HCMC – The Ministry of Industry and Trade is putting forth a draft Government decree for public consultation, which is expected to create a legal foundation facilitating the setting up of distribution or retail business in Vietnam, an official said.
Pham Dinh Thuong, an expert in the Legislation Department under the ministry, told a workshop held here early this week that “the draft decree is expected to make management over distribution service more transparent and to encourage modern retail and local retailers.”
The forthcoming decree to replace the current regulations is aimed at setting up a legal framework for developing modern retail systems, meaning modern retail will be preferred to traditional markets, he told the workshop held by EU-Vietnam Multilateral Trade Assistance Project III.
“It’s now just a draft decree and still in the process of collecting public feedback. However, it is expected to limit unfair competition,” said Thuong.
Many changes will be introduced in the new decree compared to the currently prevalent Decree 23 on distribution service management. Legal terms will be clarified to avoid confusion for investors, local and foreign alike, he said.
For example, the term ‘retail’ will be defined as the activity of selling goods directly to end-users being individuals and households.
In the current Decree 23, retail refers to an activity of selling goods directly to end-users, without clarifying whether end-users are individuals and households. Therefore, it causes confusion that a business buying materials for its production or construction might be considered an end-user.
The controversial term economic needs test (ENT) will also be highlighted in the new decree to make criteria clearer for those foreign-invested enterprises who want to establish retail outlets in the country, according to Thuong.
The legal expert said specific criteria would be introduced when calculating ENT, including the population in a given area, the traffic situation therein, and the retail revenue among others. These criteria will constitute the formula for ENT.
However, beside the ENT criteria, authorities when considering an application for a second retail business by a foreign-invested enterprise will also prioritize those modern shopping facilities, Thuong said, explaining that the ENT formula would be applied flexibly. He added ENT would be the last resort taken by authorities to protect local retailers.
He, however, stressed that the new decree once issued would primarily seek to open the Vietnamese market wider to international participation.
Despite Thuong’s reassurance on the more liberal provisions in the draft decree, some participants in the workshop doubted the transparency and clarity in Vietnam’s management over retail business.
Robert Rogowsky from the U.S.-based George Mason University told the Daily that ENT poses a signal that investing in Vietnam would be uncertain and complicated. If used, it must be clear and transparent because vague, qualitative decision criteria lead to subjective and discretionary decisions.
