10.08.2022, 09:41

Middlemen to blame for mounting prices

 

Economic expert Vu Vinh Phu took the sugar industry as an example. He said 70 per cent of Thailand's industry profits are distributed to farmers, whereas 30 per cent go to middlemen.

Meanwhile, the reverse is true in Viet Nam, with middlemen taking the lion's share of the pie. Their high-profit margins push up prices, outpacing the impact of fuel.

"Normally, products in supermarkets are sold at lower prices than those in marketplaces. Unfortunately, it is not the case in Viet Nam where the former is about 30 per cent more expensive than the latter," he said.

The expert attributed middlemen's high-profit margins to the absence of an official goods exchange. Without such an exchange, middlemen have the higher bargaining power to raise selling prices.

"In many countries, products are sold on goods exchanges, so middlemen have a weaker position in price determination," he added.

Phu called for a mechanism to help link sellers directly to buyers, thereby cutting out middlemen and cooling overall prices.

He also suggested close cooperation between producers' associations to gather enough bargaining power to drive down middlemen's selling prices.

Lastly, he suggested using a "visible hand" to regulate market prices once the prices spiral out of control.

"In Malaysia and Singapore, the authorities impose ceiling prices on chicken whenever the meat soars. The ceiling prices are not permanent but kept long enough to get prices back on track," he said.

Economic expert Can Van Luc shared this view, saying that middlemen were demanding too many profits to the detriment of consumers.

He also underscored rising prices in transport, food and construction sectors as the major cause of the recent soaring consumer price index (CPI).

For this reason, he urged the authorities to keep prices in check.

He also urged the authorities to step up inspection to ensure middlemen comply with ethical standards and do not reap profits at the cost of other economic actors. He also called for favourable policies to lower transaction costs, giving producers room to reduce their product prices.

"In the real estate sector, transaction costs account for 20 to 25 per cent of an apartment price. The costs are ultimately passed on to apartment buyers," he said.

Lastly, the expert said authorities should launch media campaigns to peg expectations, preventing inflationary sentiment. 

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