Former Minister of Trade Truong Dinh Tuyen has said that Vietnamese distributors’ competitiveness remains weak and needs to be more dynamic and active.
With its 2007 Global Retail Development Index (GRDI) of 74 points, Vietnam was placed fourth after India, Russia and China. This was the result of 30 out of 185 economies with the world’s most attractive retail markets released by AT Kearney, an international management consulting firm. This is considered a high ranking, showing the bright prospects and strong attractiveness of the Vietnamese retail market to global entrepreneurs.
On the sidelines of the first plenary Congress of the Vietnam Retailers Association, former Minister of Trade Truong Dinh Tuyen talked to the media about the future development of the Vietnamese retail market, especially in January, 2009.
According to Mr Tuyen, distribution is quite a sensitive area in negotiations and captures the attention of many countries in the world. Many countries have taken limited measures to prevent foreign investors from penetrating into their distribution markets. For example, Thailand and Russia have banned foreign investors from trading at markets.
Meanwhile, it is impossible for Vietnam to prohibit foreign retailers from entering its market since opening up the distribution service is one of the country’s commitments to the World Trade Organisation (WTO).
Since the implementation of the Vietnam-US Bilateral Trade Agreement (BTA), US distributors have been allowed to operate in Vietnam. As of January, 2009, Vietnam will have to fully open up its retail market under its commitments to the world’s largest trade body. Therefore, domestic businesses should make thorough preparations to be able to compete against global distributors.
However, Mr Tuyen said that the competitiveness of Vietnamese distributors remains poor and should be more dynamic and active in order to fulfil the flowing tasks:
Firstly, increasing the amount of investment in modern equipment; secondly, renewing the management of distribution networks and thirdly, focussing on staff training. Apart from these three factors, Vietnamese distributors should also create closer links to each other to enable to them to compete with foreign rivals.
Under WTO commitments, if foreign retailers want to establish their second units they must first have approval from the Vietnamese Government. Vietnamese agencies will check how their businesses operate then they will allow them to open additional branches.
Truong Dinh Tuyen emphasised that Vietnam will have to let more distributors operate in the country but should not allow them to establish big chains. The country should limit them when opening additional retail outlets and should not grant too many licences as this would lead to fierce competition. However, Vietnam must devise specific criteria to ensure transparency and to avoid corruption and inequality.
Another requirement proposed by Mr Tuyen and other economic experts is that businesses should consider population density, the demand for retail and the number of retailers in each area to ensure a proper supply. Vietnam should develop a retail plan nation-wide.
Many people have expressed their concern that giving foreign retailers a free hand to set up distribution networks would bring about great challenges for domestic businesses. However, Mr Tuyen said that serious competition will force domestic retailers to improve their quality of management and services. If they have a big enough capacity to organise distribution like Metro, then they can establish good links and relationship with farmers. It will be the distributors’ own fault if they too depend on Government subsidies.
Source: VOV