Vietnam - Breaking a taboo - Fuel pricing

The public has long called for transparency in fuel pricing but their legitimate request has never been given a satisfactory answer.

Fuel traders will be quick to seek approval to hike prices when global supply becomes scarce. However, they seldom do the opposite unless they are compelled to do so by the authorities.

Most of the time, they complain about protracted losses but surprisingly never seek to pull out of the market. This is partly because they can rely on the State as a financier of their losses. Meanwhile, when they make a profit, they will put it deep in their pockets.

So many times the public, through the media, has requested fuel pricing be made transparent. However, even the Ministry of Finance has been unable to know the exact cost of fuels – all of which the country still imports from other countries. Major fuel traders like Petrolimex, PV Oil, Saigon Petro and Petimex have become untouchable strongholds and pulling these bastions down has turned out to be an impossible mission.

But at a seminar on fuel price management in Hanoi on Tuesday this week, the new finance minister, Vuong Dinh Hue, publicly broke this taboo by treading where none of his predecessors had ventured despite outright objections by some senior officials at the Ministry of Industry and Trade and leading fuel traders.

Deputy Minister of Industry and Trade Nguyen Cam Tu blasted the way the Ministry of Finance had been running the business of fuel price management in the past. Though not being included as a speaker at the seminar, Tu still took the floor grilling Hue’s ministry over what priority it takes: energy security or subsidy for the public, reports the online newspaper VnExpress.

“The current fuel price management system is like ‘Dead or alive, it doesn’t matter’,” Tu said. This has outraged leaders, media, people and even family, so his best tactic now is to listen without saying a word.

The Government’s policy, Tu said, is to ensure energy security but what the Ministry of Finance has done so far is to merely try to appease the public, instead of caring about supply and demand, profit and loss at fuel firms and fuel smuggling.

The resulting outcome is fuel companies have racked up huge losses and if this situation is not remedied soon, the fuel retail system will go bust, he warned.

Bui Ngoc Bao, general director of Petrolimex, which dominates 55-60% of the fuel market, echoed Tu’s view, saying his company has been dogged by losses, with the figure in the first eight months of this year amounting to VND1.8 trillion and possibly VND2 trillion in the first nine months.

According to both Tu and Bao, the losses had worsened since Finance Minister Hue decided to lower fuel prices on August 26 while world oil prices were picking up again after a brief fall.

Hue struck back, saying his decision was based on customs figures which showed Petrolimex was earning VND780 from each liter of gasoline sold, which did not include the minimum profit of VND300 per liter factored into the basic fuel cost. This is certainly denied by Petrolimex, though.

“I personally take responsibility for the fuel price cut decision,” Hue said. “We aren’t authoritative. Our ministry’s leadership is behind each of our decisions.”

The country’s former chief auditor said that with his 10 years’ experience in the State Audit of Vietnam agency, he knows the balance sheets of fuel companies by heart. He even told those fuel traders running at a loss to withdraw from the market if needed. “Even if Petrolimex cannot do business (under the current business conditions), we are willing to disband it and find a replacement. The State does not intimidate any one and no one should intimidate the State.”

The State spent a staggering VND4.6 trillion financing the losses faced by fuel traders in 2008, he said, but no one pays attention to this sacrifice while fuel firms are just complaining about losses without showing a sense of responsibility toward society.

Hue has even gone farther by letting his deputy Tran Van Hieu sign a decision setting up three teams to inspect prices of fuels that were imported from early this year to September 15 by four major fuel traders – Petrolimex, PV Oil, Saigon Petro and Petimex – which all control over 90% of the domestic market.

Vu Hoai Giang, a reader of Thanh Nien newspaper, throws support behind Hue’s move, saying the State should impose stricter controls on fuel prices. In another newspaper, Nguoi Lao Dong, reader Banh Duc Duy praises Hue’s tough stance on fuel monopolies. “Public approval of him will be high since he puts the interests of more than 80 million people (in the country) before those of monopolistic businesses,” said Duy.

The great support for Hue is understandable because people rarely see a government minister publicly showing his/her position on a specific pressing issue, says an editorial of Dan Tri newspaper, and his courage to break such a taboo is really worth appreciating.

By Pham Vu - The Saigon Times Daily

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