Dec 18, 2012

Vietnam - MOIT’s retail network programming causes worries to domestic retailers

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VietNamNet Bridge – The Ministry of Industry and Trade (MOIT) said it has fulfilled the commitments of setting a leveling playing field for all players--when drawing up the network of supermarkets and shopping malls by 2020. However, domestic retailers have doubts about if this comes true.

Vietnam to have 500 more supermarkets

Under the distribution network development program by 2020-2030 set up in October 2012, Vietnam would have 1200-1300 supermarkets of different kinds, which means that it would have 585-695 more supermarkets in comparison with 2011. It would also have 180 shopping malls, or 82 more. Hanoi and HCM City are the two commercial hubs of the country.

The program clearly stipulates by 2020, supermarkets and shopping malls would serve as the main retail channels in the market, with the goods retail turnover through the channels expected to grow by 26-27 percent per annum by 2015 and 29-30 percent by 2016-2020. Meanwhile, the goods retail turnover through the network is expected to account for 27-30 percent of the total retail turnover by 2015 and 43-45 percent by 2020.

MOIT has promised to create a favorable business environment for all individuals and enterprises from different economic sectors--to make investment in accordance with the approved programming. This is a move to institutionalize Vietnam’s commitments when it joined WTO on opening the retail and service markets to ensure the fair competition between domestic and foreign enterprises.

Will there be fair competition?

Meanwhile, Vietnamese retailers feel worried about their future when they have to compete with foreign retailers believed to land in Vietnam soon.

The biggest worry for domestic retailers is the difficulty in accessing retail premises. This explains why foreign retailers can be certain about their development plan in the market, domestic cannot be sure about their long term strategies because they don’t know if they can find retail premises to fulfill the plans.

Pham Dinh Doan, President of the Phu Thai Group, recalled a story happened five years ago. At that time, four domestic retailers Hapro, Satra, Saigon Co-op and Phu Thai decided to establish VDA, a distribution network investment and development company, with the registered chartered capital of 600 billion dong.

However, Doan said VDA may have to shut down in five years because there has been no policy that effectively helps enterprises access the land fund.

Retailers have been told by local authorities that they would only allocate land if enterprises pay for the land at once. Meanwhile, it’s clear that Vietnamese enterprises, with limited financial capability, cannot satisfy the requirement.

“I heard that the government understands the difficulties of Vietnamese retailers and it wants to give support to them. But there has been still no support, why?” Doan said.

Regarding the issue, Vo Van Quyen, Deputy Head of the Market Management Department under the Ministry of Industry and Trade, admitted that the project on developing the domestic market and the program on retail premises development in the last five years still have problems.

The Prime Minister’s Decision No. 27, dated in 2007 mentioned a lot of investment, tax and land incentives, but none of them has come true over the last five years.

In order to settle the problems, the government plans to amend the Decree No. 108 dated in 2006, that guides the implementation of the Investment Law. It is expected that all the types of investment including trade fairs, storehouses, logistics, shopping malls and markets would be able to enjoy investment incentives.

Compiled by C. V

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