"The fact that foreign invested enterprises are exempt from the Economic Needs Test (ENT) process once they set up more retail outlets of more or less than 500 square metres is a big advantage for foreign investors," said Mr Hong Sun, General Secretary of the Korea Chamber of Commerce and Industry in Vietnam in a consultation and dialogue with businesses on ENT for the establishment of retail outlets of FDI firms in Vietnam. The discussion was co-organised by the European Trade Policy and Investment Project ( EU - MUTRAP ) and Domestic Market Department (Ministry of Industry and Trade ) in Ho Chi Minh City.
ENT is an effective tool that the Government of Vietnam is currently applying to control the development of international distribution channels in Vietnam. According to Mr Hong Sun, foreign investors put trust in the Vietnam market with the hope of conducting more retail and distribution activities in Vietnam. However, regarding FDI in Vietnam, distribution is a “conditional” field. International distributors cannot enter the domestic market due to a number of conditions, especially rules in ENT. In fact, licensing agencies have rights to reject foreign distributors in establishing additional outlets after the first one if it is not necessary for local development.
Mr Vo Van Quyen, Director General of the Domestic Market Department, Ministry of Industry and Trade, said that based on a low starting point of retail sector, Vietnam has reached an agreement with the member states in WTO accession commitments on the implementation of ENT, allowing FDI enterprises to open additional retail outlets after the first one according to objective criteria. Since 2007, Vietnam has nation-wide legislated commitments by Decree 23/2007/ND-CP; Decision 10/2007/QD - BTM and Circular 09/2007/TT BTM. During the performance of ENT under WTO commitments, Vietnam consulted FDI retailers and relevant agencies that are directly connected to ENT to complete ENT criteria towards transparency and reviewing and evaluating local management agencies. Specifically, the Ministry of Industry and Trade issued Circular 08/2013/TT-BCT dated April 22nd, 2013 detailing the goods trading and directly related activities of FDI businesses in Vietnam. On December 24th, 2013, the Ministry promulgated Circular 34/2013/TT-BCT announcing the schedule for implementation of goods trading and directly related activities of FDI businesses in Vietnam to replace Decision 10/2017/QD-BTM.
Management agencies and retailers, however, are still confused and inconsistent in implementing rules which caused difficulties for both parties. In addition, the assessment of economic needs in provinces and cities is not synchronous; there are no clear rules on time length, from the date of receiving records to the date of making decisions, indicating whether or not economic needs committee allows foreign-invested enterprises to expand investment in Vietnam.
Therefore, Mr Hong Sun recommended that in order to enhance transparency in the licensing process, Vietnam needs to build a clear licensing process and provide new guidance documents on the establishment of an Economic Needs Assessment Committee. “Areas with infrastructure planning for retail development should be exempted from ENT assessment,” he also stated.
Due to rules in ENT, many Korea’s leading retail groups are also wondering about expanding into the retail market in Vietnam. Mr Hong Sun also said that market expansion would attract foreign investors to the distribution sector of Vietnam. Simultaneously, international companies would gain many benefits when they had access to traditional distribution channels and better understanding of the domestic market. Thus, he recommended that the Government of Vietnam should not protect the Vietnamese retail market by providing strict and unclear rules like ENT that limited extensive involvement of foreign firms, limited the control of market in any forms, including price controls.
Agreeing with Mr Hong Sun, Mr Scaba Bundik, Executive Manager of the European National Business Association in Vietnam (EuroCham Vietnam), also said that many European businesses are reluctant to expand their investment in Vietnam. Meanwhile, there is no implementing legislation to clarify the ENT criteria, which leads to different interpretations by local authorities. As a result, if there are new projects to open additional retail outlets by FDI enterprises, many localities have to ask for approval from the central level of Government, which is time-consuming and affects business operations. Mr Bundik proposed that the definition and criteria for ENT need to be made clear; localities need to enforce rules consistently, thereby creating favourable conditions for enterprises to expand their business operations in Vietnam.
My Chau
Vietnamese
