April 19, 2014
It was no longer a lone voice of a single business. At a recent dialogue with businesses on the ENT criteria for retail outlets of foreign-invested enterprises in Vietnam, foreign business associations unanimously demanded for further loosened and more transparent regulations on their outlets.
Hong Sun, general secretary of the Korean Chamber of Commerce in Vietnam, acknowledged ENT is a tool used to control the growth of foreign distribution networks in Vietnam. “With ENT, the licensing agency is fully authorized to turn down proposals to open a second outlet or subsequent one. This is not necessary in localities,” Sun said at the event held in HCMC.
Retailers need warehousing and cold storage facilities for their goods. If each of them only has one or two outlets in a city or a province, investment in the storage system will hardly be commercially viable. Likewise, a meager number of outlets may push retailers to a harder time negotiating with vendors for a good price, Sun explained.
He said the South Korean Government used to fear that foreign retailers would dominate the domestic market. However, time has proven that wider market openness is beneficial to both consumers and domestic firms. While consumers benefit more from fiercer competition between retailers at home and from abroad, domestic enterprises have to improve themselves to be effectively competitive and learn from management and sale experience of foreign retailers.
The effort of South Korean enterprises coupled with their understanding of local consumer tasted has helped them defeat world-class rivals, Sun remarked. Reportedly, Wal-Mart of the U.S. and Carefour of France had to pull out this market after a time of trying in vain. Now, the South Korean retail market is occupied and dominated by domestic players.
Citing the success story of South Korean as an example, Sun said Vietnam’s worry about opening the door of the distribution market wider for foreign investors is groundless. Not only can the domestic market access modern distribution channels, expansion of retail networks also offers local agricultural products a bigger distribution channel.
Also at the event, Casba Bundik, executive director of the European Chamber of Commerce in Vietnam (Eurocham Vietnam), said European investors considered Vietnam’s retail market promising and looked to deepen their presence here. Yet, ENT is hindering the business plans of entrepreneurs of the European Union, he said.
According to Bundik, the ENT criteria were ambiguous, which easily leads to confusing interpretations and understanding among localities. Therefore, when a foreign-invested enterprises seeks permission for a new outlet, the local authorities need to consult with relevant ministries, a very complicated and time consuming process. He suggested redefining and clarifying ENT criteria. Also, execution at the local level should also be uniform so that businesses can rest assured.
The door is already open
Dinh Thi My Loan, chairwoman of the Vietnam Retailers Association, said Vietnam’s opening of the local retail market has outpaced the schedule she committed to the World Trade Organization (WTO). This was evidenced by the presence of many foreign players in this industry, Loan added.
She said most WTO members have ENT policies on foreign investors in their local distribution markets. In comparison with them, Vietnam’s ENT is at “medium level”, meaning it is neither too hard nor too easy for foreign distributors to expand their network, Loan argued.
Regarding the comment that Vietnamese ENTR criteria are vague, Loan gave a flat no. “Vietnam is ready to learn ENT rules that are clear and easy to understand,” she said. “We have studied ENT of France and some other European countries”.
She likened the local retail market to a wrestling ring, in which Vietnamese firms are tiny Davids having to engage in direct competition with Goliaths who are giant and more experienced foreign players. She argued that in such a country with a low starting point of modern retailing as Vietnam, there needs to be a referee for a battle among players of the same weight, rather than letting competitors of different weight categories compete in the showdown. As local firms are still weak, it takes time for them to learn, so ENT is necessary at the moment, she affirmed.
To make it more favorable for foreign businesses to expand retail operations in Vietnam, the Ministry of Industry and Trade last year promulgated Circular 08/2013/TT-BCT, which allows foreign-invested enterprises to comply with no ENT when they open a retail outlets of less than 500 square metres, said Vo Van Quyen, head of the Domestic Market Department under the Ministry of Trade and Industry.
(By Quoc Hung)