Duty-free supermarkets struggle due to lack of consistent policies

Contradictory policies have caused difficulties for duty-free supermarkets in the Moc Bai Border Economic Zone. Zone board chairman Phan Minh Thanh talks with Dien Doan Doanh Nghiep (Business Forum).

You say the Government has given many priorities to enterprises that invest in Moc Bai. Can you provide examples?

Decree 144/2004/QD-TTG of August 2004, and Decree 140/2007/QD-TTG.

The first was intended to supplement earlier policies aimed at encouraging investment in Moc Bai. It included zero tax for trade goods imported and exported from the Moc Bai trade-industrial zone and a 50-percent-income-tax discount for nine successive years. Decree 140 completes regulation of the zone

Nevertheless, the duty-free supermarkets lack customers. Why

Article 7 of Decree 144/2004/QD-TTg allowed domestic customers to buy up to VND500,000 (about US$26.3), worth of duty-free goods a day from the end of 2005 to July last year and business went well. GC was the first supermarket to open, in the first quarter of 2005, and 58, including Smiling, Win Mart and Fuso, followed. But customer numbers began to fall after Decree 33/2009/QD-TTg was issued at the beginning of July last year. Article 21 of the decree limits the sale of duty-free goods to foreign customers only. Supermarket sales fell to almost nil during the first 10 days after it was introduced and, as a result, Decree 93/2009/QD-TTg was issued on July 13, 2009. The decree allows domestic customers to buy up to VND500,000 worth of duty-free goods a week and some customers returned. Then, the Ministry of Finance issued Circular 08/2010/TT-BTC, which allows domestic customers to buy tax-free tax goods worth $26.3 each day, on January 14 and as it will apply for three years from the beginning of this month, sales can be expected to improve.

But many of the supermarkets are still worried about a lack of customers. What is your assessment?

Some duty-free supermarkets have many customers and some do not. Customs figures show that monthly revenue at duty-free supermarkets was VND76 billion ($4 million) in July but has risen to VND107 billion ($5.6 million) since. Daily revenue reached VND7 billion ($368,421) during Tet (Lunar New Year).

Some say the duty-free supermarkets did not take advantage of the priorities they were given and this, not policy change, caused their lack of customers. What is your view?

I don’t agree. The Moc Bai border economic zone opened on time and CG opened its supermarket soon after. The duty-free shops in the zone were Viet Nam’s first so it can’t be argued that the enterprises did not have the opportunity to take advantage of the Government’s policies.

So how can the system be improved?

I suggest the Government have consistent policies, especially in the setting of tax priorities, which enterprises are confident that they will not be changed. Then, Moc Bai can be fully developed.

VietNamNet/Viet Nam News

Tags: Duty free supermarkets in Vietnam, Vietnam retail market, Vietnam supermarkets