Under the law, the price of goods and services will be dictated by the market, with oversight from the State.

The State would act to stabilise prices indirectly through macroeconomic policies to control supply and demand of goods and services, Thoa said.

He added that the State would retain the power to intervene directly to control the price of some goods, public services and to curb the actions of monopolies.

The State would switch from fixing prices to allowing market forces to decide, Thoa said.

"The move is considered a drastic departure when it comes to the management of prices in particular and the management of the economy in general," he said.

Thoa added that the State would also ensure that social welfare policies were in place to help the disadvantaged.

Circular 122

In anticipation of the move, the Ministry of Finance issued Circular No 122/2010/TT-BTC to amend Circular No 104/2008/TT-BTC that was issued two years ago.

The circular will officially take effect on October 1. From this date, firms will only have to register prices with local authorities once. However, local authorities must be notified when prices change.

"Before issuing the new circular, the ministry has consulted relevant State bodies, foreign experts, businesses and consumers. Almost all of them supported the circular," said Nguyen Anh Tuan, deputy director of the department.

Under the circular, if companies raise or decrease the price of essential goods and services unreasonably, concerned bodies are authorised to take action.

Among the goods covered by the circular are milk powder for children under six, coal, schoolbooks, printing paper, cement, steel, fertiliser and salt.

Individuals and organisations that produce or trade goods stipulated in the circular must register prices with relevant State offices. If prices or fees being registered are considered unjustifiable, local authorities will ask firms to adjust them according to the cost of input materials, transportation fees, among other things.

Under earlier rules, action was only taken if firms raised the price of essential commodities by 20 per cent or more within a 15-day period.

Some foreign experts and businesses have claimed that the circular contravened Viet Nam's commitments to the World Trade Organisation.

However, Tuan said: "We reviewed all our commitments, especially under Article 96 to 103 and came to the conclusion that none of the regulations in the circular violates WTO's rules."

If the circular was widely considered to be unreasonable, the department would submit recommendations it deems worthwhile to the ministry for consideration, Tuan said.

Stricter fines

Under a newly completed draft decree, stiffer fines will be imposed on firms that break price regulations.

According to the draft regulation, firms that sell goods or charge fees higher than registered face a fine of VND2-VND5 million (US$102.6-$256.4).

If they fail to report price changes with the relevant offices, they face a fine of VND15-VND20 million. Firms that fail to register goods' prices or service fees from the outset face a fine of VND20-VND30 million.

Furthermore, if firms take advantage of goods' shortages to hike prices or speculate on regulated commodities, they face a fine of VND35 million or more.

If companies fail to properly adhere to local authority price guidelines, they face a fine of between VND30-VND40 million. — VNS