Vietnam's Trade Needs Breakthrough in Developing Distribution System

That is an assessment of entrepreneurs at the workshop on "Building strategy on domestic trade development strategy" held by the Ministry of Trade (MOT) recently in Hanoi. Entrepreneurs held that Vietnam's Government should quickly issue ordinance on retail to prevent foreign distribution corporations who are wholesalers in name only but retailers in nature from entering Vietnam's market.

 

There are two major tasks in the "Domestic trade development strategy for 2006-2010 period" to be submitted to the Government by the MOT. First, reorganise domestic trade towards two directions: develop distributors' system in connection with concrete districts and develop a systematic distribution network on the basis of linkages within circulation and between circulation and production.

Second, perfect legal environment for centralised management and control of domestic trade, ensure the market to develop quickly, strongly and sustainably. After completing the strategy, the MOT will request the Government to issue policies on support for key distributors.

 

The MOT has had a plan on choosing 15 to 20 domestic enterprises, developing them into core foundation for domestic trade development. Mr. Hoang Tho Xuan-Director of Domestic Trade Policy Department, the MOT said key enterprises include many forms of business such as: department store, market, supermarket, commercial corporation and retail network.

 

Chosen enterprises will be ones that are operating effectively. They must also have strategies to become big distributors which are outstanding in both aspects: important business, extensive operation area and reputation. Of which there will be several State-owned corporations specialising in petroleum, steel, food…, wholesaling and retailing and some non-state companies owning big department stores, supermarkets and distribution systems such as Trung Nguyen, Phu Thai Corp, etc, said Xuan.

 

The State will offer such businesses preferential policies on land, credit, tax and human resource development, creating a friendly cooperation environment between ministries and enterprises to share experiences, consult with each other and together participate in policy-making process. As plan, in 5 to 10 years, those enterprises will become big distributors with high prestige, enabling them to compete with foreign ones.

 

Many businesses said that it is difficult that this solution bring about efficiency because it is time to open the domestic distribution market to foreign corporations. Moreover it returns to asking and giving mechanism. However, specialists of the MOT explained that the Government would not offer enterprises money but create an environment supported by the State to encourage them to actively invest, so they themselves will grow, accumulate, unite, centralise resources, coming to master the domestic market.

 

Enterprises request that the MOT establish an Investment Fund for domestic trade development to attract capital of investors and promising distributors would catch this investment flow. It will avoid one-sided treatment and be more effective than choosing some to subsidise.

 

"Being a State-owned or private enterprise is not a condition to be chosen. Our top requirement is that the business fulfils all conditions and it is a State-ownes one. We have paid due attention to the establishment of Investment Fund and mentioned in our project, but it requires careful consideration". The State's supports are not in the form of subsidy, but mainly legal and infrastructural assistance to these enterprises. Therefore, these assistances fundamentally make impacts on all other domestic trading enterprises.

 

In 2005, garment and textile industry suffered a great shock from the US's market, therefore export only increased by 10 per cent. However, it is also a great effort of the industry. In my opinion, two existing major shortcomings of Vietnamese enterprises are small production capacity while low added value. To solve such problems, we should open door and hold talks with new markets and at the same time should not liberalise at any price.

 

For domestic market, problem that needs settling is small-scale and personal business operation. As for us, enterprises should link up with each other to deal with new competition and establish a series of linkages to innovate production method. Provinces and localities also need close cooperation in distribution. Besides, People's committees of provinces should closely follow enterprise to support them: monthly, HCM City's working group meets with entrepreneurs to find out their demands and then helps them.

Another problem of the present distribution system is that most of the multinationals such as Diary Farm, Parkson have occupied all nice positions. We must use soft power to solve the problem: issue regulations on ratio of Vietnamese goods sold in supermarkets and number of workers and human resource training in foreign-invested distribution enterprises.