Ministry of Finance keeps firm grip on milk prices

Ministry of Finance to place price ceiling on 25 formula milk products

>> MoF takes action to halt rising milk prices

The high prices for imported milk products have been a hot-button issue recently. The Ministry of Finance and Ministry of Health exchanged blame over unmanageable hikes in prices but have come up with no solutions. On May 21, the Ministry of Finance decided to apply a policy of price stabilisation which includes 25 products produced by five enterprises. The decision will take effect beginning June 1.

Currently, the highest price of all these products is for the 1.7kg container of Similac Gain Plus, sold for VND692,000 (USD33). The deputy head of the Ministry of Finance, Tran Van Hieu, said that the companies must register their prices within the next six months.

Companies producing other dairy products must also submit their prices to Ministry of Finance's Price Management Department for approval. According to the Ministry of Finance, retail ceiling prices must not exceed 15% of wholesale prices.

After the news was released, a representative from a dairy company said that applying price ceilings goes against the free market and will hurt competition, adding that companies affected may either withdraw from the market or find ways to evade the law.

The head attorney for one of the foreign milk companies said that the current price ceilings are already 18% to 30% lower than many companies' prices. He also said the Ministry of Finance's calculation for pricing does not include the factor of competition and was not in accordance with pricing law.

Another representative agreed, saying that the calculation for price ceilings must be based on domestic and world prices as well as demand. "The Ministry of Finance only used certain factors to calculate what prices should be. This is against the law and international standards," he said.

However, Nguyen Trong Nghia, head of the Ministry of Finance's legal affairs department, said Vietnam's commitments to the WTO do not ban domestic prices controls as long as the controls are evenly applied to both domestic and foreign companies. Inspections by the Ministry of Finance also have concluded that producers would still be able to earn profits.