Socialist Republic of Vietnam

Ha Noi, May 21 (VNA) -- Economists say that the downward trend of Viet Nam's consumer price index which has been happening for a number of years now, especially in the first four months of this year, has mainly stemmed from the slow-down of food and foodstuff consumption.

"Food prices have dropped by 19.4 percent in the last 28 months and 3.7 percent in the first four months of 2001, while the price index of other commodities has remained mostly stable, fluctuating around one percent," says Associate Prof. Dr Ngo Tri Long.

The prices of Viet Nam's five major farm exports continuously went down in the world market, with a fall by USD 63/tonne for rice, 57 percent for coffee, 55 percent for cashew nuts, and between 55-58 percent for hot pepper, according to statistics.

As estimated, Viet Nam's farmers have suffered a loss worth VND 15 billion from the fall of rice and coffee prices only. This has reduced their income, directly affecting their purchasing power and leading to the current drop in the consumer price index.

The economists have attributed the slow consumption of Viet Nam's farm produce to the following main reasons:
First, for many years now, Viet Nam has paid more attention to increasing the quantity of farm products when it needed to pay more attention to their quality and world market demand.

Second, the market share of Viet Nam's farm produce in the world has been narrow, forcing the country to sell its products through mediation.

Third, Viet Nam's exports are small and not diversified due to its low capacity of farm produce processing.

Last but not least, the country has made inadequate surveys of both domestic and international markets and not raised its agro-products' competitiveness in the world market.

"The fall of consumer prices has also had negative impacts on production and business transactions, which has hurt national economic growth," according to Ngo Tri Long.

He explains: "People have deposited their money in the bank instead of investing it in production and business operation. Therefore, the bank savings rose 26.3 percent in the first four months of 2001 over the corresponding period of last year."

Long says that more effective measures should be taken to spur consumption demand, especially in the agricultural and rural sector, by creating more employment for farmers and expanding traditional crafts and services.

"Although the unemployment in the rural areas is just about 20 percent of unemployment in the urban centres, the number of job seekers in the rural areas is 20 times as much as that in the urban areas," Long points out.

The Government should give preferential loans and credits to help farmers to develop traditional crafts and open new trades in all rural regions, while continuing to pursue its policy of subsidies to agricultural production such as material and technical supplies and seed selection. The government should also adopt a policy of tax reduction for these businesses.

Now, it should set up insurance funds for rice, coffee, rubber, pork, and other major farm products in order to help it stabilize market prices when necessary.

Prime Minister Phan Van Khai met with the Ministry of Agriculture and Rural Development on May 12 to discuss groups of measures to spur the consumption of farm produce and agricultural development as part of Viet Nam's efforts to curb a further fall of agro-product prices.

The Government will abolish or exempt agricultural land use taxes for farmers in some regions and buy another million tonnes of rice and another 150,000 tonnes of coffee from farmers to stockpile for export, according to the ministry.

In addition, it will work out policies to support the change of agricultural structure this year, help traders to find more outlets for farm products, and help export credit funds operate nationwide.--VNA