The increase in the price of laban is a clear warning to hard-pressed consumers that other basic commodities will also become more expensive, said a report in Al-Riyadh Arabic daily newspaper. The general public is worried that traders will now take further advantage of the ensuing holy month of Ramadan, a period usually targeted by businesspeople to raise prices without any justification. The newspaper said it has called on the Ministry of Commerce several times over the past few days to explain why there has been an increase in laban prices. There has, however, been no response so far. “The spike in prices is a blatant challenge to government efforts to provide basic products at reasonable prices,” Abdulrahman Al-Zoman, an economics consultant and member of the Global Association of Risk Professionals (GARP), was quoted as telling the paper. The increase will negatively impact the prices of other products over the next few weeks, he stressed, adding that laban companies should have decreased prices because they are already making huge annual profits. Al-Zoman said these companies get substantial support from the government, including easy loans, facilities, free plots of land, customs exemptions, and unlimited number of recruitment visas. These firms are also not required to pay fees and taxes as is the case in other parts of the world. However, these companies want to make major profits, regardless of the current economic realities, he said. “The Kingdom has a free market system where supply and demand factors control prices. But when the prices of basic products start to increase, most countries impose strict measures on price manipulation and monopolies and penalize violators,” said Al-Zoman. He said local dairy companies formed an oligopoly in 2008 and raised laban prices by 33 percent in one day amid demands by the then minister of commerce and industry to lower prices. These companies have continued to dominate the market with these practices, he added. He said the increase in the price of laban has resulted in price hikes of other products. Al-Zoman said the ministry must play its role by fining dairy companies for raising prices without justification. He said dairy companies make huge profits and must not use higher production costs as an excuse to raise prices. He said the Supreme Economics Council should also intervene. Those who breach certain economics principles should be stripped of all advantages they currently enjoy. He added that such companies want to cover up the mistakes of their administration staff by taking extra cash money from citizens. Al-Zoman said if a large company raises prices by seven percent, it is likely to make SR500 million. He suggested that companies should be forced to file an application with the Ministry of Commerce before raising prices. The companies must state why they are raising prices and provide supporting documentation. The increase should not be related to management problems but rather to factors outside the control of the company, such as an increase in global production input costs or losses during the previous financial year. Moreover, there should be no more than a five percent increase and consumers should be given a period of six months before the new price becomes effective. Al-Zoman called on the Ministry of Commerce to pay unannounced inspection visits to companies, factories and importers, and to check their accounts. Violators should be fined and have their names published in the daily newspapers. If they commit a second violation, they should be deprived of all government assistance and facilities. If they insist on committing violations, their responsible directors should be imprisoned. The ministry should also ask companies to drop prices at a certain percentage if their profits are more than 25 percent. Or it should ask the company to pay taxes, which could be used to fund social programs.
