Foreign retailers want consistent rules on opening of new stores
By Hung Le – The Saigon Times Daily
HCMC – Foreign business associations have called for authorities to make conditions lax, transparent and consistent for opening new retail stores to facilitate the expansion of their member firms in this fast growing market.
Speaking at a seminar on the economic needs test (ENT) for store opening in HCMC last week, Hong Sun, general secretary of the South Korean Business Association in Vietnam, said Korean retailers were interested in the Vietnamese market. He, however, noted distribution is a conditional business field for foreign firms, so they have found it tough to deeply penetrate into this market due to many barriers, especially the ENT.
The ENT is a tool for the Government to curb the swift expansion of foreign retailers in Vietnam, Sun said. With this requirement in place, authorities have the right to turn down foreign retailers’ applications for opening their next store.
Given Circular 08/2013/TT-BCT issued by the Ministry of Industry and Trade, the foreign retailers do not have to follow the ENT conditions if they want to open a new outlet of less than 500 square meters in the area where a centrally-governed city/province has zoned for trading activities. This requirement, which has been implemented ahead of Vietnam’s commitments to the World Trade organization (WTO), is considered a tool to compel foreign direct investment (FDI) firms to open small-scale outlets.
However, enterprises still have to follow rules on store establishment procedures. Besides, Circular 08 does not set a deadline for the application approval at the grassroots level, resulting in a slow licensing process for FDI firms.
The ENT conditions have discouraged or slowed expansion plans of many Korean retailers in Vietnam, including Lotte Mart with an ambitious scheme to open 60 stores in Vietnam by 2020.
Sun suggested that the Government should not be too cautious in protecting domestic retailers by adopting unclear rules like that on the ENT.
Csaba Bundik, executive director of the European Chamber of Commerce in Vietnam (EuroCham), said the ENT had hindered business plans of many European retailers. The ENT remains unclear and different local authorities have interpreted it in different ways. Therefore, local authorities have had to wait for relevant ministries’ instructions, thus making the approval process time-consuming.
Bundik said there should be a clear definition and criteria for the ENT for local authorities to implement consistently to encourage foreign retailers’ investment.
Dinh Thi My Loan, chairwoman of the Vietnam Retailers Association, said Vietnam had opened up the retail market much more than its commitments to the WTO and this was demonstrated through the presence of many FDI firms in the sector over the past years. As Vietnamese firms remain weak in terms of finance, experience, brand building and technology, they may not compete with their FDI counterparts if the ENT is lifted.
However, Vo Van Quyen, head of the Ministry of Industry and Trade’s Domestic Market Department, admitted that there was confusion and inconsistency in application of the ENT so a revision of it was needed.
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