Economists slam measly gasoline price cut, import tax | Look At Vietnam

Economists slam measly gasoline price cut, import tax 

May 24, 2012

A worker pumps gasoline to a motorcycle at a gas station in Hanoi. The pump price of A92 gasoline was reduced by VND500 per liter to VND23,300 (US$1.1) on May 9.
Economists have criticized the recent fuel price cuts and the reimposition of the import duty on petroleum products as coming too little, too late.
The pump price of A92 gasoline was reduced by VND500 per liter to VND23,300 (US$1.1) on May 9, and diesel by VND300 to VND21,600.
Import duties, which were scrapped on March 8, have been reinstated at 2 percent on gasoline and diesel and 3 percent on kerosene and fuel oil.
Gasoline prices increased twice this year, in March and April, by a total of VND3,000.
Nguyen Minh Phong of the Hanoi Socioeconomic Research Institute said the reduction came in response to public pressure after a VND900 increase on April 20. Petroleum companies were only losing VND500 per liter at that time.
He said the Ministry of Finance, instead of raising the import tax, should have ordered petroleum companies to make deeper cuts in gasoline prices.
Many firms are having difficulty merely surviving due to a slump in demand and other problems, and could do with bigger price cuts to help reduce costs, he explained.
The government’s tax breaks won’t suffice, he said, referring to a tax relief package of VND29 trillion ($1.4 billion).
Le Dang Doanh, an economist, said: “The meager price cut and import tax increase would make people lose faith (in the government’s policies). Restoring public confidence is much more important than collecting gasoline import taxes.”
The fuel price cuts should have been bigger because global prices have fallen sharply. According to the Vietnam National Petroleum Group, also known as Petrolimex, the gasoline price in Singapore fell to $121.6 per barrel on May 9 from $128.1 on April 20.
Nguyen Tien Thoa, head of the Ministry of Finance’s Price Control Department, said the interests of fuel traders, consumers, and the government come under consideration whenever gasoline prices are adjusted.
According to the tax framework issued by the department, duties on gasoline and diesel can be raised to a maximum of 20 percent and 15 percent.
The tax revenues can be used to stabilize gasoline prices when global prices rise, Thoa said. “The price is forecast to rise this winter when demand increases.”
Thoa said gasoline accounts for 3.2 percent of the basket of goods and services used to calculate the consumer price index. The VND500 price cut would help bring down the CPI by 0.24 percentage point, he said.
But most industries said the reduction is too meager for them to cut their own prices.
Nguyen Manh Hung, chairman of the Vietnam Automobile Transport Association, said: “It is an insignificant reduction. So, transport firms cannot cut their prices.”
Pham Xuan Bang, a Hanoi taxi driver, said: “We (taxi drivers) did not expect the small reduction. It came just to make sure people are not shocked by future hikes.”
Policy issues
Ngo Tri Long, former deputy head of the Market and Price Research Institute, said retail prices are adjusted based on average fuel costs over 30 days.
“The period is too long, failing to precisely reflect changes in the world market. We need to shorten the period, maybe to a week.”
Thoa said: “We are aware of the problems in calculating fuel prices and plan to fix them.”
He said shortening the period to 10 or 20 days will be considered.
A new policy limiting the commissions fuel companies pay retailers could also be introduced, he said, adding that excessive commissions are paid in the hope of expanding market share.
The average price during the 30-day period ending May 8 was VND828 per liter lower than the retail price on that day, he revealed.
Some analysts said the fuel price adjustments are not timely or based on market forces.
In 2009 the government passed a decree stipulating that fuel prices would be based on the market.
Under the decree, businesses are allowed to adjust retail prices and only have to inform the Ministries of Finance and Industry and Trade about it.
But due to spiralling inflation, the government invoked a clause in the decree which says “if the price hike can affect socioeconomic development, the government will adopt measures to stabilize fuel prices” to repeatedly intervene.
With the government only increasing fuel prices when it is no longer able to keep them unchanged, the hikes have come in massive chunks instead of incremental ones, the analysts pointed out.
But other analysts said that, since the gasoline market is monopolistic – with Petrolimex holding some 60 percent of the market – the government should regulate the prices.
The country’s sole refinery Dung Quat contributes too little to the market to help the government stabilize prices when world prices are volatile.
The 6.5-million-ton-per-year refinery, located in the central province of Quang Ngai, meets only 30 percent of the domestic demand. It is seeking to sell a 49 percent stake to foreign investors to raise funds to expand capacity by 54 percent to 10 million tons a year.
This would help it to meet 40-45 percent of demand, according to the Binh Son Refining and Petrochemical Co, which runs the $2.2-billion refinery.
Even with Dung Quat running at full capacity, Vietnam imported 10.65 million tons of oil products in 2011, according to the General Statistics Office.

