JEDDAH, 27 February 2008 — Despite a royal order given two months ago by Custodian of the Two Holy Mosques King Abdullah to subsidize baby milk, prices have remained unchanged, according to consumers.
The objective behind the subsidy was to ease financial woes of citizens due to rising inflation. However, consumers are beginning to feel that they are simply being pacified by the system instead of being given genuine assistance.
“I don’t believe the news reports that prices of commodities are to be cut or that there is a subsidy that is to be applied,” said Tarek (not his real name), adding that even if the suppliers and distributors are given a subsidy retailers will not lower prices rendering the government’s efforts to support consumers ineffective,” he said.
The duty of carrying out the subsidy order, which was increased from SR2 to SR12 per kilogram of the infant formula, was assigned to the Ministry of Finance in December and was to be followed up by Ministry of Commerce and Industry to ensure that the subsidy was trickling down to consumers’ end prices rather than being absorbed by the retailers.
However, results of a recent investigation into the prices of baby formula at Jeddah retailers found the prices unchanged. Prices ranging from SR20 to SR32 per 400g were found to be the average in most pharmacies and supermarkets and are resulting in most consumers asking what the holdup is on implementing the subsidy and getting prices decreased.
“We have been hearing a lot about a subsidy and how prices of baby milk are going to be lowered, but I have yet to see any difference,” said Hadeel, a Saudi mother of three who is expecting her fourth child.
Arab News contacted the Ministry of Commerce several times by phone and fax but received no replies to the numerous requests for comment.
Nashwa Taher, head of the Commercial Committee of the Jeddah Chamber of Commerce and Industry (JCCI), reportedly met with a team to gather suggestions to recommend to the ministries of commerce and industry and finance on what could further be done to help lower consumer prices.
The report mentioned that a number of retailers and business owners were apprehensive about the delay of the financial support, raising concerns that they wanted the procedures to run faster and would like to obtain the subsidy upon delivery of goods at ports instead of waiting to be paid from government offices in Riyadh. The report further stated that Taher plans to relay the results of the meeting to both ministries and expects action to be taken soon.
Nevertheless, consumers are still curious to know which entity is responsible for setting prices of baby milk and other commodities in the first place, whether it be a governmental body, individual retailers or suppliers, and continue to ask why prices are continuing to remain high, unaffected by the governmental mandate.
Arab News spoke to several pharmacies and supermarkets, which declined giving concrete answers on who is setting prices at their particular business establishments.
Following several inquiries a representative of a prominent Saudi pharmacy in Jeddah, who wished to remain anonymous, said: “We are not the ones who are setting our own prices on baby milk, medicines, or other goods.”
He added that a price list from the supplier accompanies each product shipment stating the wholesale price and includes the recommended retail price for each item. “Our pharmacy has been following strictly recommendations from our overseas product suppliers and Saudi distributors regarding suggested retail prices and are utilizing every effort in keeping prices stable,” the source said, adding that he believes that the bulk of price competition is being stemmed from the suppliers themselves.
Arab News contacted major suppliers of baby milk to the Kingdom inquiring about the guidelines used in determining the recommended retail price that is being passed on to consumers. Of the suppliers contacted, Nestle Middle East responded and explained their policy on deciding prices.
“Price-setting takes into account our landed cost to the distributor, which covers the cost of goods, shipping costs, port handling charges and insurance,” said Raef Labaky, spokesperson for Nestle Dubai, adding that prices as of late have also been influenced by the escalating increase in raw material prices worldwide, shipping costs due to high oil prices and exchange rates. “The recommendation of retail prices, as suggested to our distributors and retail outlets, is as per its very designation, a recommendation, which the individual businesses may or may not follow depending on their business environment and interests.”
Distributors of international products in the Kingdom have also said they have passed on recommendations obtained from suppliers to retailers and it is the sole responsibility of the traders selling baby milk products to control prices.
But regardless of whose fault this is, one fact is certain: The price predicament has created a cycle of blame but has done little to ease the financial burden, which is becoming a common phenomenon. It is certain that no one seems to know who is responsible for setting high prices or why they haven’t been lowered for that matter but in the end the group left to pay for the decision is clearly the consumer.
