Vietnamese retailers urge tougher scrutiny of foreign retailers’ expansion

August 26, 2009

LookAtVietnam – Domestic retailers say that local officials are too lenient when foreign retailers seek permission to establish new outlets.

When Vietnam joined the WTO, it was agreed that it could restrict the expansion of foreign retailers by subjecting applications for additional branches to an “economic needs test” or ENT.


Vietnamese domestic retailers are now pressing the Ministry of Industry and Trade (MOIT) to administer the licensing review directly, rather than delegate it. They also say that it is necessary to establish clearer norms for ENT, so that domestic and foreign retailers can refer to to understand about their rivals.


In a working session with the MOIT, representatives of Vietnam’s retailing sector expressed fear that if province and city authorities continue to have the right to license foreign retailers, they may discriminate against Vietnamese retailers.


Dinh Thi My Loan, Secretary General of the Vietnam Retailers’ Association, noted that Vietnam can use the economic needs test (ENT) as an effective tool to protect domestic retailers and give them more time to prepare for global economic integration. Such a regime is legal under WTO rules, she emphasized.  A foreign-invested company must apply for a separate license for each outlet.  Approvals are made on a case-by-case basis, according to three criteria: the number of existing service suppliers in a particular geographic area, market stability, and geographic scale.


However, Loan said, there is reason to worry, because local authorities do not apply ENT uniformly, leaving domestic retailers vulnerable to intense competition. Therefore, the Retailers’ Association is urging MOIT to take charge of granting retail outlet licenses under an ENT scheme.


Supporting Loan’s proposal, Vu Thanh Son, General Director of Hanoi Trade Corporation (Hapro), said that domestic retailers are much weaker than foreign rivals and they need protection.


“Foreign retailers are willing to take long-term losses in order to conquer the market. Vietnamese retailers rely on the ENT to protect themselves. However, if local officials retain the authority to grant licenses to foreign retailers, it may be that too many licenses will be granted,” Son said.  He explained that local authorities are more lenient in licensing investment projects as they always want to attract foreign investments.


As an example, Son referred to the “massive licensing” of golf course projects by local administrations.


A Phu Thai retail group representative related that when he surveyed local markets to expand Phu Thai’s retail network, local authorities told him they give priority to foreign investors. He fears that foreign retailers will too easily get the nod from local authorities to open more retail outlets.


Dau Tu newspaper was told, however, that setting up uniform standards for ENT is impossible, because different localities have different socio-economic conditions. MOIT ought not to be in charge of licensing; this is a responsibility for local authorities.


In order to help local officials to make right decisions in licensing retail outlets, the ministry said, that it will soon issue guidance to local authorities.  “Local authorities will draw up the scheme of wholesale and retail outlets in the localities, while the ministry will provide the detailed framework for big cities. This will serve as the basis for local authorities to consult when licensing retail outlets,” said Hoang Tho Xuan, Director of MOIT’s Domestic Market Policy Department.


The Deputy Director of MOIT’s Planning Department, Hoang Thi Tuyet Hoa, has reassured domestic retailers that since Vietnam’s official ‘opening’ of the retail sector, only one additional Metro and one additional Big C have been licensed. Hoa said that domestic retailers should not be too worried about a massive influx of foreign-owned retail outlets due to loose local controls.


Chairman of the Hanoi Supermarket Association Vu Vinh Phu commented that domestic retailers will feel safer if there is a plan governing retail network development across the country.



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