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Foreign retailers bounding through legal loopholes
With advantages in finances and experience, more and more foreign retailers are arriving in Vietnam’s market. Meanwhile, legal loopholes are helping them penetrate the market more easily.
Landing in Vietnam
Vietnamese consumers nowadays are familiar with foreign retailers’ names like Parkson (Lion group, Malaysia), Big C (Casino, France), Metro (Metro Cash & Carry, Germany), or Dairy Farm (Hong Kong).
At the end of 2008, Japanese Best Denki, specialising in retail electronic products, arrived in Vietnam through a franchise contract with Carings, the retail brand name of Ben Thanh Marketing Company, setting up a home appliance centre at Lotte building in district 7, HCM City.
Most recently, Lotte Mart, a subsidiary of South Korea’s Lotte Group, announced it had officially joined Vietnam’s retail market by shaking hands with a domestic company to establish a joint venture to run Lotte supermarts in Vietnam.
It is clear that foreign retail groups cherish the hope of expanding their operations in Vietnam. Besides commercial hubs Hanoi and HCM City, retailers have expanded their operations to cities in the central region and west.
By early 2009, German Metro Group had eight distribution centres in big cities in the country. In April, the An Giang People’s Committee will give cleared land to Metro so that the group can set up a supermart to distribute commodities in the province, marking nine retail points in the country.
Similarly, Big C is also preparing for its ninth supermart to open. Big C said that it has got an investment licence from the Thua Thien-Hue People’s Committee for a Big C in Hue city project.
Lotte Mart is planning on opening its second supermart in HCM City at the earliest possible time.
Regulations? Existing, but ineffective
Dinh Thi My Loan, Secretary General of the Association of Vietnamese Retailers, (AVR) in a recent meeting, said that Vietnam has been lax about the implementation of the Economic Needs Test (ENT) under its WTO commitments.
Under the ENT, the licencing of foreign retailers is carried out based on three factors: geographical position, the number of service providers in localities and the market stability for the second and additional retail points.
In September 2007, the Ministry of Industry and Trade of Vietnam promulgated a document, stipulating two more factors for consideration when licencing foreign retailers: population density and the suitability of investment projects to local planning.
However, the regulations have not been obeyed.
AVR said that Vietnam needs to have concrete guidelines on the implementation of ENT and carry out the ENT in all localities in the country.
Analysts have also pointed out that foreign retailers have ignored the regulations on the commodity items they are allowed to trade, while Vietnam’s state management agencies have not ‘raised their voices’.
Under Vietnam’s WTO commitments, Vietnam is entitled to a permanent exclusion list of goods foreign retailers can’t sell at their distribution chains (tobacco, cigars, books, newspapers, journals, precious metals, gemstones, pharmaceuticals, rice, sugar, and some others), and a temporary exclusion list of commodities (cement, clinker, steel, wine and fertiliser).
Despite the regulations, rice and sugar are still being sold by foreign retailers. AVR said that every subject in the market must obey the regulations, and that Vietnam needs to take actions to protect its rights.
VietNamNet/VnMedia
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