By Ngan Anh, Thanh Nien News (The story can be found in the May 18th issue of our print edition, Vietweek) 

Tank truck overturned, hundreds loot gasoline (video) | Look At Vietnam

Tank truck overturned, hundreds loot gasoline (video)

May 9, 2012

LookAtVietnam – At noon on May 7, a tank truck carrying 25,000 liters of gasoline from Ha Tinh to Quang Binh in central Vietnam was upturned on National Highway 1A. Gasoline spilled all over the road.

After receiving 25,000l of gasoline at the Vung Ang gasoline warehouse in Ha Tinh province, driver Bui Xuan Cuong, 37, drove the car to Quang Binh province.
When he avoided a car running in the opposite direction on National Highway 1A in Ky Anh district of Ha Tinh province, the driver lost control. The tank truck was overturned and slid for around 30 meters. Gasoline spilled over the road.
Being afraid of explosion, hundreds of local residents took buckets and basins with them to scoop gasoline far from the tank truck. But when police officers used buckets to scoop gasoline from the tank to prevent fire and explosion, local people rushed forward to loot gasoline from the tank, regardless of the prevention of the truck driver and police officers.
Until noon, when gasoline in the tank was nearly exhausted, plus scorching hot, local people left the scene.

PV

Vietnam unsure how to shield poor from gas prices

Vietnam's government said Wednesday it would take steps to cushion the impact of a drastic fuel price hike on the country's poor, but released few details of what the steps might include.
On Monday, the government raised the retail price of gasoline 31 per cent, to 19,000 dong (1.13 dollars) per liter. The price rises are painful for poor people dependent on gasoline use, such as taxi drivers and fishermen.
Vietnamese press reported Wednesday that fishermen hurt by higher fuel prices would soon receive additional fuel subsidies from the government. But Deputy Agriculture Minister Nguyen Viet Thang told Deutsche Presse-Agentur, no decision had been made yet.
"We are waiting for a proposal from the Ministry of Finance," Thang said. "I think the rise in the fuel subsidies for the fishermen should be equivalent to the rise of 31 per cent in the price of fuel."
Vietnam's poor are already bearing the brunt of the country's galloping inflation, which topped 27 per cent in the year through June.
To curb inflation, the government tightened credit rules for banks, raised the prime interest rate to 14 per cent, and cut or delayed tens of millions of dollars in spending by government and state-owned enterprises. In March, it froze the prices of key commodities, including gasoline.
The efforts seemed to bear fruit in June, as the monthly inflation rate dropped to 2.2 per cent, from 3.9 per cent in May. But Monday's fuel price hike will filter through into higher inflation this summer, said the International Monetary Fund's Hanoi representative, Benedict Bingham.
"I think they would have been far better off not to have made the commitment back in March to freeze prices, and to let the increase in oil prices continue to feed through in a gradual way," said Bingham. "That would have given households and businesses a better chance to adapt to the situation, rather than being faced with a large shock."
Bingham said the decision to raise prices now "was the right one, but given the magnitude of the adjustment it is important that they put in place some measures to cushion the impact of the fuel price hikes on the poor."
Figures released Wednesday by the Ministry of Planning and Investment estimated the inflation rate through the end of 2008 at 25 per cent, but it was not clear whether gasoline price hikes had been factored in.
The ministry forecast growth of 7.5 per cent in the second half of the year, but with a dramatic trade deficit of 19 billion dollars, over 21 per cent of projected GDP. Vietnam's trade deficit is financed by inflows of billions of dollars in direct foreign investment, as manufacturers confident of future economic growth expand their operations.
The fuel price hikes and high expected inflation have contributed to falling prices on Vietnam's stock exchange. The VNIndex fell 2.8 per cent Wednesday, its fourth straight day of losses.
But Peter Ryder, CEO of Indochina Capital, said the falling market was mainly due to profit taking after a month-long rally that raised the VNIndex some 33 per cent, and not to the fuel price hike.
"People were pissed because the government came out and said a few weeks ago they weren't going to raise prices, and then they went ahead and did it," Ryder said.
"But I'd give kudos to the government for maybe recognizing that the market was going to trade off anyway, so why not throw (higher gas p

