Vietnam: Fuel Markets and Fuel Auctions – Impact on the Economy
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1. How the recently announced fuel auction could affect the fuel markets in Vietnam and will it solve the shortage? Is this an effective long-term solution?
Information about the upcoming auction has slowed the increase in fuel prices, which will positively affect the entire fuel market. Specifically, the objective of the 100 million liter gasoline auction is to have more supply for the market, resulting from the lack of supply at the Nghi Son refinery and increased imports. key companies. Therefore, the auction is only for the short term and does not completely solve the shortage.
2. What else can be done to mitigate the impact of rising fuel prices on the Vietnamese economy?
– The Vietnamese Prime Minister decisively ordered government agencies to implement certain solutions to mitigate the impact of rising fuel prices, as reported in Dispatch No. 160/CD-TTg of 22 /2/2022 on securing fuel supply for the domestic market:
o Reduce taxes on fuels, in particular by adjusting the environmental protection tax policy for petroleum products. However, the fuel price tax rate is only 38-39% and the fuel price in Vietnam is currently much lower than other countries in the world, which can lead to cross-border fuel smuggling. , resulting in government reluctance. towards this solution;
o Use the BOG Fund (Oil Price Stabilization Fund), thereby supporting fuel prices for businesses so that the market price in Vietnam is low compared to other countries;
o Proactive clarification of information to ensure alternative sources of supply. Avoid spreading fake news, overdoing it affects people’s general psychology, leading to hoarding of goods waiting for prices to rise;
o Improve inspection and increase fines for individuals and organizations that deliberately hoard fuel and wait for prices to increase;
– In addition, the government can indirectly support people by reducing VAT from 10% to 8% or creating a database of fuel consumption demand in each place at each moment (normal and abnormal), as a basis for ask major suppliers to provide sufficient fuel.
– However, all these are only short-term solutions because Vietnam must follow the law of market economy (when the world increases, it increases). Thus, if the government intervenes too much, it will roll the economy back to the previous subsidy period.
1/ Law on real estate auctions n° 01/2016/QH14;
2/ Decree No. 83/2014/ND-CP on oil and petroleum trading;
3/ Dispatch No. 160/CD-TTg of 22/2/2022 relating to the guarantee of fuel supply for the internal market.
Please do not hesitate to contact Dr. Oliver Massmann at email@example.com if you have any questions or wish to know more about the above. Dr. Oliver Massmann is the Managing Director of Duane Morris Vietnam LLC.
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