VINACHEM

A number of petroleum distributors have been prosecuted recently, reflecting the serious problems that exist in the petroleum market. Closing legal loopholes will be necessary to ensure the smooth operation of the market.

Nguyen Tien Thoa, former director of the Price Appraisal Department under the Ministry of Finance, now chair of the Vietnam Price Appraisal Council, talked to VietNamNet about solutions to the problems.

What are the ‘bright spots’ in the petroleum market?

There is a positive thing in the petroleum market these days: the supply is stable and petroleum products are available at all times, satisfying all the needs of the economy.  This is significant success in management work. However, there are still deficiencies that need to be looked at realistically and amended.

What are the deficiencies?

First, the regulations on price management and the Price Stabilization Fund are not yet clear about the main responsibilities of relevant agencies such as the Ministry of Finance (MOF) and the Ministry of Industry and Trade (MOIT). The management of the Price Stabilization Fund also involves commercial banks, so there is no major management agency, making it difficult to address malpractices. When violations occur, ministries and government bodies tend to shift blame onto each other, resulting in delayed and inefficient handling.

Second, inspection and supervision are not strict enough. The management relies on paperwork and reports, without actual control on the spot. This can be exploited by businesses to manipulate the Price Stabilization Fund and their actions cannot be found immediately.

Given that management bodies have continuously imposed fines and even criminally prosecuted offending petroleum companies, has this been sufficient to sanitize the petroleum market?

While such measures are necessary, we need to thoroughly address the management loopholes to prevent these violations from recurring. If these loopholes continue, no matter how stringent the penalties are, they will only be patchwork. It is crucial to establish strict management mechanisms that do not allow offenders to repeat their wrongful actions.

This would not only help enhance the effectiveness of government management but also contribute to creating a transparent and open business environment, while still maintaining discipline. This is a fundamentally important requirement.

What do you think are the solutions to address these problems?

The most important measure is to clearly define the management responsibilities of each agency. For example, the Price Stabilization Fund needs a primary managing agency to avoid the abuses as seen in recent years.

The biggest loophole lies in clarifying the responsibilities of major regulatory bodies. For instance, regarding the Price Stabilization Fund, when problems arise, MOIT tends to refer these to MOF, asserting that it falls under MOF’s responsibility. Meanwhile, MOF believes that it is MOIT which takes the responsibility of handling the problems.

I read Circular 33 and I could not find the provisions for which the agency must take major responsibility. In general, the relevant agencies don’t have a reasonable cooperation mechanism. As a result, issues arise, as seen in the case of HaiHa, where the bank deducted debts from the Price Stabilization Fund, leading to management discrepancies.

Furthermore, the current management largely depends on paperwork and reports but lacks actual control. There is no linkage between regulatory bodies and banks where businesses open accounts. As a result, businesses can easily withdraw cash from the stabilization fund to use for other purposes, causing losses and diminishing management effectiveness.

Additionally, the process for granting petroleum business licenses also needs to be more stringent. Businesses that do not meet requirements are still granted licenses.

What would you say about the current draft decrees related to the management of petroleum prices which are designed to make the market healthier?

I still can’t see any clear positives in the drafts, especially regarding price issues. If we truly want reform, we need to reconsider several important points.

First, the Politburo’s Resolution 55 released in 2020 says that we have to apply the market-based pricing mechanism to all types of energy, aiming at transparency and barrier removal, i.e., prices must be determined by market supply and demand.

You may see that the draft documents still maintain significant state intervention in petroleum pricing and the market.

Under the drafts, petroleum prices will be determined based on market supply and demand, but the state will still announce the costs that make up the oil and gas prices, from which ceiling price levels will be set up and businesses won’t be able to sell petroleum products above the ceiling levels.  – Source: VNN