Flag-waving questions beg patriot's reply | courier-journal |

As America gears up for its Fourth of July birthday party without all the birthright optimism of its past, much less being able to afford the ice cream and cake, I'm thinking about the wars in Afghanistan and Iraq, the presidential race -- and the price of gasoline.
Today's flag-waving questions for all automatic patriots:
Unless you have family or friends in the military, what kind of real sacrifices have you made to support the men and women fighting these wars -- as in at least being willing to pay for them?
If it turns out our presence in oil-rich Iraq will help feed America's selfish energy needs, does that help justify its cost in tax dollars and lives?
For those with mixed feelings about the war, is there now a tiny part of you saying, yes, we now need to do whatever it takes to boost our steadily slipping standard of living?
Was this war, as many have charged, really about access to oil all along? Since there were no weapons of mass destruction, and democracy in Iraq remains an ethnic-charged illusion, are you willing to rationalize our permanent presence there if it will help keep gasoline under $5 a gallon?
With four giant oil companies -- Exxon Mobil, Shell, Total and BP -- hovering over no-bid Iraqi oil concessions, have all those soldiers died in part to help keep oil company profits at obscenely high levels?
Just something to think about as you drive to the lake.
The presidential race of late has become bogged down in military rhetoric and symbolism -- but what else is new?
The symbolism thing comes way too easily. Barack Obama never served in the military -- the great majority of Americans do not these days -- but John Wayne never did, either. So which one would be your first choice to lead the country into war -- and why?
Gen. Wesley Clark, an Obama supporter who was seriously wounded and won a Silver Star while a company commander in Vietnam, took some verbal shots at John McCain, who was a tortured POW in Vietnam for 5½ years, by saying, "I don't think riding in a fighter plane and getting shot down is a qualification to be president."
Nobody wins at that level of argument -- and Obama backed away from it. But if military record and experience is so important, how did we end up with our present commander in chief?
He used family influence to get into the Air National Guard during a time when that mostly insured not seeing any combat -- and ended up fighting the Vietnam War in Alabama.
Granted, he is now the lamest of ducks, but where was all the military argument -- unless you consider "swiftboating" military patriotism -- the last time around?
Just something to think about on the way to see the kids.
Which brings us to the cost of gasoline to get there. The news headline that most brought that chicken home to roost went, "Energy experts puzzled over oil prices."
They are not alone. From what I've read, the nation's demand is down just a tad, the availability of oil is steady -- and the price at the pump jumps 20 cents a day.
My fully unscientific theory is that we are being had by oil companies -- who will again reap enormous profits -- cynical politics, market manipulators and greed.
Just something to think about while driving to the Fourth of July parade.
Bob Hill's column appears on Tuesdays, Thursdays and Saturdays. Reach him at (502) 582-4646 or bhill@courier-journal.com. Comment on this column, and read his blog and previous columns, at http://www.courier-journal.com/bobhill

Flag-waving questions beg patriot's reply courier-journal The Courier-Journal