Jan 15, 2013

Vietnam - Report says oligopoly exists in 6 business fields

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VietNamNet Bridge – The Competition Administration Department (CAD), an arm of the Ministry of Industry and Trade (MOIT), which conducted a survey on 10 business fields, has found out that oligopoly exists in six of them.

Monopoly will lead to unhealthy competition

The 10 surveyed business fields included trucks, buildings glass, detergent, paper, vegetable oil, pharmacy distribution, sea transportation, non-life insurance, advertisement and pay-TV.

The six business fields in which CAD found oligopoly include detergent, vegetable oil, trucks, insurance and pay-TV.

Under the Competition Law, when the CR3 (concentration ratio) is higher than 65 percent, which means that the three biggest enterprises hold more than 65 percent of the market share, the dominant position, or oligopoly exists.

Of the five surveyed manufacturing sectors, the above said structure has been found in three: trucks, detergent and vegetable oil

Of the five service sectors, the highest CRs have been found in non-life insurance and pay-TV. Three non-life insurance companies leading the market are now holding 76.7 percent of the market share, while the ratio is 65 percent in pay-TV.

The sea transportation also has a relatively high concentration ratio with three biggest enterprises holding 65 percent of the market share.

According to Tran Phuong Lan, Head of the Competition Supervision and Management Division of CAD, once a group of businesses holds big market share, this may lead to unhealthy competition, including the abuse of the dominant positions or the anti-competitive agreements. The group of businesses would corner the market, control the prices, thus causing damages to small businesses and enterprises.

However, the CAD’s report has shown that no anti-competitive behavior in the fields has been found in manufacturing sectors. However, the problem is so serious in service sectors.

Service providers posted the ad pieces with the content speaking ill of the rivals, or deliberately showed the indications that may lead to misunderstanding, thus badly affecting the images of the rivalry brands.

Regarding the issue, Dr Dinh Van Thanh, Head of the Trade Research Institute, has noted that the CAD’s report, though mentioning some anti-competition behaviors, has not named the violating enterprises.

“Is it difficult to punish the unhealthy competition behaviors conducted by the enterprises?” Thanh questioned.

Domestic enterprises still inferior to foreign

According to the Vietnam Advertisement Association, there are more than 4000 firms operating in the ad industry, but only 50-100 firms have been providing ad services in the true sense of the word, while the remaining just provide supporting services or make billboards.

The noteworthy thing is that only several foreign ad firms now hold up to 80 percent of the market share.

Therefore, the group of researchers from CAD has suggested to tightly control the merger and acquisition (M&A) deals forecast to witness a boom in the time to come. M&A would bring Vietnamese ad firms the opportunities to provide ad services themselves instead of acting as second-class agents or subordinate contractors for foreign ad firms.

Regarding the sea transport, Lawyer Tran Huu Huynh, Chair of the Advisory Council for International Trade Policies, said Vietnam is pursuing the sea-borne economic development strategy. However, Vietnamese shipping firms remain weak in competitiveness and they have been just working as the agents for foreign firms. Therefore, this remains a big question for policy makers.

Also according to Huynh, the associations of Vietnamese enterprises still cannot do much to protect their member companies and the industries, which partially explains why Vietnamese enterprises do not have a voice in the market.

Compiled by C. V

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