What measures should be taken to keep the CPI in check? Dr Nguyen Minh Phong, who is head of the Economic Research Department under the Hanoi Institute for Economic and Social Research and Development granted an exclusive interview to a reporter from Radio the Voice of Vietnam (VOV).

VOV: The Government has taken many measures to curb inflation but the CPI is still increasing. In your opinion, what is the main cause of this?

Mr Phong: Arising CPI is a great challenge to the Government in the context of complicated developments throughout the world. Therefore, it is necessary to take flexible measures to curb the inflation rate.

In an effort to curb inflation, the Government has recently made adjustments to major policies, aimed at tightening monetary policies. In addition, it has adopted measures to ensure social security and prevent price hikes caused by speculation and monopoly.

However, there remain shortcomings in improving the competitive edge in the market and controlling the costs of monopolies. In other countries, when a national economy encounters difficulties, enterprises will reduce costs and streamline staff to increase their efficiency.  However, most of Vietnamese enterprises, especially monopolies have not made such reforms.

In addition, the government’s solutions to curb inflation have not been carried out effectively in many localities.

VOV: Regarding solutions to reduce inefficient public investment, according to statistics from the relevant ministries and local agencies over the past few months, the monies saved by cutting the amount of projects in operation, have not lived up to the government’s expectations. In your opinion, what measures should be taken so that localities can implement the government’s instructions correctly in order to curb inflation?

Mr Phong: As you mentioned, the government’s solutions are only policies and many localities have not implemented them effectively. It’s still not clear about how to identify ineffective investments, especially ineffective projects. The government should provide clear guidelines in the future. For example, it should consider the implementation of investment projects carefully to sort out ineffective ones and put pressure on their managers to keep them running with efficiency.

VOV: Among the Government’s eight key solutions to combat inflation, which should be given top priority?

Mr Phong: First, we should curb monetary inflation. It is essential to intensify measures to reduce the volume of redundant money in circulation that causes inflation. However, this does not mean that we limit all investment sources injected into business operations or expansions. Export investments and infrastructure projects, which are nearly completed, should not be postponed in order to avoid more outlays. Second, we have to import more goods, open storage depots and boost distribution channels in order to overcome the shortage of goods due to epidemics. We also need to ensure a balance between supply and demand and control the rising prices of food and foodstuffs, which account for up to three quarters of the CPI table.

VOV: Businesses and the public are very concerned about price fluctuations after June 30 when the Government’s decision to keep taps on the prices of essential commodities is no longer valid. What do you think about this?

Mr Phong: Finance Minister Vu Van Ninh believes that the Government will continue to select certain goods to limit price rises according to the local market.

I think, we should both float prices and increase competitiveness so that the market can play an active role in adjusting and stabilizing market prices.

After a spike in May, prices are likely to surge in June. However, the reasons behind the price rises include speculation by sales agents and commercial businesses. Therefore, apart from its current policies, the Government should introduce policies to monitor the local market and prevent price hikes caused by speculation.

VOV: In recent months, the Government has had to subsidy the losses while consumers still face price rises. What should the Government do to cope with this?

Mr Phong: This is attributed to two problems. First, through which channel State subsidies are provided and how pricing mechanisms are managed. Second, how distribution networks, particularly sales agents are able to manage prices. Hence, it is necessary to examine and adjust allocations from the State budget and ensure that retail distribution networks operate in accordance with international laws.