Milking the market
By Son Nguyen in HCMC
Prices of dairy products on the local market go up again, again, and again, despite widespread complaints from consumers, despite multiple checks from market monitors, and despite repeated promises from State agencies to harness the galloping price fever. Over the past few days, distributors of several foreign dairy brands have revised up prices by some 7% to 9%, but this is just one rising stage of milk prices out of several price hikes since early this year. There is no place to hide for consumers as the final victims.
It is widely seen that prices of dairy products in Vietnam are far higher than elsewhere in Asia, but consumers cannot simply walk away in a market largely dominated by foreign dairy brands. They can only rely on relevant State agencies, though to no avail. And the price hike goes on.
Four or five times this year have dairy product makers raised prices to make the most of a market where legal tools have not yet been sufficiently available to regulate prices, according to local media.
In January 2010 alone, Abbott, Mead Johnson, and FrieslandCampina Vietnam increased prices of their products by 7% to 9%, according to Vneconomy. Others followed suit, when Vinamilk in February raised prices by 8%, and then Dumex, Meiji and Milex in March also revised up prices by 8% to 10%. And now, given the latest price hike, milk prices in the country this year have leapt by 20%.
Regular price hikes in recent times have pushed prices of dairy products in Vietnam to sky-high levels compared to neighboring countries.
A survey conducted by a Vietnamese trade attaché abroad shows that prices of Dugro products as a brand of Dumex in Vietnam in the middle of 2009 were 100% to 150% higher than those in Thailand, Indonesia and Malaysia although import tariffs in Vietnam are equal or lower, says Tuoi Tre.
On Nguoi Lao Dong, Vu Thi Bach Nga, head of the Consumers Protection Commission under the Vietnam Competition Authority, notes that while Vietnam’s import tariffs on milk products are under 10%, much below Thailand’s tariffs, prices of the same products in Vietnam are 20% to 60%, or even 100% higher than those in Thailand. Meanwhile, inspectors of the Finance Ministry in late 2009 pointed out that imported milk products on the local market were twice the real import cost, says Thanh Nien. The Vietnam Competition Authority under the Ministry of Industry and Trade has ascertained that local milk prices are several times higher than prices of the same products on other markets, also according to the paper.
On the part of dairy makers, several reasons have been given to explain for the price rise. These include the depreciation of Vietnam dong against the U.S. dollar, and rising prices of input materials, according to Nguoi Lao Dong.
However, the Ministry of Industry and Trade rejects the explanation, pointing out that material prices are falling while the forex rate has not fluctuated that much. In a report, the ministry says the price of skim milk on the global market is between US$2,850 and US$3,100 a ton now, or a fall of US$350-450 compared to last month, while full-cream milk prices have also fallen by US$100 to between US$3,200 and US$3,500 per ton.
The real fact behind rising prices is the rising demand. Tuoi Tre says milk imports as of mid-July hit US$395 million compared to US$270 million in the first seven months last year. The value of milk consumption in Vietnam increased by 18% annually in the 2005-09 period, which explains why dairy makers constantly revise up prices in the full awareness of relevant State agencies.
State agencies, especially the competition regulator, admit that they do not have the necessary legal vehicles to arrest the price fever. In its report, the bureau also says it cannot uncover any fraud so as to weigh a punitive measure, says Thanh Nien.
Dairy products belong to the list of commodities whose prices are put under State control. However, prevailing regulations provide that only those traders in which the State holds a majority stake will have to register prices, while most dairy product traders now are private concerns. A new legal document is being compiled to patch up this loophole, according to Tuoi Tre.
Several newspapers call for tougher actions from the Government to restore order on the dairy market.
Tuoi Tre urges the State to resort to legal tools, especially the Competition Law, to dictate order on the dairy market, saying it is useless to call on enterprises to show their social responsibility.
Thanh Nien says there are signs of dairy products makers conspiring with one another to fix prices, which constitute infringement of the Competition Law.
Sai Gon Tiep Thi refers to a fresh case under which 19 non-life insurers have been penalized for conspiring with one another to fix service prices and eliminate competition, saying the competition bureau needs to probe the case of dairy makers for the same purpose. “There should be a probe to see if there exists a concealed agreement among traders and importers on raising milk prices,” says the paper.
Prices should be market-driven, but market forces cannot be used as an excuse for any fishy price manipulation, especially in cases of abnormal market signs like exceptionally high profit margins, says Thanh Nien. Stricter rules should apply to prevent dairy makers from continuing to milk an undeveloped dairy market.
The Saigon Times Daily