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July 9, 2008

Vietnam assures steady prices to keep inflation at bay
Vietnam has ruled out fuel price hikes for the remainder of the year, signalling that it will put the fight against double-digit inflation ahead of worries about the cost of subsidies, Reuters reported.

Prices of petrol, diesel, power, coal, steel and fertiliser "will not be raised in the remaining six months of 2008," Deputy Industry and Trade Minister Bui Xuan Khu said in a government report seen on Wednesday.

Hanoi raised fuel prices by one-third for diesel and 11.5 percent for petrol in February, the first hike in 3 months, but they remain well below global levels.

In late March, after several months battling inflation, the Communist Party government imposed controls on 10 "essential" commodities -- petrol, electricity, coal, water, cement, steel, school and hospital fees, bus, rail and air travel.

Vietnam's annual inflation hit 26.8 percent in June driven by sharp jumps in food prices, marking the eighth month in a row with double-digit inflation.

The curbs leave Vietnam out of step with other Asian nations after China raised fuel prices last month, becoming the sixth Asian country, after India, Indonesia, Malaysia, Bangladesh and Sri Lanka, to trim subsidies in the face of rising global prices.

The government has ordered state-owned banks to continue lending to fuel importers and promised to cover all the losses incurred, estimated to reach $2.7 billion in 2008 if crude prices stay above $130, to ensure undisrupted supply.

Vietnam's retail gasoline price now stands at $0.90 per litre and diesel at $0.86 per litre.

Petrol prices in the Southeast Asian country of 86.5 million have nominally been deregulated since mid-2007, but importers still need government approval when setting end-user prices and are effectively restrained from changing prices too often.

Fuel importers, all controlled by the state, said last month they had to incur a loss of about 4,000 dong ($0.24) per litre of the popular 92-octane petrol and about 6,000 dong per litre for diesel, as world crude prices jumped to more than $140 a barrel.

Low prices have led to rampant smuggling of fuel across the southwestern land border into Cambodia in recent months, state-run Voice of Vietnam radio said on Wednesday.

Vietnam is Southeast Asia's third-largest crude producer with output averaging 300,000 barrels per day, but imports fuel because it will not have a refinery until next year.

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