VietNamNet Bridge – It is clear that Vietnam needs to do a lot of things to develop the local distribution network and help its enterprises become stronger before foreign retailers land in the market. The uncertainty lies in the details.
Time is precious
Vietnamese retailers will have two more years to strengthen themselves before foreign retailers land in the market in 2009, when the market door opens for them, said Deputy Minister of Trade Nguyen Thi Kim Ngan, adding that Vietnamese enterprises do not have much time.
Hoang Tho Xuan, Director of the Domestic Market Policies Department under the Ministry of Trade, said that the biggest problem now is the lack of a comprehensive distribution network development strategy, and that local authorities project the network expansion just by ‘feeling’.
“In many localities, advantageous places are reserved for agencies’ headquarters, while markets and supermarkets are ‘hidden’ in corners or put on disadvantageous positions. The investors of the markets and supermarkets seem to ignore the habits of local residents,” Mr Xuan said.
Huynh Van Minh, Director General of Satra, said that the corporation is building a 4ha supermarket at the Moc Bai border gate in Tay Ninh Province. A traditional market has appeared, adjacent to the supermarket, in front of which is a duty-free shop. As such, four markets co-exist in the border area with low population.
“The high density of distribution centers would make the business operation less effective,” said Mr Minh.
He has pointed out that the bad programming of distribution network development is the main reason behind the overlapping and waste of sources.
Meanwhile, Mr Xuan has acknowledged that until now, the Ministry of Trade (MoT) still has not drawn up the detailed programme on traditional market and supermarket development nationwide.
He said that one of the key solutions to develop the domestic trade is to change the viewpoint on trade development. Meanwhile, according to him, “MoT has not received any sums of money sourced from the official development assistance (ODA) for trade development”.
Therefore, MoT is intensively promoting for an ODA project on trade development provided by the Finnish Government worth more than $20mil, which would focus on distribution network development. Mr Xuan stressed that it is imperative to make heavy investment in trade as in other fields.
Wal-Mart to enter Vietnam?
Under the WTO commitments, from January 2007, foreign investors can set up distribution joint ventures, in which they can hold up to 49% of capital. The capital contribution ratio would be raised to 50% in 2008. From 2009, Vietnam will open its market door for 100% foreign owned retailers.
Will the giant retailers like Wal-Mart, JC Penny, Target or Metro land in Vietnam in 2009?
“They are likely not to enter Vietnam immediately after January 1, 2009,” said Tran Quoc Khanh, Director of the Multilateral Trade Policies Department under MoT.
According to him, big retailer groups in the world seek the way to penetrate a market only when they find out that the income of the population of that country increases high enough to ensure high purchasing power, and ensure profit for the retailers.
Mr Khanh said that when negotiating the issues relating to the retail market opening, Vietnam has successfully maintained the principle of ‘licensing based on the demand of the national economy’, i.e Vietnam will consider every concrete project to decide whether to license.
“With such a provision, Vietnam will be able to limit the number of retail points to be set up by foreign investors, by setting up technical requirements,” said Mr Khanh.
He has announced that MoT is thinking about whether to set up the requirements to be applied nationwide, or to let local authorities to set up requirements after considering local specific conditions. For example, Vietnam should not limit the opening of trade centers in several provinces in the north. However, it would limit the number of supermarkets in Hanoi, HCM City or Bien Hoa City. In these localities, we may set up the regulation that only one supermarket is allowed to be set up in the area with the population of 50,000 people.
Mr Khanh has also reminded that it is necessary to keep a balance when programming trade development. The retail industry is considered a ‘sensitive’ branch, as it has big impacts on the life of small businessmen. However, in fact, the retail industry only can help create jobs, while the wholesale sector is really the important sector as it can create the biggest added value.
Huynh Van Minh, Director General of the Saigon Trade Corporation (Satra):
We are trying to speed up the implementation of the projects in order to get prepared for the fierce competition to come in 2009.
Satra has contributed to the establishment of the Trade Infrastructure Development and Investment Joint Stock Company (VDA), which will focus on developing the depot network in different regions of the country, build up big supermarkets, and make financial investment in big enterprises.
We need the support from the State to run the projects smoothly. Complicated procedures prove to be the biggest barrier for retailers: it takes time and money to set up a new distribution point.
Phan Thi Van Anh, Deputy Director General of Saigon Outlet Mall:
Saigon Outlet Mall has just opened a branch in Binh Duong, which has the investment capital of $30mil. It is too early to make sure about the success, however, I believe in the success of the mode of outlet mall, i.e every producer (or sole distributor) has its pavilion with large premise to sell their products directly to clients
(Source: Tuoi tre).
