FDI Flows in Retail, Food Sectors

 

Vietnam has welcomed many renowned foreign retailers since the start of this year. The first was the opening of Aeon Mall, a US$100 million 50,000-square metre shopping mall in Tan Phu District, Ho Chi Minh City. Apart from Aeon Mall Tan Phu, Aeon Group of Japan also planned a shopping system in Binh Duong province.

 

South Korean retailers have also recently stepped up investment in Vietnam. LOTTE Mart has built seven modern commercial centres in Ho Chi Minh City, Hanoi City and Danang City. LOTTE targets at 60 stores nationwide by 2020. In addition to LOTTE Mart, K-Mart and E-Mart are also seeking investment opportunities in Vietnam.

 

Food and fast food sectors have caught the attention of foreign enterprises. At the end of July, 10 small and medium enterprises from Japan met with Vietnamese businesses to seek investment opportunities in Ho Chi Minh City.

 

Mr Osato Kazuhiko, Director of Trade and Investment Promotion from the Japan External Trade Organisation (JETRO), said that Japanese enterprises have invested in 300 food stores in Ho Chi Minh City. Besides, half of more than 200 Japanese companies in Ho Chi Minh City are engaged in retailing and services and the rest is involved in manufacturing and business activities. Notably, Japanese enterprises have been on the trend of investing in service and food fields since 2012.

 

South Korean fast-food companies like Lotteria and BBQ Chicken are seeking to boost strong investment in this market segment.

 

Giving explanations to this new wave of investment, Mr Hirotaka Yasuzumi, Managing Director of JETRO Office in Ho Chi Minh City, said, Vietnam with more than 90 million people is a big market. The country’s economy and GDP per capita have steadily grown.

 

Mr Hong Sun, General Secretary of the Korean Chamber of Commerce (Kocham), said that with potentials in farm produce, Vietnam had abundant material sources, particularly agricultural products, for the development of food processing industry. Because of high ratio of young population, Vietnam spends more in food and beverage and shopping than other countries in the Asian region, he said.

 

Mr Hirotaka Yasuzumi said that although Vietnam is a growing emerging market, it has the ground for the services sector to take roots and for the market to make strong growth. Many Japanese companies do not demand preferential treatments or special supports but they expect barriers to investment or barriers to market entry are abolished.

 

He added that the Government of Vietnam should treat Japanese companies the same as they treat Vietnamese in investment and business licensing procedures as specified in Japan - Vietnam Investment Agreement; enhance transparency and streamline administrative procedures; improve mechanisms to reduce risks of renting land and workshops or transferring the property-use rights. "Now, so much effort, time and expense for administrative procedures are becoming major obstacles to investment attraction. However, the most important thing is that the Government must believe in enterprises and the market to build regulations for a market with a higher degree of freedom," Mr Hirotaka Yasuzumi stressed.

 

Meanwhile, Mr Hong Sun said, with current potential, South Korean companies will further invest and broaden their market shares in Vietnam in the future. Business protection policy is very important to the State but the Government of Vietnam should encourage and create more advantageous conditions for retailers, particularly South Koreans, to run their business in the country, he added. Foreign companies investing in Vietnam not only bring resources but also hope to improve and help Vietnam to better administration and quality. Hence, the Government should encourage investment for the better quality of economic services for Vietnam.

 

For example, food processing industry is a strong development advantage of a commercial agriculture but it is not the case in Vietnam because it lacks processing and preserving facilities. Therefore, the Government of Vietnam should invite more investors to build processing facilities to modernise this potential agricultural sector," Mr Hong Sun noted.