VietNamNet Bridge – Deputy Minister of Industry and Trade Nguyen Cam Tu talks about the petrol import tax cut and the petrol price mechanism.
However, you have another viewpoint if you are a state management agency. The state budget needs more money to offset the money it paid before to enterprises to help stabilise prices. In this case, I think we need to have a balance of interests.
Enterprises say that the 10% petrol import tax is not high enough for them to cut retail prices. Can you think of any other measure that would allow consumers to be able to enjoy lower prices?
Enterprises have lately asked for approval to raise retail petrol prices, saying that they have incurred losses. Some enterprises have asked for several thousand VND per litre increases, others have asked for more modest increases.
The ministries of industry and trade and finance sat together to discuss the petrol price, while considering the benefits of all groups in the society. We even had to report to the prime minister about this.
Our standpoint is that we should not let enterprises raise retail prices at this moment, and that tax cuts should be made. A petrol price increase at this moment would contradict the efforts by the government to prevent recession.
The prime minister has agreed with our viewpoint, and as you have seen, the petrol import tax has been lowered. The tax cut will help enterprises reduce losses and pave the way for retail price reductions as well. However, the retail petrol price decrease will still depend on the expenses of every enterprise.
Can we calculate how high the petrol price will be if we consider the crude oil price on the international market?
In principle, there exists a link between crude oil and petrol prices. However, the link has changed unexpectedly, not following any laws.
Until mid 2007, we still could calculate the price of petrol products, but we cannot now. Meanwhile, every enterprise has its own expenses. Big enterprises with wide distribution sales agent networks and big storage depots have lower production costs than smaller enterprises.
We have been implementing the market mechanism in petrol pricing, and experts say that we need to follow all the laws of the market mechanism and avoid administrative orders. What do you think about that?
We need to follow a very strict roadmap in the marketisation of a sensitive product like petrol. I think we still need more time before we follow all the laws of the market mechanism. At that time, enterprises will have the right to define sale prices without having to ask for permission from any state management agency.
We have just experienced 20 years of doi moi (renovation), quite a short period compared to the hundreds of years other countries have spent forming market economies.
Petrolimex now holds 60% of the market share. Do you think that this makes the likelihood of a competitive market in the future unfeasible?
Big fish can also be caught in a shoal. Large scale does not mean more effective operation. The big fish have advantages when operating in normal conditions, but may also face big difficulties in unusual economic conditions. The role of the state is to create a healthy competitive environment for businesses.