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Monday , January 28 , 2013
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Vietnam outgrows fear of FDI

While Indian communists see only gloom and doom in FDI in retail, socialist Vietnam is all set for a boom in foreign retail beginning this year.

“Supermarket stampede” was how the country’s state-controlled national English newspaper, Vietnam News, described the expected retail rush in its edition of January 7.

French, German, Japanese and South Korean retailers plan to open new supermarkets or expand their existing ones from this year, taking advantage of the government’s decision to liberalise the retail sector further.

The first foreign retailers entered the country’s market about a decade ago. One of the first to come was K-Mart, finally ringing the curtain down on the American War (the Vietnam War to the rest of the world) in popular perception.

Metro, the German retailer, may have been lucky to open the only foreign retail store in Calcutta a few years ago, thanks to Buddhadeb Bhattacharjee’s reform initiative. But here in socialist Vietnam, the company plans to open 16 new supermarkets to make it 35 nationwide, according to the Sai Gon Dau Tic, an investment newspaper based in Ho Chi Minh City. South Korea’s Lotte Mart plans to open 60 supermarkets in the country by 2020.

Japan’s Aeon retail group has announced its plans to open a giant shopping complex in Ho Chi Minh City early next year, to be followed by one in Hanoi a year later. The group has plans to open 20 shopping centres nationwide by 2020.

Aren’t the Vietnamese concerned, like the Indian political parties and some business associations opposed to FDI in retail, that foreign retailers would destroy local businesses and small traders?

Sitting on the pavement next to the Hang Da shopping centre in the city’s Old Quarters, Bep Thi Ngyuen, a middle-aged woman fruit seller, wondered why her business would suffer because of the supermarkets. “My consumers always come to me. Others go to the big shops,” she said through an interpreter.

The confidence shows in the bustling street markets and shops that clutter every street here. For most shopkeepers, it is the busiest of seasons because the Tet (lunar new year) festival is round the corner — in the early part of February.

“We welcome foreign retailers precisely because their investments would improve conditions in both production and supply chains,” said an official of the ministry of planning and investment, who did not want to be quoted. More FDI in retail, according to him, would create better organisational methods that would benefit both producers and consumers.

In a country where neighbourhood shops are still the preferred choices of consumers, foreign and domestic retailers are increasingly attracting the younger generation.

According to Dinh Thi My Loan, general secretary of the Association of Vietnam Retailers, most young consumers prefer modern retail outlets. But both foreign and domestic retailers have plenty of opportunities as the current outlets account for only 20 per cent of the country’s potential.

Vietnam currently has 636 supermarkets, 120 shopping centres and more than 1,000 convenience stores. But this is considered too little for a population of nearly 90 million.

Despite the rapid expansion of foreign and domestic retail chains, two things are said to favour the small traders: centuries-old consumer habits and prices.

“The Vietnamese have always bought and sold goods on the streets. That habit cannot simply disappear because of the supermarkets,” said a senior journalist at the weekly Vietnam Investment Review, an organ of the ministry of planning and investment.

“Also, the people can always go back to the street shops when the supermarket prices hurt them.”

Domestic retailers have one complaint, though, about some foreign retailers. Some foreign retailers have been accused of evading taxes and of not contributing much to the country’s economy.

But such complaints have not stopped Vietnam’s communist rulers from pushing ahead with their plan to lure in more foreign retailers.

Investments — in retail and other sectors — continue to be the government’s first priority, as they have been since the launch of the Doi Moi, the open-door policy that Vietnam embraced in the late 1980s.

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