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Commodity prices still quoted in US dollars because of loosened control
Why do producers and distributors still quote commodity prices in US dollars, ignoring the laws? It is because of the loosened control over the law enforcement.
The dollarisation exists in people’s thoughts
Automobile manufacturers, who have been criticized for quoting prices in dollars, said that they have to do that because they will incur losses if they quote prices in VND. As they have to pay in dollar to import car parts, they will suffer if the dollar prices increase.
To date, domestic automobile manufacturers still have been relying on car parts imports as the localization ratio of domestic cars remains very modest. Toyota Motor Vietnam, for example, has the localization ratio of between 17-37%, while Honda Vietnam’s ratio is 23%.
The price quoting in dollar in Vietnam has become so popular that very few people know that the quoting violates the laws. The price quoting in dollar has been applied to a wide range of products, from USBs, computer’s mouse, to consumer products like footwear, clothes and meals.
Why have businesses still been violating the laws inconsiderately? Dr. Vu Dinh Anh, Head of the Market Price Research Institute, said that Vietnam has loosened control over the law enforcement.
“The value of advertisement campaigns has been announced in dollar. The Government’s demand stimulus package has also been announced in dollars, US $1 billion, instead of VND 17 trillion,” Anh said.
The problem lies in the fact that all people and institutions, from state management agencies to normal people, prefer dollars. “We have set regulations, but we have forgotten that we have set the regulations,” Anh said.
He added that he cannot see any more countries in the world where the use of the dollar is so popular like in Vietnam. The duty-free shops in Thailand and Singapore also quote prices in the local currencies. China proves to be the typical example for applying strict regulations on using the local currency in making payments with heavy punishments set on violators.
Meanwhile, Dr. Vo Tri Thanh, Head of the International Economic Integration Studies Department under the Central Institute of Economic Management (CIEM), said that the dollarization has been sourced from the habit of consumers. A lot of people like talking about the value of commodities in dollars, considering this the confirmation about the high quality of the products.
The big impacts
Responding to the explanations by automobile manufacturers, Vo Van Quyen, Deputy Director of the Domestic Market Policies Department under the Ministry of Industry and Trade, said that producers cannot put all the risks from the exchange rate fluctuations on the burden of customers.
In principle, Quyen said manufacturers, in defining sale prices, always have to consider all the possible impacts of the market on the sale prices, including the influences in exchange rates.
Quyen also said that if Vietnamese consumers have to convert their VND into dollars to purchase commodities, it will badly affect the foreign currency market and damage the national monetary policies.
Meanwhile, in the talks with VietNamNet, Trieu Quang Thin, Head of the General Affairs Division under the Market Management Agency under the Ministry of Industry and Trade, said that the agency has been inspecting the general violations in price quotation, while the inspection over the price quotation in dollars has not been the focus.
Thin also said that the State Bank of Vietnam’s inspectors have to take responsibility for the violations in quoting prices in dollars.
Under the current regulations, the fines of between VND 5-12 million will be imposed on the violators in quoting prices in foreign currencies. The fine levels will be higher for repeaters.
Pham Huyen
vietnamnet
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