VietNamNet Bridge - Vietnamese retailers have been reassured that the regulation on ENT (economic needs test) would serve as a barrier that prevents foreign retailers from expanding in Vietnam and protecting local retailers. However, analysts don’t think this will work.

In a move related to the transfer of Big C Vietnam, the General Department of Taxation (GDT) has sent a dispatch to relevant parties, requesting to ‘make declaration and pay the capital assignment tax’, estimated at VND3.6 trillion.

Meanwhile, the Ministry of Finance has asked the Prime Minister to instruct the Ministry of Industry and Trade to ‘take necessary measures to prevent from the establishment and development of illegal retail points’.

The proposal was made after competent agencies discovered that French Casino Group, the old owner of Big C, ‘dodged the laws’ by setting up a lot of legal entities under the same brand Big C, but the retail points, in fact, operated as the members of a chain.

Under Vietnam’s WTO commitments, to open the second and subsequent retail outlets, FIEs must obey the regulation on ENT. If local authorities find it unnecessary to open more supermarkets in an area, they have the right to refuse FIEs’ proposal to open second and subsequent outlets.

Vietnamese retailers have been reassured that the regulation on ENT (economic needs test) would serve as a barrier that prevents foreign retailers from expanding in Vietnam and protecting local retailers.

However, analysts commented that ENT won’t be able to prevent foreign retailers to expand their business in Vietnam because it is easy to overcome the barrier.

Making merger & acquisition (M&A) deals is a good way to penetrate the Vietnamese market without having to undergo ENT. This has been the way followed by many foreign retailers in the last two years to enter Vietnam. 

By acquiring the existing supermarket chains, foreign retailers can quickly possess retail points with existing large custom, existing goods suppliers and staff with deep knowledge about the Vietnamese market. If they do this from the very beginning, they will have to spend 5-7 years.

The M&A deals have raised a lot of questions about legal loopholes. Will the enterprises with foreign portfolio investment capital have to bear the limitation on the opening of retail points like the WTO’s ENT?

M&A is not the only channel bringing foreign retailers to Vietnam. Over many years, foreign retailers have been penetrating the Vietnamese market through franchise contracts. 

In early 2010, Parkson opened its fourth shopping mall – Parkson Flemmington in HCM City and the sixth in Vietnam. And in mid-2008, Parkson C.T near the Tan Son Nhat Airport also became operational, causing a big surprise even to state management agencies.

A senior executive of Parkson Vietnam later revealed that Parkson Flemmington is registered by a 100 percent Vietnamese owned company, while Parkson just hired a management company. 


TBKTSG