A worse-than-expected economic forecast and loose cooperation between state agencies at central and local levels are the main culprits for the sudden rise in the consumer price index (CPI) last month, said a senior state official in a recent TV program.

It is a hard lesson to be learned in state management, said Finance Minister Vuong Dinh Hue on “Dialogue with the people – The people ask, the Ministers reply” of national broadcaster Vietnam Television.

Underperforming analysis and forecasts caused a misleading price management mechanism as the CPI rise was too small, and even at a negative rate, in the previous two months.

“If the job had been done properly, we could make the price increase little by little regularly, so we can avoid such a price hike shock.”

Poor coordination between ministries and state agencies, as well as between those at the central and local levels in price management, such as in health services, helped create the problem.

While the price increase roadmap is decided by a joint circular of the Ministry of Finance and the Ministry of Health, its realizations locally are determined by the local People’s Councils.

“We should avoid simultaneous price hikes in September because it is the month of the new school year when a lot of related items and tuition fees are to be increased.”

“As a result, if the price increase of healthcare services were materialized sooner, in July or August when world oil prices were also adjusted, we would have no price shock in September.”

The CPI rise, equivalent to the CPI rise in the previous eight months combined, was caused by the increase in prices of a series of essential goods and services at the same time, surpassing all forecasts of local experts.

It is mainly due to the price hike of four commodity/services groups: drug-medical services, education-training, petroleum products and housing and building materials.

They made up 2.1 percent out of the 2.2 percent CPI spike in September.

In September, as 43 provinces and cities nationwide adjusted drug prices under the joint circular of the Ministry of Health and the Ministry of Finance in February, the group increased by 17.02 percent month-on-month, making up 0.95 percent of the percent CPI rise.

The rise of education and training was mainly caused by tuition fee adjustments, which made the group rise 10.84 percent m-o-m, accounting for 0.65 percent of the CPI rise.

The three price hikes in petroleum products in late August and early September helped the transport group rise 3.33 percent, contributing 0.34 percent into the CPI rise.

The petrol price surges were affected by world oil prices.

Regarding the fact that petroleum products are essential goods, but are subject to a special consumption tax, Minister Hue said since fuel is a non-renewable fossil energy resource, the use of its must be strictly controlled for economic purposes

Many countries worldwide have exercised the collection of such taxes on gasoline and oil, but in Vietnam the tax is only levied on gasoline. The taxation started in 1996.

Vietnam’s tax charge is very low, at around $0.1 per liter, equivalent to that in China, Thailand, and the Philippines. The rates in Hong Kong, India, and Australia are $0.78, $0.6 and $0.4-0.5 per liter, respectively.

However under the tax reform program, the ministry is also reviewing the taxes and charges on the principle of diminishing rates to boost consumption and business investment.