f this happens, foreign goods will flood the domestic market and harm the domestic production, experts warn.
According to the HCMC Business Association, the current state’s policies to protect domestic retailers are not tight enough to protect domestic retailers.
In principle, foreign invested enterprises (FIEs) are initially allowed to establish only one retail outlet. Subsequent outlets are subject to an ENT (economic needs test) assessment by appropriate agencies.
This means that the agencies will consider criteria, including the number of existing retail outlets, stability of the market and population density, before deciding whether to grant licenses to foreign retailers to open additional outlets..
However, the association believes that the principles of ENT are not detailed enough, while there is no common framework to be applied throughout the country.
| If the government does not create reasonable policies to protect Vietnamese retailers, they would fall in competition with powerful foreign retailers. |
“Each city and province applies the ENT its own way. As a result, domestic retailers have not been protected as in the spirit of Vietnam’s WTO commitments,” the association states.
Vietnamese retailers feel they are less protected than colleagues in other Asian countries.
In Malaysia, for example, all investments must be approved by a specialized committee under the Ministry of Trade, i.e. businesses must get approval from the committee before implementing the steps to invest in infrastructure.
Foreign investors have to team up with domestic enterprises to set up joint ventures and ensure that 30 percent of value of products is supplied by domestic small and medium-sized enterprises.
In India, foreign retailers must set up joint ventures in which they must not hold more than 51 percent of the total capital, at $100 million at minimum.
Thirty percent of value of the products displayed at the retail chains must be sourced from domestic small and medium enterprises. The locality, where an outlet is set up, must have the minimum population of 1 million people.
The HCMC Business Association has proposed to offer a series of special preferences to domestic retail firms, such as allocating land on advantageous positions with reasonable rents and imposing preferential tax rates.
Deputy Minister of Industry and Trade Do Thang Hai, when asked about the measures to protect domestic retailers, related a story that some years ago, a Vietnamese retail firm asked for the state’s support to obtain the retail premises on advantageous positions, and get preferential loans and tax incentives.
However, the enterprise, after gaining some successes, decided to sell stakes to foreign investors.
Hai did not name the enterprise, but everyone knows the enterprise is Fivimart.
In this case, analysts commented, the government of Vietnam gave support to foreign retailers who did not need assistance because of their power.
