The Ministry of Finance (MoF) plans to maintain the current import tariff of 5 percent on medical milk, lower the rates from 10 to 7 percent on normal types and only raise the rates from 3 to 5 percent on unsweetened powered milk, mostly raw materials for processing. The 2-percent increase is much lower than before and the rates that Vietnam has committed itself to the World Trade Organisation (WTO)

A positive move
In a short interview granted to VOVNews on July 22, Nguyen Dang Vang, vice chairman of the National Assembly Committee for Science, Technology and Environment, said that the 2-percent increase means almost nothing to milk companies when compared with recent sharp reductions in the prices of imported milk. Untreated imported milk has dropped by 2.5 times in value from US$5,300 to around US$2,000 per tonne. Therefore, he said, the ministry’s adjustments will not cause a negative impact on the domestic dairy market in the long term.

Dr Do Kim Tuyen, an official from the Ministry of Agriculture and Rural Development, echoed Mr Vang, saying that the import tariffs should be adjusted in line with Vietnam’s commitments to the WTO. Accordingly, the tariff rates on some commodities, including milk, will range between 10-30 percent from now until 2012.

“The current rates of 3-5 and 7 percent imposed on a number of imported dairy products are too low,” said Dr Tuyen.

However, Ho Tat Thang, vice president of the Vietnam Consumers Association, said that his organisation has proposed that the Ministry of Finance delay its plans and take into account recent fluctuations in the market. He was afraid that dairy companies will make use of the higher import tariffs to hike prices.

“The fact is that customers will be affected by fluctuations in the prices of many commodities, including milk, which often go up after import tariffs are raised,” said Mr Thang.

He suggested that the MoF tighten up its management of dairy products on the market rather than raising tariffs at the moment. It should raise the tariff rates only when milk prices drop to reasonable levels.

Huge profits
According to the Vietnam Milk Company (Vinamilk), the company is striving to make a post-tax profit of VND1,490 billion this year. However, it has made VND1,019 billion worth of net profits in the past six months, making up more than 20 percent of its total revenue and up 1.5 times against the same period last year. If a consumer purchased a dairy product valued at VND20,000, Vinamilk earned a profit of VND4,000 on average.

Consumers are paying as much as 1.5 times more than a year ago, said Mr Vang, citing the fact that in contrast to sharp reductions in the price of imported milk, domestic retail milk prices have shot up significantly.

This means the root cause does not lie in tax adjustments. Milk prices will not be affected by any tariff adjustments if we control the market well, said Mr Tuyen.  

He attributed the soaring prices of milk in Vietnam to high transport, warehouse and advertising costs plus fluctuations in the exchange rate between the Vietnamese currency and the US dollar.

Mr Vang said that the adjustments will make it easier for the MoF to manage the dairy market. However, he warned that opportunists could make use of the adjustments to raise domestic retail milk prices.

“The MoF should make clear in its legislation that such higher tariffs do not affect finished dairy products imported into Vietnam,” said Mr Vang.

He also asked the media to provide the right information about the MoF’s plan to ensure that consumers will not be out of pocket again.