Vietnam's rule requiring foreign retail chain operators such as Tesco Plc to meet an economic needs test for starting more than one store in the nation is "discrimination," a trade group said.
The test "appears to be a market access barrier to foreign invested enterprises to expand," the European Chamber of Commerce in Vietnam said in a report released on December 1. That regulation needs to be changed to lure more overseas investment in the sector, according to the group.
Vietnam's 25-year-old goal of attracting foreign investors to set up manufacturing hubs in the country has been dented by labor disputes that have hurt the nation's appeal as a low-cost alternative to China. Pledged foreign direct investment in Vietnam is forecast to drop to $15 billion in 2012 from an estimated $17 billion this year, the government said in October.
"We've seen many European supermarket chains, big retailers, that want to come to Vietnam but our lawyers still have to tell them you can open your first shop but we're not so sure you can open the second to the 20th shop," Matthias Duehn, Ho Chi Minh City-based executive director of the chamber, known as Eurocham, said at a press conference in Hanoi on December 1. "The economic needs test is an example of the lack of progress we've seen," he said.
Greg Sage, a spokesman for Cheshunt, England-based Tesco, declined to comment. The UK's largest supermarket chain doesn't have a store in Vietnam. Tesco is among retailers who were interested in starting stores in the country, according to Alain Cany, chairman of the chamber.
Vietnam is open to investment and is "not restricting" big retailers, Pham Sy Chung, deputy general director of the planning department in the Ministry of Industry and Trade, said by phone on December 2. "Those are not really restrictions; they are more technicalities to guarantee we'll select foreign investors that meet all the requirements."
The government should ensure Vietnam doesn't miss the chance to attract investment from overseas retailers as those companies can help slow inflation, Cany said at the conference. Vietnam's inflation at 19.8 percent is the highest among 17 economies in the Asia-Pacific region tracked by Bloomberg.
"It's such a pity because this type of retailing should push prices down including food" because the companies would be involved in the whole supply chain, Cany said.