Foreign business associations have urged the Government to loosen andmake more transparent the economic needs test (ENT) that foreignretailers have to pass to establish their second and subsequent outlets.
With a population of nearly 90 million, rapid economicgrowth, and a youthful population eager to keep up with the latesttrends, Vietnam is a potential gold mine for retailers, Hong Sun,secretary general of the Korea Chamber of Business in Vietnam, told aconsultation and dialogue held with businesses on ENT criteria in Ho ChiMinh City on March 28.
"But foreign distribution companieshave not been able to fully penetrate the market due to the ENT process –an effective tool the Vietnamese Government has used to control thedevelopment of foreign distribution networks in Vietnam," he said.
During the ENT process, the licensing authority examines thesuitability of the retail outlet in an area based on factors likepopulation density, number of existing retail outlets there, marketstability, and local zoning plans.
"With ENT, the licensingauthorities in Vietnam have been able to disallow foreigndistributors from opening a second and subsequent distribution outletsif they conclude that the new outlets are not necessary," Hong said.
But the Ministry of Industry and Trade last year issued a circular torelax conditions, allowing an ENT exemption for foreign retailersestablishing an outlet of 500 sq.m or less in an approved area withcomplete infrastructure.
Csaba Bundik, executive director ofEuroCham Vietnam , said Vietnam opened its distribution market to100 per cent foreign ownership as part of its WTO commitments, but theENT criteria causes difficulties for foreign retailers seeking to expandtheir networks.
The ENT is vaguely defined and there is nonation-wide implementing legislation to clarify the ENT criteria,resulting in unpredictable, discretionary, and varied interpretation bydifferent local authorities, he said.
He called for a cleardefinition and criteria for ENT, adding that the Ministry of Industryand Trade and other relevant ministries need to provide clear guidancefor investors and licensing agencies and to ensure that the criteria areapplied consistently by local authorities.
Vo Van Quyen,director general of the Domestic Market Department, said: "Because ofthe very poor starting point for its retail sector, the country obtaineda very important agreement from WTO members on the application of theENT in relation to establishment of a retail sale point which is not thefirst one."
Distribution is a highly regulated sector forforeign investors, and this was the premise based on which the countryopened its doors to them, he explained.
Authorities collectedfeedback from involved parties like foreign direct investment retailersand regulating organisations to draft ENT regulations to ensuretransparency, he said.
But the implementation of theregulations is inconsistent, he admitted and promised that efforts wouldbe made to improve the situation and smoothen things for foreignretailers.
Dinh Thi My Loan, chairwoman of the VietnamRetailers Association, said: "In reality, Vietnam opened its marketearlier than committed with the WTO.”
"The ENT is not at all abarrier for foreign investors to enter Vietnam 's retail market," shesaid, adding that the changed regulations make it easier for foreignretailers to open small outlets.
The more than 700 supermarketand megamarket outlets and over 100 shopping malls in the countryaccount for only 25 percent of the distribution in Vietnam, meaningthere is plenty of opportunity left for foreign investors, she said.
Hong Sun said: "A more wide open market will attract more foreigninvestors to the distribution sector in Vietnam . At the same time,domestic companies need not worry since they have better access totraditional distribution channels and have a better understanding ofdomestic consumers."
But foreign investors are not willing tomake a substantial investment to open one retail outlet without somelevel of confidence that they would be permitted to open additionaloutlets in the future, he said.-VNA
With a population of nearly 90 million, rapid economicgrowth, and a youthful population eager to keep up with the latesttrends, Vietnam is a potential gold mine for retailers, Hong Sun,secretary general of the Korea Chamber of Business in Vietnam, told aconsultation and dialogue held with businesses on ENT criteria in Ho ChiMinh City on March 28.
"But foreign distribution companieshave not been able to fully penetrate the market due to the ENT process –an effective tool the Vietnamese Government has used to control thedevelopment of foreign distribution networks in Vietnam," he said.
During the ENT process, the licensing authority examines thesuitability of the retail outlet in an area based on factors likepopulation density, number of existing retail outlets there, marketstability, and local zoning plans.
"With ENT, the licensingauthorities in Vietnam have been able to disallow foreigndistributors from opening a second and subsequent distribution outletsif they conclude that the new outlets are not necessary," Hong said.
But the Ministry of Industry and Trade last year issued a circular torelax conditions, allowing an ENT exemption for foreign retailersestablishing an outlet of 500 sq.m or less in an approved area withcomplete infrastructure.
Csaba Bundik, executive director ofEuroCham Vietnam , said Vietnam opened its distribution market to100 per cent foreign ownership as part of its WTO commitments, but theENT criteria causes difficulties for foreign retailers seeking to expandtheir networks.
The ENT is vaguely defined and there is nonation-wide implementing legislation to clarify the ENT criteria,resulting in unpredictable, discretionary, and varied interpretation bydifferent local authorities, he said.
He called for a cleardefinition and criteria for ENT, adding that the Ministry of Industryand Trade and other relevant ministries need to provide clear guidancefor investors and licensing agencies and to ensure that the criteria areapplied consistently by local authorities.
Vo Van Quyen,director general of the Domestic Market Department, said: "Because ofthe very poor starting point for its retail sector, the country obtaineda very important agreement from WTO members on the application of theENT in relation to establishment of a retail sale point which is not thefirst one."
Distribution is a highly regulated sector forforeign investors, and this was the premise based on which the countryopened its doors to them, he explained.
Authorities collectedfeedback from involved parties like foreign direct investment retailersand regulating organisations to draft ENT regulations to ensuretransparency, he said.
But the implementation of theregulations is inconsistent, he admitted and promised that efforts wouldbe made to improve the situation and smoothen things for foreignretailers.
Dinh Thi My Loan, chairwoman of the VietnamRetailers Association, said: "In reality, Vietnam opened its marketearlier than committed with the WTO.”
"The ENT is not at all abarrier for foreign investors to enter Vietnam 's retail market," shesaid, adding that the changed regulations make it easier for foreignretailers to open small outlets.
The more than 700 supermarketand megamarket outlets and over 100 shopping malls in the countryaccount for only 25 percent of the distribution in Vietnam, meaningthere is plenty of opportunity left for foreign investors, she said.
Hong Sun said: "A more wide open market will attract more foreigninvestors to the distribution sector in Vietnam . At the same time,domestic companies need not worry since they have better access totraditional distribution channels and have a better understanding ofdomestic consumers."
But foreign investors are not willing tomake a substantial investment to open one retail outlet without somelevel of confidence that they would be permitted to open additionaloutlets in the future, he said.-VNA
