Domestic retail market wants more FDI

CA - In the past more than three years since Vietnam joined the World Trade Organization (WTO) on January 11, 2007, the Vietnamese retail market has been opened to welcome foreign investors. Thus far, however, foreign direct investment (FDI) in this market has been inconsiderable.

The Ministry of Industry and Trade said that by August 2010 only four foreign companies invested in the Vietnamese distribution and retail market, including Metro, Big C, Lotte and Parkson, with 23 points of sale.

After Vietnam became an official WTO member, it has opened the domestic market of many sectors to welcome foreign investors as committed with this organization. From January 11, 2007 to January 1, 2009, Vietnam allowed foreign companies to invest in the Vietnamese distribution market by setting up joint ventures with domestic businesses but foreign investment capital must be less than 100 percent. Since January 1, 2009, Vietnam has allowed foreign distributors and retailers to do business in Vietnam with 100 percent of their own capital.

Hoang Thi Tuyet Hoa, the deputy director of the Planning Department of the Ministry of Industry and Trade, said that Vietnam had prepared very well to open the domestic retail market to welcome foreign investors. Right in the initial period of negotiations on WTO accession, Vietnam listed the distribution markets among the ones that will be opened wide to welcome foreign investors. As soon as Vietnam joined the WTO, the Ministry of Industry and Trade began to make some legal documents including Decree 23/2007/ND-CP, Decision 10/2007/QD-BTM, Circular 09/2007/TT-BTM and Circular 05/2008/TT-BCT. In addition, the ministry organized conferences and workshops to disseminate Vietnam’s commitments with the WTO among State authorities and the business community. The ministry also worked directly with local authorities to make them deeply aware of these commitments.

However, many foreign distributors and retailers come to Vietnam just to survey the domestic market, according to the Vietnam Retailers Association.

Promising changes

The Vietnam Retailers Association attributes the above situation to some reasons. First, Vietnam opened the domestic retail market while the global financial crisis was going on and therefore foreign investors came to Vietnam just to learn about the investment environment here. Second, a large percentage of Vietnam’s population is still based on agriculture.

However, many people think that the existing situation does not mean that foreign investors are not interested in the Vietnamese retail market which is considered to be of great potential.

Hoang Thi Tuyet Hoa believes that in the years to come the domestic retail market will continue to attract new foreign investors and those who are investing in this market will expand their businesses here in Vietnam.

Looking at the growing trends of domestic retailers and the country’s socioeconomic and trade development strategies, and having direct contacts with foreign retailers, Hoang Thi Tuyet Hoa believe that foreign retailers are financially capable and willing to invest in the Vietnamese distribution market by opening large points of sale that are far from residential areas like those of Metro or near to residential areas like those of Big C, Lotte. Some large distribution groups in the world also have the intention to come to Vietnam and hire land to build trade and service centers here. In the opinion of Hoang Thi Tuyet Hoa, in the future foreign investors can cooperate with domestic businesses to open franchise shops – a trading model that is suitable with international practices and has occurred in many other countries.