Walmart won’t be coming to Vietnam anytime soon

Vietnam’s application of an ‘economic needs test’ is the main factor deterring Walmart and other giant foreign retailers from entering the retail market here, says a consultant quoted by Tuoi Tre.

Predictions were rife that foreign retailers would flock to Vietnam when the nation opened its market to foreigners on January 1, 2009. It hasn’t happened. In the judgment of participants in a recent workshop, the retail market remains a playing field with abundant opportunities for domestic retailers.

The workshop on “the retail market in the WTO period” was sponsored by the National Assembly’s Economic Committee, the Trade University and an EU-funded “Multilateral Trade Policy Assistance Project” (MUTRAP III) in Hanoi on June 29.

Only a few foreign retailers have come to Vietnam so far. Fred Burke of the consulting firm Baker & McKenzie asserts that the most important reason for that is Vietnam’s across-the-board application of ENT (Economic Needs Test), a special tool that the World Trade Organization (WTO) allows members to use to restrict market access.

ENT allows local governments to review and reject every application by foreign retailers to open their second and subsequent stores in the country.

“We talked to some international distributors who are interested in Vietnam’s market like Walmart. They said that they will only come to Vietnam when they are sure that they can open more than one store,” Burke said.

According to WTO, more than 90 countries apply an ENT regime. However, Burke explained, in most countries, ENT is only applied in a few specific fields – not in the entire retail sector like in Vietnam. In the Republic of Korea, for example, ENT is only applied in the case of retail meat shops.

Burke believes that as long as Vietnam allows application of ENT so broadly, big foreign retail groups will steer well clear of Vietnam.

Ten more years of shelter will be helpful to domestic retailers, said the former Deputy Trade Minister who negotiated Vietnam’s accession, Luong Van Tu. In that time, they can improve their competitive power and strengthen their positions in the market. “There will be enough time for Vietnamese retailers to develop”.

In Vietnam’s distribution sector so far, foreign companies have invested only $300 million, which is trivial, Tu said. “Domestic retailers still have opportunities to develop.”

Dinh Thi My Loan, Secretary General of the Vietnam Retailers’ Association, reported that in 2009, revenue from retail sales of goods and services grew by 18.6 percent, and another 26 percent in the first half of 2010 – very impressive figures.

Vietnam’s retail market opening is a breakthrough that is changing the face of the retail branch in Vietnam, Loan says. The market opening brings more choices to consumers while driving Vietnamese retailers to raise their competitive power. However, Loan warns, foreign retailers find Vietnam’s retail market attractive because it is still fledgling and backward, offering many opportunities which domestic retailers still cannot grab.

Tuoitre

Tags: Vietnam retail market, Vietnam Retail sector, Walmart