New decree to reform petrol market, pave way for foreign distributors

New decree to reform petrol market, pave way for foreign distributors

The domestic petrol market is expected to become more competitive with many different price levels for consumers to choose under a new decree, Phan The Rue, chair of the Vietnam Petroleum Association, has said.

Rue said Decree 83, to take effect on November 1, will provide a legal framework for the petrol market to operate in accordance with market rules.

Under current regulations, sales agents, general agents and filling stations operate in the market. The new decree will admit merchants and franchisees as well.

Merchants will buy petrol products from supply sources and determine the selling prices themselves.

An analyst commented that once the Decree 83 takes effect, existing sales agents and general agents would shift to becoming merchants to enjoy the right of determining the selling prices.

Under current regulations, import and distribution enterprises can raise or lower selling prices by no more than 7 percent. With the current price at VND24,000 per liter, they can adjust the selling price a maximum of VND1,600 per liter, an increase high enough to shock the economy.

But the situation will be different once the new decree takes effect. Enterprises will be allowed to raise the price by no more than 3 percent for each adjustment, while the next adjustment must be made 15 days after the previous one.

The 3 percent price increase, or VND700-750 per liter, is viewed as “bearable” for the economy and consumers.

In order to keep petrol prices stable, distributors have asked the government to not raise import tariffs stable for six months or one year.

However, this might not be good news for consumers, because stable prices do not mean low prices.

Rue noted that the current import tariff is relatively low. Under WTO (World Trade Organization) commitments, Vietnam can impose import tariffs of up to 40 percent, while under AFTA (ASEAN free trade agreement), it is no more than 35 percent.

In recent years, the tariff remained at 0-12 percent, but it is highly possible that the government will raise the tariff to 20 percent on average so as to increase revenue for the state. If so, the petrol prices will not be low as consumers want.

Rue has predicted that many foreign investors will flock to Vietnam when Vietnam begins opening its market in 2018.

The number of foreign investors showing their interest in the Vietnamese petrol market is “even higher than the number of foreign investors interested in the Vietnamese retail market”.

“They have learned about the policies and the market conditions, and are ready to land in Vietnam once they can,” Rue said.

vietnamnet