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Vietnam Business » Vietnam Economic News » The sugar "underworld" controls prices?

The sugar "underworld" controls prices?

The world sugar price has decreased by 30 percent from two months ago. The Ministry of Industry and Trade has doubled the sugar import quota, but the domestic retail price is still high - twice the worlds price.

According to Ha Huu Phai, Secretary General of the Sugar and Sugar Cane Association, the world sugar price has fallen from its peak of $740 per ton two months ago to $530 per ton.

With this drop, the sugar price in Vietnam after taxes and fees should be 12,000-12,500 dong per kilo, and yet the domestic retail price sits firmly at over 20,000 dong. Who controls the sugar price?

Not producers, nor retailers

The Ministry of Industry and Trade has granted quotas to import 200,000 tons of sugar, double that of 2009, with a preferential import tariff of five percent.

Yet on March 19, 2010, Bien Hoa Re sugar sold at 21,000 dong per kilo at Big C, while Bourbon Tay Ninh sugar sold at 19,000 dong.

These companies have yet to import sugar, which keeps the price high.

"Many enterprises clamoured for quotas, but they have not imported sugar yet," explained Doan Xuan Hoa, Senior Official of the Ministry of Agriculture and Rural Development.

Then, others questioned why enterprises do not import sugar, especially when they fought for the quotas they have now.

Phai denied that sugar companies are controlling the sugar price. There are seven sugar production plants in Vietnam with similar capacities, so no one sugar corporation is able to set prices. Currently, producers are wholesaling at 14-15,000 dong per kilo.

Retailers deny reaping fat profit from pushing up the prices. Big C complains that they have never been able to buy sugar directly from producers. The chain purchases sugar from agents at 17,500-18,000 dong per kilo.

The sugar association confirmed that the supply is large enough for domestic consumption, but sugar plants refuse to sell products to retailers by saying they have nothing to sell.

Wheres the flaw?

Tran Phuong Lan from the Competition Administration Department in the Ministry of Industry and Trade believes that sales agents are the perpetrators in this underworld of secrets. If a sugar production plant refuses to follow the unwritten rules set by the sales agents, they will be punished and their products will not be sold.

Phai confirmed this. "There is a secret in the sugar industry, which no one dares to speak out against," he revealed. "If someone does complain, they will be boycotted."

According to Phai, no sugar plant can build their distribution network or sell products directly to retailers. The distribution of their products is controlled by the network of sales agents.

Thus, sugar producers must meet the demands set by sales agents, or they will never be able to sell their products.

Economic analysts commented that the sales agent network is so powerful that no one dares to fight their secret regulations.

This also explains why businesses do not import sugar. If they do, they know that they will not be allowed to sell the sugar to retailers.

Vietnam Business And Financial News Network. Source [english.vietnamnet.vn]

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