Vietnam business group calls for tight rein on foreign retailers

Thanh Nien News

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A Big C supermarket in Ho Chi Minh City. Photo: Diep Duc Minh/Thanh Nien A Big C supermarket in Ho Chi Minh City. Photo: Diep Duc Minh/Thanh Nien


A group of businesses in Ho Chi Minh City has complained about the arrival of many foreign retailers recently, claiming they are given a loose rein to expand at a pace that will eventually hurt local companies. 
The Ho Chi Minh City Union of Business Associations (HUBA), a large body whose members include major retailers and manufacturers of various industries, has reportedly sent at least two letters to the government raising legality questions on some business activities of foreign retailers. 
Under Vietnam's existing laws foreign businesses are not allowed to distribute products such as rice, cane sugar and cigarette but they are still available at the supermarkets and convenience stores of most foreign retailers, including South Korea's Lotte and Big C, Tuoi Tre reported, citing the union.
The group also suspected that some foreign retailers may have broken regulations that aim to limit the number of outlets in a particular area. 
Foreign retailers in Vietnam are obliged to go through the Economic Needs Test before they are allowed to open a new store which is larger than 500 square meters. The test is an administrative review of the number of existing retail outlets in the vicinity, a rule that has been generally interpreted as a measure to protect the business of locally-owned supermarkets. 
But despite the restriction, according to the business union, many large foreign outlets keep popping up in big cities. 
Following the complaints, Prime Minister Nguyen Xuan Phuc has ordered relevant agencies to check the operation of foreign retailers, as well as recent mergers and acquisitions involving them. 
Mega Market Vietnam, the owner of Metro wholesale stores around the country, is expected to be the first to face the scrutiny. The stores were originally operated by Germany's Metro before being acquired by Thailand's consumer group TCC early this year.
Mega Market Vietnam will have to report on the 655-million-euro (US$755 million) deal and its market share, local media reported. 
Statistics showed Vietnam is now home to more than 700 supermarkets and 132 shopping malls, mostly in big cities such as Hanoi and Ho Chi Minh City.
Local retailers have expressed their worry over the expansion of foreign rivals. 
Vu Vinh Phu, chairman of the Hanoi Association of Supermarkets, told Tuoi Tre that a supermarket in the northern city of Hai Phong saw a decline of 30 percent in revenue in the six months after a foreign superstore was opened.
Local retailers are not the only who suffer from the massive arrival of foreign retailers who now control more than 50 percent of Vietnam's retail market, the association said.
Many producers complained that they are struggling to bring their products into foreign supermarkets, mainly because these retailers ask for very high discounts, HUBA's vice chairman Pham Ngoc Hung told news website Saigon Times Online.
Meanwhile, products imported from countries such as Japan, Malaysia, South Korea and Thailand are becoming more and more popular, he said.
Vietnam's retail sales rose 10.6 percent from 2014 to VND2,469 trillion ($109.4 billion) last year, according to official figures.

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