Markets & Prices
Last updated: Monday, April 24, 2017
Support Solutions Proposed for Vietnam RetailersPosted: Wednesday, April 05, 2017
Vietnam’s retailing in general and commodity retailing in particular have witnessed impressive, continuous growth over the past years. In the eyes of foreign investors, Vietnam's retail market is also among the most attractive emerging markets. Indeed, this is a highly potential service sector in the economy.
According to a report from the Association of Vietnam Retailers (AVR) and its member and non-member retailers, after one year of implementing Resolution 35-2016/NQ-CP, AVR and the Ministry of Industry and Trade have cooperated to share and provide information on commitments of international economic cooperation frameworks and economic and trade agreements; to continue and step up the “Buy Vietnamese” campaign, which encourages Vietnamese people to give priority to made-in-Vietnam goods on their shopping lists; and to strengthen connectivity of manufacturers with distributors and with consumers as well.
AVR added that the Ministry of Industry and Trade already carried out Resolution 35 by holding meetings with experts and retailers to collect their opinions to draft the Domestic Market Development Master Strategy to 2025, with an eye to 2035.
In fact, the retailing sector’s contributions to the economy are not limited to earnings and jobs it generates. As an indispensable link between production and consumption, retailing operation is important to consumer goods industries in terms of output, input and margin ratio. In other words, the development of the retail sector not only affects this sector itself, but also the development of most production sectors in the economy. AVR expected that State management agencies will rapidly and effectively execute Resolution 35 to have strong development supports for retailers.
One of AVR’s proposals is quickly drafting and completing the Retailing Industry Strategy in the Domestic Market Development Master Strategy to 2025, with an eye to 2035, with a focus on consulting AVR and retailers.
In addition, AVR recommended adding the retail sector (including all types of retailing except online retailing) to sectors subject to investment incentives in the capacity of an independent industry, rather than a sub-sector of the group of infrastructure sectors as now (Decree 118/2015/ND-CP - Annex I). In the near future, it is advisable to add some promising and supportable retail forms (convenience store, specialty shop and grocery store) in addition to existing forms with investment incentives (supermarket, trade centre and countryside market).
To advise on retail sector development solutions and support domestic distributors, AVR proposed that the State support establishing Commodity Exchange Centres or organising regular and periodic Commodity Exchange Market Sessions (once or twice a month); increased commodity quality: In many cases, retailers cannot control commodity quality (especially when producers/suppliers deliberately swindle commodity quality), thus totally depending on producers’ compliance with obligations to their product quality. Solutions to this issue include a choice of different specific policies and eye to a common objective of effectively controlling product quality in circulation.
As for financial support policies related to space costs, to access to reasonable finance, and to tax and fee issues among others, AVR will introduce support solutions to retailer - bank associations to organise forums for retailers and financial institutions; have financial incentives (to encourage financial institutions to lend to retailers, especially to small, micro and individual retailers); take advantage of financial supports tailored for small and medium-sized enterprises (in the Law on Small and Medium Enterprise Support) and direct small and medium retailers to credit guarantees and access corporate financial funds.
AVR said it was necessary to overhaul the tax and fee system of the entire economy, for instance, continuing tax and fee reform efforts (reducing corporate income tax and other taxes and reforming tax administrative procedures). Besides, tax and fees in the retail sector may be peculiarly different from others, thus needing technical solutions to tackle these obstacles.
With respect to support policies on labour and professional retailer capacity, the Government should include contents that may help raise professional capacity and competitiveness of the retailing industry into appropriate development plans and support programmes (e.g. Trade Promotion Programme).
Competing with foreign-invested retailers is an attention-grabbing sector issue. The competitiveness of local retailers is now weaker than foreign-invested rivals and the gap seems to be getting wider. AVR emphasised that the most important policy is supporting equitable competition with foreign direct investment (FDI) firms. Accordingly, as the output of production and the key promoter of consumption, the retailing industry in particular and the distribution industry in general are extremely important to all countries. Therefore, except for developed economies with strong services industry, others always tend to have different measures to protect the domestic retail industry against foreign competitors. However, with market opening commitments, direct protection measures against foreign investors are shrinking dramatically. Policy solutions to this issue should thus focus on legislations on market opening, investment commitment and direct support to the domestic retailing industry, thereby helping raise the capacity of local retailers to compete with foreign rivals.