Vietnam moves ceiling price mechanism for dairy products

--FILE--People visit the stand of Fonterra Cooperative Group Ltd during a dairy products exhibition in Beijing, China, 12 September 2013. Global dairy cooperative Fonterra will buy a 20-percent stake in Chinese dairy giant Beingmate to increase its access to China's infant milk market, Beingmate has announced. The Shenzhen-listed firm said on Monday (8 September 2014) evening that Fonterra will invest 3.68 billion yuan (599 million U.S. dollars) to become Beingmate's major shareholder. After the share transfer, Beingmate and Fonterra will build a joint-venture milk powder factory in Victoria, Australia. Beingmate will invest more than 185 million U.S. dollars in the factory, in which it will have a 51-percent ownership, it said.

The Government removed price ceilings on dairy products for children under six from April 1, 2017 according to the Ministry of Industry and Trade’s proposal.

The Government has direct the ministry, other ministries and related agencies to manage prices of dairy products for children under six according to the Law on Price and other legal documents. They were also told to enhance State management in price control, anti-speculation and monopoly controls.

After three years of use, the mechanism had many limitations so abolishing the mechanism was necessary and suitable with price management measures in a market economy.

Experts said after removing the ceiling price mechanism, the State should encourage competition and a healthy business environment. They also suggested the State regulate the price if a firm gains a monopoly of dairy products or if dairy firms violate the Law on Competition.

The most important task of the price management agency should be to follow the development of factors used to calculate the selling price. The agency should manage the prices of dairy products according to market rules, the experts said.

Price ceilings were put in place in May 2014 by the Ministry of Finance. At the end of the second quarter of 2015, the ministry extended the price ceiling to March 1, 2017.

The Ministry of Finance’s Pricing Management Department said after stabilising milk prices, the prices dropped by between 0.1 per cent and 34 per cent for milk products for under six year-olds.

Experts said in the short term, buyers have enjoyed lower prices thanks to the price ceiling. But in the mid and long term, the mechanism would hinder the development of milk firms and reduce competition.

They said the price ceiling for dairy products of children under six would not be for the long term because Việt Nam signed free trade agreements that forbade it from using price ceilings to manage the market.

At present, 877 milk products for children under six have their prices listed on the websites of the Finance Ministry and local finance departments across the nation.