Pulling the rug out

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Experts fear that the spiraling cost of living will negate any gains felt by the planned minimum wage hikes


Construction workers have their lunch outside a construction site in Ho Chi Minh City. These workers are among the people who are most affected by the steep rise in prices in Vietnam.

Nguyen Thi Anh hesitates before stepping up to the meat counter, these days.

For a factory worker like Anh, meat and fish have become a luxury.

Prices rose 11.09 percent in November from a year earlier, according to figures released Wednesday by the General Statistics Office. On a monthly basis, prices rose 1.86 percent in November from October.

Hanoi's consumer price index rose to an estimated 1.93 percent this month, a nine-month high, while Ho Chi Minh City's index hit 1.73 percent, according to data from the cities' statistical offices.

The prices of food, fuel and construction materials have all gone up this year, dealing a serious blow to those living on the economic margins.

"Prices are soaring and salary raises can't keep up with the cost of living," said Anh, 23, who earns some US$100 a month working for an electronic firm in the Bac Thang Long Industrial Park.

In the market, pork fillets sell for VND80,000 ($3.8) per kilogram 15 percent more than two weeks ago.

Do Thi Thuy, an employee at a mechanical firm in Quang Minh Industrial Park, said she and her sister used to spend some VND40,000 ($1.9) on their two daily meals. Now they cost at least 50,000. "We have no choice," she said. "We just have to eat less."

Rents and basic service costs have also gone up. In the 12- square meter room Thuy shares with three other employees, she set up a sewing-machine to repair garments for her co-workers as a way of supplementing her meager income.

Minimal wage

The potential gains offered by the government's minimum wage hikes have been wiped out by soaring consumer prices.

Meanwhile, the dong devaluation and rising gold prices have also contributed to nullify the benefits of the minimum wage hike.

Minimum monthly salaries at local and foreign firms in Vietnam will increase by between VND100,000 and VND370,000 ($4.8 and $17.6) next year.

Currently, local companies have been ordered to pay their staff a minimum of between VND730,000 and VND980,000 per month (depending on location).

Employees at foreign-invested enterprises are required to receive no less than VND1 million to VND1.34 million.

Double-digit doom

Economists attribute this month's inflation to the impacts of rising prices of gold and US dollar in the domestic market.

Inflation is likely to exceed the government's estimation of 8 percent for this year. Vu Dinh Anh, deputy director of the Institute of Market and Price

Research fears that it may reach double digits.

In a move to tighten monetary control and curb inflation, State Bank of Vietnam increased its base rates from 8 to 9 percent, and left the market to decide interest rates, instead of urging lenders to bring them down.

Some economists say ineffective investments in some projects, and the increasing interest rates, which now stand at 17-20 percent, have pushed up production costs, leading to higher inflation.

Investment disbursement tends to speed up in the last months of the year, while prices are expected to continue to rise as Tet (the Lunar New Year festival) approaches.

Nguyen Minh Phong of the Hanoi Socioeconomic Research Institute said relevant agencies should stabilize prices of food and other essential products, strengthen efforts to curb speculation, and offer capital support to firms which are involved in producing consumer goods to satisfy domestic demand.

Nguyen Tien Thoa, head of the Price Management Department under the Ministry of Finance, said firms need to boost production and cut costs to improve competitiveness.

He further called for a total overhaul of the nation's distribution system, encouraged price promotions and urged an overall reduction in state overspending.

Men on the street

Factory workers and the elderly, the people most affected by the steep rise in prices, would welcome the move as their purchasing power for essential items has been severely reduced. Many workers in industrial parks earn only about VND2 million ($95.2) a month.

Sitting on tiny plastic chairs at a street-side restaurant near Quang Minh Industrial Park, where laborers rent rooms and toil in textile and mechanical firms, a group of construction workers ordered rice, vegetable and fish.

The meager meal for four people cost VND60,000 ($2.86), compared to only VND50,000 a month ago.

In the cramped restaurant, customers squeezed together on dusty tables and on the floor littered with used tissue paper. "Although we try to save money, everything is more expensive, so it is impossible to spend less," one of the workers said.

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