[Vnbiz] Not on Vietnam but may shed light on the inflation debate....a readers rsponse from

Fri Mar 7 16:32:01 PST 2008

Dear anh Hoanh:
It's happen.  Vietnam exports cheap rice and imports more expensive, 
higher quality rice. Supply and demand.
I think  you meant to say why should Vietnamese citizens pay more for gas 
than Lao citizens.  I don't think they do, unless the Lao are subsidizing 
even more.  Vietnamese importers are paying world market price or higher 
because they are not able to buy in high volume for lack of storage 
capacity.
Vietnamese consumers are paying world market price minus any subsidies 
because although Vietnam produces crude oil, it imports refined products, 
and because the crude oil that is exported and the refined products that 
is imported are both commodities.
California produces oil.  Californians pay more than most for gasoline.
Japan supplies the world with cars, yet cars are very expensive in Japan.
There are many other ways to deal with inflation that's better than 
subsidizing gasoline with oil revenue.  Lowering import tariffs and other 
taxes on gasoline, for example.  A stronger VND should get the consumer 
you more gasoline per dong. 
But the important point here is that we shouldn't encourage Vietnam to 
slide back into command economy mode after all the progress toward a 
market economy.  Even if PetroVietnam and Petechim, etc. are still SOE's, 
they should be able to make their business decision free of undue 
government interference.
Cheers,  HPP

"Tran Dinh Hoanh" <tdhoanh at gmail.com> 
Sent by: vnbiz-bounces at mail.saigon.com
03/06/2008 09:05 PM
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Re: [Vnbiz] Not on Vietnam but may shed light on the inflation debate....a 
readers rsponse from

[ Vietnam Business Forum ]

Dear brother Phong,

Foreign investors can have their share.  I am saying that Viet Petro 
should have its some of its share transferred to offset the import cost. 
This is nothing mysterious about it.  All private companies have to do the 
same thing (to "pass-on the saving" to the customers if they want to stay 
in business for a long time.

Vietnam produces rice, shouldn't Vietnamese customers pay for a much lower 
rice price than Iranian customers?  Wouldn't be absurd if Vietnamese 
customers have to pay the same price for rice as Iranians pay?

Why should Vietnamese customers, citizens of an oil export country, pay 
less for gasoline than citizens of a non-oil country like Lao?  Wouldn't 
that be absurd if citizens of an oil-export country have to pay the same 
price for oil as citizens of a non-oil country?
I can't tell how much of the export profit can be used to offset import 
price, but that is another issue.  Let's start planning the transfer 
first, then we will know how much can be done.  Any bit to help reduce 
inflation is good.  Oil price affects food price.

And I am not talking about using rice money to offset oil price.  We don't 
want to use one market to distort another market if we don't have to.  I 
am just talking about ONE market--oil.  But if we have to do that to 
reduce spiral inflation, anything that may solve the problem is not out of 
the question.

Have a great day!

Hoanh
On Thu, Mar 6, 2008 at 7:27 PM, <Hong-Phong_Pho at ita.doc.gov> wrote:
[ Vietnam Business Forum ]

Dear anh Hoanh: 
What's absurb here is that if your recommendation is actually taken, 
Vietnam would step backward from becoming a market economy! 
Your "analysis" assumes an all powerful pre-doi moi command economy 
government that runs an economy by edict. 
Fortunately, two decades of market reforms have made that nearly 
impossible, even in the monopoly sector of oil and gas. 
Just a few practical aspects: 
-  Crude oil is produced and exported under production sharing contracts 
with foreign investors who sanks in billions of dollars into the venture. 
They do this for profit.  Who can tell them to give up their "windfall" 
profit. 
-  Oil is a global commodity, as is gasoline; distorting their prices have 
unintended economic consequences that can't be managed. 
-  Vietnam's total oil production/export at 320 mln bbl/day is not that 
much higher than its consumption/import at 270 mln bbl/day.  Is there 
really much to "transfer"? 
-  Gasoline price lowered by such a subsidy will benefit a Honda driver 
and the real estate zillionaire in her Phantom all the same, as well as 
Vietnamese products exported all over the world.  Why should Vietnam 
(indirectly) sell it's crude oil for cheap to the World?  Where is the 
fairness in that? 
-  Suppose Vietnam has no crude oil, but it would still have to import 
refined products, and it has a big year exporting rice or coffee, would 
you advocate taking windfall profit from rice or coffee producers and 
exporters to offset high gas prices? 
The command economic model does not work! 
Cheers,  HPP 

-- 
Tran Dinh Hoanh, Esq., LLB, JD
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