The paradox of "unsold" price-stabilized goods

The Hanoi City Price Stabilization Program (BOG) has been implemented for four years, from 2008 to 2011, with a budget of VND475 billion in 2011 alone. This program is expected to be a “special remedy” in the context of continuously escalating prices.

Price stabilization areas are not of interest to many consumers.

However, seriously looking back at the past journey and especially what was accomplished in 2011 (from May 2011 to the end of April 2012), this very meaningful program still has some points that cause concern.
Consumption of stable goods... "not stable"

Going to any of the 653 BOG points of sale across the city, from the points of sale in markets, industrial parks or supermarkets, one can see that price-stabilized goods are not welcomed by many consumers. Even though businesses have signs to identify them and publicly list their prices, BOG goods are still modestly displayed, hidden among countless other goods.

Ms. Le Thi Vui, Vinh Phuc ward, Ba Dinh district, said: "I often go to both markets and supermarkets but I don't pay much attention to BOG goods, because these items are not much cheaper than the market, sometimes even higher." And it is not difficult to understand why recently, many opinions have said that the prices of stabilized goods do not follow the market price and are not in line with the city's policy of selling 10% lower than the market price.

The fact that two companies participating in the city's BOG program in 2011: Hanoi Agricultural Investment and Development One Member Co., Ltd. has inventory of stabilized goods up to now at 4 billion VND; Ha Tay 2-9 Co., Ltd. has inventory (both stabilized goods and other goods) up to 25 billion VND has partly proven the effectiveness of the stabilization program. Although, among the 15 enterprises participating in this program, not all units have such large inventories, there are certainly many enterprises with backlogs of goods. Because of the large amount of inventory, some enterprises selling BOG goods have not recovered their capital in time, so they have been late in paying the Hanoi city budget according to regulations.

Explaining this issue, the Hanoi Department of Industry and Trade said that businesses have a large backlog of goods due to the difficult socio-economic situation, low demand for goods, reduced purchasing power, and people tightening spending, causing businesses to reduce their purchases and sales. But that is only an objective factor. Looking at the reality, Mr. Nguyen Tien Vuong, Deputy General Director of Hanoi Trade Corporation and Ms. Vu Thi Hau, Deputy General Director of Nhat Nam Joint Stock Company said: Because the units have not carefully calculated the consumption capacity and how to organize sales, a large amount of goods are backlogged.

"Sinking" in the market

As someone who has been involved in Hanoi's trade sector for decades, Mr. Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, affirmed: "Hanoi's BOG program was not successful due to poor organization and management."

According to Mr. Phu, the factor leading to the failure of the BOG program is the return to the non-market economy period, which means that the program has created a subsidy mechanism, a request-grant mechanism between the units participating in price stabilization and the units not participating. Moreover, the city's price management of stabilized goods is very rigid and inflexible because when prices go up or down, businesses must submit documents to the Department of Finance and Industry and Trade for approval, and when these units agree, the prices change. Accordingly, the selection of 9 groups of goods for price stabilization (regular white rice, pork, chicken, duck, poultry eggs, processed foods, frozen seafood, cooking oil, sugar, vegetables) is not suitable for the needs of life because most of these items are often bought by people at traditional markets to ensure freshness; only cooking oil is effective. There are times when BOG goods are taken advantage of by traders to buy (especially cooking oil), causing the stabilized goods to not reach the right people.

And a very important thing, with the amount of 475 billion VND of BOG in 2011, businesses reserve the amount of goods to meet 10% of the total demand of 9 groups of goods in one month. That means, the amount of goods participating in price stabilization is very small compared to the consumption demand of the people of the capital and thus, prices are still regulated by the market.

There are many other reasons pointed out by Mr. Vu Vinh Phu, such as not excluding the possibility that businesses can borrow capital from the BOG program but use it for other purposes that are not controlled by the authorities. Even the amount of goods reserved for BOG work is not strictly controlled by the authorities... causing the BOG work to not go in the right direction.

The Chairman of the Hanoi Supermarket Association also gave the experience of some countries implementing BOG such as letting businesses spend and collect in BOG work to create competition in the market. Or the State regulates by using all BOG capital to stabilize a product at a certain time, when that product's price fluctuates, to overwhelm the market. And if you want to support consumers when market prices fluctuate, then directly support the poor with money...

Thus, the BOG program of Hanoi city needs to be reviewed to be effective and meet consumer expectations.

According to News - H