also affect long-term trade and investment prospects in general. The Government’s interference in the business decisions of enterprises sends a negative signal to investors that Vietnam’s investment climate is not genuinely stable, open or integrated,” the NFG said.

As per data released by market research company AC Nielsen in July 2015, the market for formula milk for children under six shrunk by 11 percent in the 12 months after Decision 1079 was implemented. “This might have been caused by the negative psychological impact the price ceiling had on consumer behaviour. Furthermore, up to 60 percent of the public report that they have experienced moderate to no benefit from the State’s price intervention measures,” the AC Nielsen report said.

According to the NFG, since the price ceiling regulation was put in place in 2014, many costs have increased, such as Vietnam’s dong exchange rate and the cost of electricity and labour, all of which impact milk manufacturers and distributors. In this context, one of the biggest international milk companies decided to exit the Vietnamese market in 2016.

The group said the Government should clarify the objectives and the intended beneficiaries of its price control measures. When necessary, it should impose price stabilisation measures for a restricted period of time and only on essential products that are needed to ‘meet the basic needs of the people’, as stipulated in the Law on Pricing.

“With regard to the milk formula market, the Government should not control the prices of products in the mid-tier and premium segments. It should impose price stabilisation measures only on the economy segment to improve low-income consumers’ access to these products,” the NFG said.

The State must consider lowering price-composing factors such as import tariffs (5 percent for imports from ASEAN and 10 percent for other countries, which is higher than in other countries in the region) and value added tax rates to reduce the price of milk formula products for children under six years of age, it advised.

There are an estimated 888 milk products across the premium, mid-tier and economy segments, offering an incredibly diverse selection of products to meet the diverse needs of Vietnamese consumers.-VNA