Revised Price Law: Removing problems of price negotiation

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The Ministry of Finance will revise regulations on price negotiation. Photo: Thu Diu.

Regulations on price negotiation are not clear

At the request of the Prime Minister and proposals from businesses, the Ministry of Finance has organised price negotiations for several goods and services such as: coal for sale for 4 large consumers (electricity, cement, fertiliser, paper); coal freight for electricity production by river; industrial explosives for mining, and aircraft refuelling charges.

According to the Price Law, the price negotiation work is organised in accordance with the decentralisation and chaired by the Department of Finance.

Some local governments have have successfully organised price negotiations and harmonised benefits to parties involved, such as: Ninh Binh Department of Finance organised a price negotiation for wastewater treatment of Thanh Nam Construction and Trading Co., Ltd in Khanh Phu Industrial Park in March 2014 and Quang Ngai Department of Finance held a price negotiation for transport companies.

However, regulations on price negotiations reveal shortcomings in the scope of price negotiation (Clause 1, Article 25 of the Law on Price), which provides for two cases of price negotiation. The regulation that goods and services subject to price negotiation are not in the list of goods and services valued by the State is, in particular, not necessary. In addition, the regulation on actual price negotiation conditions does not specify the nature of the seller and the buyer.

The Ministry of Finance also said that from the organisation of price negotiations shows that the regulation of the competence to request price negotiation of the "Prime Minister, Ministers, Heads of ministerial-level agencies, heads of governmental agencies and Chairmen of the Provincial People's Committee” (Article 23 of the Law on Prices) is unnecessary and leads to different interpretations.

Currently the legality the agreed price in the successful negotiations and the temporary price in unsuccessful negotiations are not clear and there are no specific regulations to protect the legitimate interests of the parties involved including the seller, the buyer or the negotiation organiser.

Legality of the agreed price in successful negotiations specified

In a report on the policy impact assessment to propose to revise the Price Law, the Ministry of Finance introduced solutions to overcome such shortcomings.

The first solution is maintaining existing regulations on price negotiation measures. This option will not affect the socio-economy, administrative procedures or the rights and obligations of the people, but such current regulations will make price negotiation in some cases abusive and inappropriate. The use of price negotiation between the State and enterprises to purchase assets from the State budget may overlap with the legal provisions on State procurement with many forms of bidding and procurement.

Moreover, the effectiveness and efficiency of State management of price negotiation is not high because regulations still make the implementation of price negotiation in some cases inappropriate.

The second solution is amending provisions of the price negotiation. Specifically, the Law on Price (revised) will stipulate the scope of price negotiation is only for trade of important goods and services which are produced and traded in specialised conditions or have a market with limited competition monopoly and interdependence between enterprises. State procurement shall comply with the provisions of the Law on Bidding and not be covered by the scope of price negotiation.

The Law on Price will also be revised towards specifying the legality of the price in successful negotiations and a temporary price in unsuccessful negotiation; and the responsibilities of stakeholders in the implementing above prices.

According to the Ministry of Finance, the revision will help identify the scope of price negotiation and avoid different interpretations of price negotiation. The price negotiation conducted between enterprises is appropriate with the nature of a socialist-oriented market economy, in line with its nature and objective and in accordance with practical implementation. Thus, it will clarify the objective of price negotiation is not a State intervention or regulatory method.

The use of price negotiation between the State and businesses to purchase assets from the State budget should be in accordance with the law on bidding and related regulations, and is not in the scope of price negotiation.

The removal of regulations on negotiation conditions at the request of the Prime Minister, ministers, heads of ministerial-level agencies, heads of governmental agencies, and the chairpersons of provincial-level People's Committees also help agencies be more flexible in organising negotiations and does not make different interpretations and contradictions in law performance. Especially, this will avoid the thinking that the State interferes in the purchase and selling prices of firms.

Regulations on the process and methods to determine the temporary price will be added to help unify the way to determine the temporary price as well as ensure the legal basis and responsibilities of the organiser in determining this price. The organiser will also have a stronger legal framework to give legal and persuasive price levels.

More importantly, the solution neither increases new administrative procedures nor affect the rights and obligations of citizens under the Constitution; is consistent with the Enterprise Law, Competition Law or other relevant legal documents and is compatible and in line with international treaties Vietnam is acceded to.

With such positive impacts, the Ministry of Finance proposes choosing the second solution to implement the development of the Price Law (revised).