How to control the market

July 15,2011. Automatic import licences, price declaration and restricted import of automobiles, liquor, telephones and cosmetics are merely administrative tools

The use of administrative tools to control the market by many State management agencies may bring some benefits, but it causes consequences that take a long time to deal with

Vietnam has adopted many policies as administrative orders to manage monetary fields such as interest rates, credits and exchange rates. This way of management has, however, helped stabilize the monetary market, especially interest rates.

At a seminar held in Hanoi last week by the Government Office and the World Bank (WB), Nguyen Ngoc Bao, head of the State Bank’s monetary policy bureau, confirmed its management through administrative tools in the presence of local and foreign economists, entrepreneurs and media. “We must use administrative measures to intervene in the market,” he said when talking about the difficulties of managing the monetary policy in the first half of this year.

The Ministry of Industry and Trade, with its mandate to limit the trade deficit as one of the causes of the economic instability, did not hesitate to carry out similar interventions. Its policies on automatic import licences, price declaration and restricted import of automobiles, liquor, telephones and cosmetics are merely administrative.

Experts said economic losses could probably be not so big as losses in the management method, a return to administrative tools and non-market economy which Vietnam has tried to escape from thanks to the reform.

“Macro-economic instabilities lead to managerial problems: overusing administrative tools and slowing down the reform,” Nghia said at that conference.

Administrative measures, seen from another angle, are opportunities to give rise to negative practices in certain fields. “Commercial banks now like the administrative tool because they are easy to evade and neutralize it,” Nghia said. “The ceiling interest rates and credit crunch are not as they are talked about. If (the State Bank) wants to use the market tool, they will object because they cannot escape. Never before has the financial system been morally destroyed like that.”

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