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VIETNAM: Coping With Skyrocketing Fuel Prices

HANOI, Aug 1 2008 (IPS) - Nguyen Van Minh has just delivered a consignment of apples from China in his modified Hyundai at Long Bien market where, each night, hundreds of trucks pull up laden with fruits and vegetables from distant provinces and neighbouring countries.

Xe Om (motorbike taxi) drivers await custom in Hanoi.  Credit: Matt Bennett/IPS

Xe Om (motorbike taxi) drivers await custom in Hanoi. Credit: Matt Bennett/IPS

“I spent VND 200,000 (12 US dollars) more than I used to, before last week’s fuel price hike, to get this load here,’’ he told IPS between drags on his cigarette. “Transport is so hard, and for so little profit. My truck is supposed to carry 3.5 tonnes, but I took 11. It’s illegal, but I have to do it.”

Unable to sustain subsidies on imported fuel, Vietnam’s communist government, on Jul. 22, suddenly raised domestic prices by 36 percent hitting ordinary people like Van Minh hard.

Only in March the government had frozen fuel prices along with nine other ‘essential’ commodities like cement, steel, school and hospital bills, water, electricity and coal. And early July there was an official promise that prices of petrol and diesel would not be disturbed until the end of the year.

Vietnam has now become the seventh Asian country, after China, India, Indonesia, Malaysia, Bangladesh and Sri Lanka, to cut fuel subsidies as response to rising fuel prices.

While long-term consequences are yet to be assessed, a report by the Asian Development Bank, coinciding with the fuel hike, cut growth estimation for 2008 to 6.5 percent, down from its April prediction of seven percent.

Inflation first hit double digits last November and as of July topped 27 percent, the highest it has been since the early 1990s, during a period of economic upheaval.

Not everything is negative though. In March, the international food crisis helped double the price of Vietnam’s rice exports, driving it up to 700 dollars per tonne. Prime Minister Nguyen Tan Dung had to cap exports to stabilise domestic supply, but prices stayed high and moved into non-food areas.

Although there have been no recent rises in food prices many believe that last week’s fuel prices will have a cascading effect on all goods in a matter of weeks, if not months.

It is estimated that the government may have to cover a loss of 3.2 billion dollars in subsidies this year, despite the fuel retail price hike, if world crude prices continue to stay around 145 dollars per barrel.

Vietnam, though a crude oil exporter, relies almost entirely on imports for its petroleum product needs as it lacks refining capacity. In the first half of this year the country spent nearly six billion dollars for imported fuel as crude oil prices soared to a record high of over 147 dollars per barrel on Jul. 11.

“When international oil prices are so high, the principle of community responsibility must be implemented to share the hardship between the government, organisations and consumers,” a finance ministry statement said, soon after the new retail prices were announced.

But that dictum is no consolation for truckers like Van Minh who must now cope with a 14.3 percent rise in diesel prices to VND 15,950 (97 cents) per litre.

With petrol prices up by 31 percent, and a litre of 92-octane selling at VND 19,000 (1.13 dollars) Hanoi’s taxi drivers are drinking, but not on the job. Many are sitting around in bia hois (local restaurants serving cheap Vietnamese beer) because they can no longer afford to go to work.

Several taxi companies have increased fares to offset the rapid rise in fuel costs, charging up to 30 percent more per km.

Self-employed cab drivers are not so lucky. “I really don’t want to work now,” cabbie Nguyen Thanh told IPS. Some drivers claim they were making up to VND 200,000 (12 dollars) a day before last Tuesday’s spike, after fuel and company car hire costs. Now they feel lucky to make even a third of that.

According to local media many people are opting for bus travel over motorbikes (the most common form of personal transport) since the fares have not gone up yet. The department of transport in Ho Chi Minh City reported a 20 percent increase in service use and subsidies have been approved to keep ticket prices stable.

Unlike bus companies and the luckier cab drivers, self employed delivery drivers and the country’s ubiquitous xe om drivers (motorcycle taxi drivers) enjoy no subsidies and little support.

Many are getting through with a grudging stoicism learned in leaner years. “We’ve suffered a lot through the war years and later. This is not as bad,’’ says Vu Cau Cuong, a xe om driver parked by Hoan Kiem lake in the city’s centre.

On Tuesday, car registration taxes were upped from five percent to 15 percent, as part of an effort to keep fuel consumption low. Though a motorcycle nation, cars are increasingly common in Vietnam, even if unaffordable for most.

There are reports of a widespread return to Vietnam’s traditional means of personal transport – the humble bicycle.

Hanoi’s bicycles were last in the news, earlier this year, when the trendy next generation were turning out on BMX-style bicycles embellished with flashing lights, tinny speakers playing techno, personalised number-plates and even giant toys tied to handlebars.

The trend finished some months ago and few expected a second, less colourful revival of the bicycle.

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