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10 November 2009

Vietnam sees foreign retailers confidence rising

Vietnam's retail market is to start bearing fruit in the next two years on the back of rising foreign retailers' confidence and more savvy young consumers, reported

Bui Ngoc Hong, a legal consultant at Indochina Counsel, told a recent retail and distribution conference in HCM City that foreign firms were eyeing up Vietnamese retail and distribution businesses.

Hong said: "Indochina Counsel has alone supported seven foreign retail companies, which will appear on Vietnam's high streets in the next two years."

Following local markets being opened up this year under World Trade Organisation (WTO) commitments, many foreign firms had set up shops in Vietnam.

For example, Japanese sewing machine manufacturer Brother International recently won a licence to set up a $2 million distribution company in Vietnam, while stainless steel and construction material producer Sojitz opened an import, export and distribution branch in March. Car manufacturer Nissan and electronics producer Sharp have both started distributing their own products in Vietnamese market.

Fabrice Carrasco from TNS Vietnam said Vietnam's retail market was still smaller than many other South East Asia countries and Vietnam's consumer habits were changing sharply.

He cited US-based global market research firm RNCOS' report that retail turnover in Vietnam will top $85 billion in 2012, adding that Vietnam's retail turnover was $23.7 billion in 2008 and is expected to rise to $39 billion by the end of this year.

According to the Ministry of Industry and Trade, Vietnam's annual retail turnover has increased by 20 percent over the last few years.

The country currently houses around 230 supermarkets and hypermarkets, 23 trade centres, 165 wholesale markets and nearly one million square metres of floor area under construction for retail business.

"Rising incomes over the last 10 years have dramatically changed the buying habits of Vietnamese consumers," said Carrasco. "With 56 percent of the population under 30 years old, Vietnam has a large consumer market with young, demanding and newly sophisticated consumers."

"As purchasing power has exploded, many consumers have begun to prefer shopping in safe, clean and convenient and sometimes indulgent places," said Carrasco. "The doors to trading and distribution rights for foreign investors have been opened.

However, the implementation of these rights face difficulties due to ambiguous legal provisions," Hong stressed. Under Vietnam's WTO commitments, a licensed foreign retailer in the country can only open one outlet. Its expansion plans are subject to an economic needs test (ENT), an instrument the WTO allows to be used to limit foreign access to domestic markets.

Under the ENT, the foreign-invested company must apply for a separate licence for each subsequent outlet, with approvals made on a case-by-case basis based on the number of existing outlets, market stability, population density and the conformity of the project with the province's planning.


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