Monday, 24/4/2017
Price subsidization
24/2/2011 10:48' Send Print

The Party and Government have implemented policies and taken solutions to improve the people’s living standards, assist localities and poor people in difficulties. Almost all of these regulations have accountd for poor people and difficult areas. However, in reality, sometimes this concern has not yielded expected results as not all people in difficulties can benefit from these policies as financial resources have fallen short of demands.

When deciding to increase electricity price in line with the roadmap on price regulation according to the market economy, the Government also adopted a solution to subsidize the poor by keeping the price of the first 50Kwh of electricity lower than the production price. Analyses show that poor households, especially farmers, public employees and households in difficult areas consume around 50 Kwh of electricity per month. Thus with electricity price subsidy, they pay low price for electricity. In addition, as the electricity price increases by scale, better-off families who use more electricity will pay more. However, according to the current policy, all households are entitled to subsidy to the first 50 Kwh. Only when the consumed electricity surpasses this amount do better-off families have to pay more. It means that the every household enjoys electricity subsidy.

The policy on price stabilization in the two big cities of Hanoi and Ho Chi Minh city during the Lunar New Year holidays (Tet) has proved to be inappropriateness. The objective was to stabilize essential commodities’ prices during Tet. It seemed this objective was achieved when the Ministry of Industry and Commerce announced that there was neither price hike nor commodity scarce. Nevertheless, the number of people in difficult situation who could have access to subsidized goods was not high. Instead, the number of business people who bought these commodities at subsidized prices and then sold out at higher prices were larger. In addition, according to analysis of economic specialists in many other provinces of which average income per capita was relatively lower than that of Hanoi and Ho Chi Minh city, people could not enjoy the subsidy.

The policy on subsidization of interest rate for businesses’ bank loans so that they can procure farm products when prices decrease has achieved certain positive effects. The solution helps maintain prices and store commodities. But, according to farmers most of this subsidy did not directly benefit them-who make agricultural products and are in need of support. The large part of this subsidy has gone to traders who procured most of the farmers’ products. Because businesses can not procure goods from each and every household. And so it is the traders who make prices. Hence, high financial subsidy rarely benefited farmers in difficult situation.

The 62 poorest districts have been the focus of assistance policies of the Party, the Government and other social organizations and communities. The Programme 135 assisting especially difficult communes, the Programme on housing, domestic water, the Programme on sustainable poverty reduction and policies on reduction and exemption of agricultural tax and irrigations fees are among them. These policies have been implemented, reviewed with lessons learned, supplemented, revised and renovated. Thus, they have become more effective. The delegation of responsibility and finance in assisting especially difficult communes has made these programmes better meet the needs of local people. A more simple but effective method of subsidy is to send money for Tet directly to poor people and households who really in need of assistance.

Meanwhile the subsidy to bus operation in Ho Chi Minh city is said to be wastefull and of ineffective. It is to recall that the Transport Service of Ho Chi Minh city received a subsidy of more than VND 841 billion VND in 2010 and nearly VND 986 billion in 2011, an increase of VND 145 billion. At the same time, the city will spend around VND 1,850 billion on purchasing more buses from now to 2015. Meanwhile, the daily number of bus passenger increases by only 10%. It is a wasteful subsidy.

This year, the Government has set its primary goal of stabilizing macro economy, inflation control to ensure social security, reduction of State budget deficit, public spending management and national debt control. One of the decisive elements to success is to restructure the economy.

In the project “Orientations on prices in the financial strategy in 2011-2020” being drafted by the Ministry of Finance, there is one item on eradicating price assistance and subsidy, including subsidy to farm products and commodities even in difficult time. This is an important and imperative decision as we are scaling up the market economy and international integration. When Vietnam is in the process of international integration, we have to abide by international commitments including removal of unpermitted subsidization. However, international commitments have also opened up new direction of subsidization.

In reality, the Government is realizing impacting policies mapped out by the Party to assist the poor people in several aspects, namely employment, insurance, eradication of hunger and reduction of poverty and provision of public services. To put these policies into practice, it is important to coordinate comprehensive solutions, particularly the involvement and contribution from community and businesses.

All of these solutions should aim at improving the people’s livelihoods. Subsidization without focus will not only be wasteful but can give rise to corruption.

This means, subsidization should focus the right target with right objective to maximize effectiveness./.

Ly Thai Phuong