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Vietnam has pledged to consider easing market restrictions for retailers from the European Union five years after its free trade agreement with the bloc takes effect.
The country has maintained a technical barrier called the economic needs test (ENT), which has made it difficult for foreign companies to expand in the local retail market.
All foreign retailers in Vietnam are now required to go through the test before they are allowed to open a new store which is larger than 500 square meters. The test is basically an administrative review of the number of existing retail outlets in a particular area, aiming to protect local retailers from fierce competition.
The ENT creates a major hurdle that global retail groups have been protesting for years.
The government's promise to offer greater market access to European companies indicates its willingness to open up the market further or its confidence in homegrown retailers or both.
The EU and Vietnam are expected to implement their bilateral free trade agreement in early 2018.
With a growing middle class and a sizeable young population, Vietnam’s retail market has become increasingly attractive to foreign investors.
Vietnamese retailers are indeed going head to head with foreign players.
In May, the Ho Chi Minh City Union of Business Associations, a large body whose members include major retailers and manufacturers, reportedly sent at least two letters to the government raising questions about business activities of foreign retailers.
According to local media reports, the union claimed that foreign retailers somehow managed to keep opening new outlets despite the ENT barrier.
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