Government dedicated to freeze on construction costs

Pham Van Khanh, Director of the Department of Construction Economics, spoke to Dau tu (Investment) about measures to stabilise the price of building materials

Can the recent increase in the cost of building materials be attributed to the soaring electricity, coal, oil and gas prices?

The Government is determined to control the cost of building materials in accordance with market rules.

Electricity, coal, oil and gas price hikes have pushed up production and freight costs, bringing about an increase in steel, cement, sand and stone prices. Supply and demand are no longer the biggest factors affecting costs. For example, the price of cement is only increasing slowly when it should have increased much more, due to a shortage. In years to come when more cement factories are operational, we will have a surplus of cement and prices will be less affected by increased electricity, coal, oil and gas prices.

Have the increased costs of building materials alarmed the local building materials market?

They have increased to a worrying level. The cost of sand, for example, has increased by 20 per cent in some areas. The increase can partially be blamed on increased freight costs due to the record low water levels on the Hong (Red) River which have forced businesses to transport materials by road. But I believe that prices will be steadied as the Government is intensifying efforts to curb inflation.

What has the Government and the Ministry of Construction done to stabilise the cost of building materials?

Under Decree 112 dated December 14, 2009, the Government forbids developers from altering the costs of projects during construction and after completion due to fluctuations in the costs of building materials. Instead, the decree states that developers should calculate the costs of projects taking into account potential changes in the price of materials.

The Ministry of Construction will also issue a guideline circular to implement the decree. The circular will help to minimise the impact of inflated prices when projects are under construction.

The Government will also promulgate another decree to ensure transparency and equality in management over construction activities. The decree aims at stabilising the market.

The Ministry of Finance will also conduct a price check to combat speculation and inflated prices

Are the costs of building materials likely to increase like they did in 2007 and 2008?

In my opinion, no. The Government is experienced such matters and is curbing inflation more effectively than before. Supply and demand will not have a big affect this year. Moreover, the construction materials market is being affected by a tight credit policy.

VIETNAMNEWS

Tags: Vietnam Construction