Foreign businesses asks to clarify conditions for opening retail points
According to Hong Sun, Secretary General of the ROK Chamber of Commerce in Vietnam, South Korean retailers have high interests in the Vietnamese market. However, distribution is a conditional business in Vietnam.
To date, foreign distributors still cannot penetrate the Vietnamese market deeply because of the barriers installed by the government, including the ENT (economic needs test).
Sun believes that ENT is a tool being used by the government of Vietnam to control the development of the foreign invested distribution network in Vietnam.
With ENT, Vietnamese management agencies have the right to refuse the foreign retailers’ proposals to open second and subsequent retail points, reasoning that the retail points are not necessary in the localities.
In fact, the government of Vietnam has been trying to create more favorable conditions for foreign retailers to develop their networks in Vietnam.
In 2013, the Ministry of Industry and Trade released the Circular No. 08, stipulating that the ENT would not be required in case foreign distributors plan to set up the retail points with the area of less than 500 square meters in the areas programmed for the goods trade development.
The regulation is described as “more open” than that committed by Vietnam when joining to the World Trade Organization (WTO). It is believed to facilitate foreign invested enterprises to open small scale retail points.
Nevertheless, Sun noted that foreign investors still face barriers because they have to ask for the permission to set up new retail points.
Meanwhile, the Circular No. 08 does not stipulate the time-limit for management agencies to decide whether to approve the foreign retailers’ proposals on the opening of new retail points. The delays by the concerned agencies in dealing with administrative procedures would affect foreign investors’ business.
Sun went on to say that it is the ENT mechanism which has made South Korean investors hesitant to implement their business expansion plan. The investors include Lotte Mart with the plan to open 60 retail points by 2020.
Meanwhile, Emart showed its intention to invest in Vietnam a long time ago, but it has not set up any retail point so far.
He believes that there is no need to be too cautious in protecting Vietnamese retailers by pursuing the ENT mechanism, which would prevent foreign investors.
Csaba Bundik, Managing Director of EuroCham Vietnam, also noted that the ENT has hindered the European investors’ plans to expand their business.
He thinks that the ENT is “vague” which leads to different ways of interpretations. In many cases, local authorities have to consult with the central agencies before making decisions, which would cost foreign investors a lot of time to wait for final decisions.
In reply, Dinh Thi My Loan, Chair of the Vietnamese Retailers’ Association, admitted that Vietnamese retailers, which remain weak in financial capability and experiences, need the protection by the government.
She also said that the Vietnam’s process of opening its retail market has been going more rapidly than the committed process, which can be reflected in the large presence of foreign retailers in Vietnam in recent years.
