Fuel price hike to hit struggling business

27-Apr-2012 Intellasia | VIR | 7:05 AM Print This Post

Businesses already struggling to survive in both domestic and international markets are going to be very hard hit by the second rise in fuel prices in less than two months, economists say.

Dr Nguyen Minh Phong of the Hanoi Institute for Social and Economic Development Studies told the Tuoi Tre newspaper that the increase in petrol prices would lead to increases in the prices of many goods and services, affecting the consumer price index (CPI).

Given the difficult economic situation, the impact of recent increases in fuel prices would be by no means negligible, he said.

Economist Le Dang Doanh said that the two increases since the beginning of the year had pushed up petrol prices by VND3,000 per litre. This was a heavy burden to businesses because besides the high interest rates, they would have to bear higher material costs.

“They will be unable to stand one day,” he said.

In addition, higher input costs would make Vietnamese goods less competitive in the world market, Doanh said.

According to the Ministry of Finance, the latest hike in fuel prices will lead to an increase of about 0.3 per cent in CPI, but several businesspersons say that the hike in fuel prices amid the current economic difficulties is a knock-out punch.

They say many businesses will be forced to stop production and trading activities.

Nguyen Phuc Tien, deputy general director of the Van Thanh Mousse and Foam Company, said fuel accounted for 3 to 5 per cent of production costs. For transportation alone, his company spent about VND1 billion (US$47,600) a month to buy petrol.

With the latest increase in petrol prices, the company would have to pay a lot more money for fuel, he said. However, since purchasing power in the market was very low, the company would find it difficult to increase its selling prices to cover the higher costs, he added.

Nguyen Quang Trung, general director of Fico Tay Ninh Cement JS Company, said the higher fuel prices would have an enormous impact on people and businesses.

Businesses could not keep prices stable when all input costs went up. Consumers would be “victimised” since they had to bear the increase in prices, he said.

As expected, the prices of many kinds of goods and services have increased following the latest increase in fuel prices.

Nguyen Thanh Ha, deputy director of the Thu Duc Wholesale Market, said prices of many kinds of fruits and vegetables had gone up by thousands of dong per kilo.

The prices of goods and services at markets would surely increase in the next few weeks, she said.

Ngo Van Hai, deputy general director of the Citimart chain, told Nguoi Lao Dong newspaper that the supermarket had received announcements about price increases of 5 to 10 per cent from many producers and providers who had not raised their prices after the previous increase in fuel costs.

Nguyen Phuong Thao, director of the Cong Hoa Maximark outlet, said about 20 suppliers planned to raise their prices by 8-10 per cent.

Some travel transport service companies have said they would have to increase their fares corresponding to increases in fuel prices.

Many freight companies have said while they have not completed negotiations with customers about the new transportation prices after last month’s fuel price hike, the latest increase will force them to raise transportation costs by about 5 per cent in the next few days.

Taxi firms are finding it difficult to respond to the increase in fuel prices in quick succession.

Ta Long Hy, chair of the HCM City Taxi Association, said the time lapse between two increases in fuel prices was rather small, so it was difficult for them to follow suit in applying new fares.

However, he said, sooner or later, they would have to make fare adjustments, otherwise they would die.

 


Category: Business

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