Focusing on Social Welfare to Ease Price-rising Pressures

The economy has generally made positive progress. Particularly, Vietnam successfully managed the foreign currency market, pulled the plug on illegal foreign exchange, adjusted prices of essential goods like electricity and petroleum in accordance with market mechanism principles. In the coming time, it is critical to enhance transparency, control prices and bring an end to speculative activities and unreasonable price hikes.

 

However, the economy still needs to address existing weaknesses like rising consumer price index (CPI) and trade deficit in the first four months.

 

I would like to reconfirm Prime Minister Nguyen Tan Dung’s request to ministries, agencies and localities that it is critical to cut unnecessary and ineffective projects to focus on important ones which need to be completed in 2011.

 

In the coming time, the Government will continue adopting strong measures to curb inflation, stabilise macro economy, ensure social security and reduce pressures of price hikes, especially on vulnerable people. The Government is considering adding three groups of people to the list of vulnerable groups, including Non-state workers, military personnel and students.

 

The consumer price index climbed 3.32 percent in April because costs increased when market-based pricing was applied to essential commodities like petroleum, electricity and coal. Most recently, coal price was added only 5 percent out of 50 percent recommended to match the market mechanism while new electricity price was raised more than 15 percent out of 40 percent needed to keep up with the market mechanism. Currently petroleum prices have also not been sufficiently added. Besides, pressures from rising exchange rates and minimum wages also drove up inflation. Authorities are intensifying inspections and examinations to control price movements. The market-based mechanism will continue to be applied to abovementioned commodities but it will be carried out with a good roadmap, not freely adjusted. However, to a certain extent, we have to accept new price levels to ensure accounting transparency.

 

The State Bank of Vietnam (SBV) has employed some necessary measures to control credit and total means of payment. But to avoid adverse impacts on the market, the State Bank still maintain open market operations, mainly for short-term liquidity targets.

 

As regards the ceiling deposit rate (currently 14 percent per annum), several credit institutions are reportedly found to breach the ceiling. Some experts have proposed loosening the ceiling rate but the SBV has no plan for this. The SBV will continue to track market developments to take proper steps.

 

Credit growth was over 5 percent in the first four months. If this pace is maintain throughout the year, the target of capping credit growth at below 20 percent is attainable. At the present time, there is no need to add more tightened monetary measures but existing measures need to be maintained to assess the upcoming three-month performances before taking new steps.

 

Preparatory works for opening rice export tenders will stretch from now till the end of September. Currently, companies are completing procedures to have their capacity, facilities and infrastructure verified qualified for rice export licensing. To date, no foreign investors have applied for rice export licenses.

 

Recently, it is reported that Hiep Phuoc power plant shut down power supply because the Electricity of Vietnam (EVN) got into arrears. This problem originated from last dry months when the EVN had to purchase electricity at high prices but sold at State-fixed prices, resulting to huge losses. The shutdown of Hiep Phuoc power plant is not resulted from the EVN’s debts but this facility is incurred a monthly loss of US$6 million. Operators of Hiep Phuoc power plant have sent documents to the Ministry of Industry and Trade and relevant bodies to claim that they could not operate at such a huge loss. The ministry has worked with the People's Committee of Ho Chi Minh City and Hiep Phuoc power plant to work out plans to sell electricity. The ministry will make a decision on this plant in the coming time.