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Time is precious
Vietnamese retailers will have two more years to strengthen themselves before foreign retailers land in the market in 2009, when the market door opens for them, said Deputy Minister of Trade Nguyen Thi Kim Ngan, adding that Vietnamese enterprises do not have much time.
Hoang Tho Xuan, Director of the Domestic Market Policies Department under the Ministry of Trade, said that the biggest problem now is the lack of a comprehensive distribution network development strategy, and that local authorities project the network expansion just by ‘feeling’.
“In many localities, advantageous places are reserved for agencies’ headquarters, while markets and supermarkets are ‘hidden’ in corners or put on disadvantageous positions. The investors of the markets and supermarkets seem to ignore the habits of local residents,” Mr Xuan said.
Huynh Van Minh, Director General of Satra, said that the corporation is building a 4ha supermarket at the Moc Bai border gate in Tay Ninh Province. A traditional market has appeared, adjacent to the supermarket, in front of which is a duty-free shop. As such, four markets co-exist in the border area with low population.
“The high density of distribution centers would make the business operation less effective,” said Mr Minh.
He has pointed out that the bad programming of distribution network development is the main reason behind the overlapping and waste of sources.
Meanwhile, Mr Xuan has acknowledged that until now, the Ministry of Trade (MoT) still has not drawn up the detailed programme on traditional market and supermarket development nationwide.
He said that one of the key solutions to develop the domestic trade is to change the viewpoint on trade development. Meanwhile, according to him, “MoT has not received any sums of money sourced from the official development assistance (ODA) for trade development”.
Therefore, MoT is intensively promoting for an ODA project on trade development provided by the Finnish Government worth more than $20mil, which would focus on distribution network development. Mr Xuan stressed that it is imperative to make heavy investment in trade as in other fields.
Wal-Mart to enter Vietnam?
Under the WTO commitments, from January 2007, foreign investors can set up distribution joint ventures, in which they can hold up to 49% of capital. The capital contribution ratio would be raised to 50% in 2008. From 2009, Vietnam will open its market door for 100% foreign owned retailers.
Will the giant retailers like Wal-Mart, JC Penny, Target or Metro land in Vietnam in 2009?
“They are likely not to enter Vietnam immediately after January 1, 2009,” said Tran Quoc Khanh, Director of the Multilateral Trade Policies Department under MoT.
According to him, big retailer groups in the world seek the way to penetrate a market only when they find out that the income of the population of that country increases high enough to ensure high purchasing power, and ensure profit for the retailers.
Mr Khanh said that when negotiating the issues relating to the retail market opening, Vietnam has successfully maintained the principle of ‘licensing based on the demand of the national economy’, i.e Vietnam will consider every concrete project to decide whether to license.
“With such a provision, Vietnam will be able to limit the number of retail points to be set up by foreign investors, by setting up technical requirements,” said Mr Khanh.
He has announced that MoT is thinking about whether to set up the requirements to be applied nationwide, or to let local authorities to set up requirements after considering local specific conditions. For example, Vietnam should not limit the opening of trade centers in several provinces in the north. However, it would limit the number of supermarkets in Hanoi, HCM City or Bien Hoa City. In these localities, we may set up the regulation that only one supermarket is allowed to be set up in the area with the population of 50,000 people.
Mr Khanh has also reminded that it is necessary to keep a balance when programming trade development. The retail industry is considered a ‘sensitive’ branch, as it has big impacts on the life of small businessmen. However, in fact, the retail industry only can help create jobs, while the wholesale sector is really the important sector as it can create the biggest added value.
Huynh Van Minh, Director General of the Saigon Trade Corporation (Satra):
We are trying to speed up the implementation of the projects in order to get prepared for the fierce competition to come in 2009.
Satra has contributed to the establishment of the Trade Infrastructure Development and Investment Joint Stock Company (VDA), which will focus on developing the depot network in different regions of the country, build up big supermarkets, and make financial investment in big enterprises.
We need the support from the State to run the projects smoothly. Complicated procedures prove to be the biggest barrier for retailers: it takes time and money to set up a new distribution point.
Phan Thi Van Anh, Deputy Director General of Saigon Outlet Mall:
Saigon Outlet Mall has just opened a branch in Binh Duong, which has the investment capital of $30mil. It is too early to make sure about the success, however, I believe in the success of the mode of outlet mall, i.e every producer (or sole distributor) has its pavilion with large premise to sell their products directly to clients
(Source: Tuoi tre).
