HANOI : Vietnam has violated its World Trade Organization commitments with a new price control law targeting overseas firms, a US business leader said Thursday, adding to foreign opposition to the decree.
The law on prices took effect on October 1 and allows state institutions to impose “stabilisation” measures if, for example, prices rise faster than production costs.
Vietnam, which began opening its economy 24 years ago, has denied that the measures would violate rules of the WTO, which it joined in 2007.
“We believe that price controls do not work and are counterproductive to future growth,” Hank Tomlinson, chairman of the American Chamber of Commerce (AmCham), told the Vietnam Business Forum.
“We are also concerned that implementation of the new law has focused primarily on imports from foreign companies — a clear violation of the letter and spirit of Vietnam's World Trade Organization (WTO) commitments.”
In a written brief, AmCham called the decree on price controls “a step back towards central planning that will add substantial costs and uncertainty to the private sector doing business here”.
The forum for local and foreign business leaders is held twice a year by the World Bank and Vietnam's Ministry of Planning and Investment.
The European Chamber of Commerce in Vietnam told the gathering that under the price-control decree, producers of coal, formula milk, oil, gasoline, steel and other goods have to declare their suggested retail and other prices, apparently adding to firms' administrative burden.
The Australian Chamber of Commerce also expressed “serious reservations” about measures including price controls.
The government is trying to control inflation, which reached 11.09 percent year-on-year in October, well above a targeted maximum of eight percent this year.
On Tuesday a government decree said price “stabilisation” was among the administration's top priorities for the rest of the year.
AmCham voiced concern that Vietnam lacks an effective inflation policy, and said the investment community had “credibility and confidence issues” with government economic and monetary policy.
“Vietnam's currency system has undermined confidence — both among local and foreign investors — and there is no anchoring of expectations on the value of the Vietnam dong,” Tomlinson said in his address.
From January 1 the government will impose a 10 percent tax on gold exports — up from the current rate of zero — a Ministry of Finance official said.
With the gold market closely linked to foreign exchange trade, the government is likely to temporarily achieve its goal of returning stability to financial and stock markets, Nguyen Hai Ha, chief analyst at Ho Chi Minh City-based MBCapital fund management, told Dow Jones Newswires on Thursday.
In Vietnam many people see dollars and gold as a safe haven against economic uncertainty.
On Wednesday the dong slumped to a record low in the free market, a day after Prime Minister Nguyen Tan Dung urged “strong measures” to stabilise foreign exchange rates and gold prices.
Channel News Asia