Vietnamese retailers call for safeguards to fight off foreign rivals

By    June 23, 2016 | 10:55 am GMT+7

Vietnamese retailers have suggested lawmakers install non-tariff safeguards to protect local firms against the anticipated threat from foreign rivals as Vietnam rapidly opens its market.

Local retailers, including Nguyen Thanh Nhan, chief executive of popular supermarket chain Saigon Co.op, view the trend of foreign retail giants breaking into the Vietnamese market as a real threat to local retail companies.

Foreign retailers like Japan’s Aeon, South Korea’s Lotte and Thailand’s Central Group have competitive advantages over local companies in terms of financial strength, hands-on experience and extensive supply chains, Nhan told the Vietnam News Agency.

He suggested the government use technical safeguards to protect the domestic retail industry as fewer barriers to entry will result in fierce competition between local and foreign retailers.

vietnamese-retailers-look-to-non-tariff-safeguards-as-effective-shield-from-foreign-rivals

The government is not standing on the sidelines watching the domestic retail industry be taken over by foreign investors. Photo by VGP

Foreign investors are aiming to gain a firm foothold in Vietnam by setting up extensive retail networks in a short period of time, so they are either acquiring or forming partnerships with local businesses.

Many industry experts say that Vietnam's retail market will soon be flooded with foreign brand names such as Thailand’s Central Group, which has announced it will change the name of the recently acquired Big C Vietnam next year.

“Central is in the process of changing the name of Big C discount stores in Vietnam by next year, even though it has the right to carry the Big C name for another decade,” said Central’s CEO Tos Chirathivat in an interview with the Bangkok Post last week.

The Vietnamese government, however, has adopted a consistent viewpoint that the process of global integration has become an irreversible trend.

Mergers and acquisitions reflect a common trend in global integration, said Vo Van Quyen, head of the Domestic Market Department under the Ministry of Industry and Trade.

Vietnam has opened up its market to integrate further into the global economy, Quyen added.

He also pointed out that recent mergers and acquisitions have not involved local retailers, citing the recent $700 million purchase of German retailer Metro's Vietnamese arm by a major shareholder in Thailand’s consumer product group Berli Jucker as an example.

And the government is not standing on the sidelines watching the domestic retail industry be taken over by foreign investors.

For instance, Japanese retailer Aeon has shown an interest in forming partnerships with local firms like Fivimart and Citimart, but its ownership of these companies is capped at 50 percent.

Vietnam’s retail market is growing rapidly and full of potential. Official figures show that retail chains meet only 25 percent of the country’s demand, while the remaining 75 percent is catered for by traditional markets.

There are currently 8,660 outdoor markets, 800 supermarkets, 168 shopping malls and more than one million small family shops nationwide. It is estimated that the current figures will jump by 45 percent in the next four years, meeting only 40 percent of the demand.

Foreign-invested companies have accounted for 75 percent of retail revenue in Vietnam over the past 10 years, official figures show.

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