Economic needs test for foreign retailers maintained

 “There aren’t sufficient conditions to remove the economic needs test (ENT) for retailers,” Minister of Industry and Trade Vu Huy Hoang claimed in a document answering a proposal raised at a meeting between the prime minister and business community in Hanoi last week.

Under Vietnam’s WTO commitments, foreign invested enterprises (FIEs) licensed for retail activities are only initially permitted to establish one retail outlet. Additional outlets are subject to an ENT assessment by the licensing authorities, based on certain criteria, including the number of existing retail outlets, stability of the market, population density and size of the geographical area where the additional outlets are proposed to be established.

However, FIEs complained that the lack of concrete ENT regulations act as an obstacle to accessing new markets. They have questioned whether the Vietnamese government would remove the ENT in the near future.

Last year, the Ministry of Industry and Trade released Circular 08/2013/TT-BCT providing guidelines on the import, export, and distribution of goods by FIEs in Vietnam.

Hoang said Circular 08 set out more specific rules on licensing and procedures for ENTs that FIEs would have to go through in order to conduct business or open additional retail outlets in Vietnam.

Hoang claimed the new circular had relaxed conditions, allowing an ENT exemption for foreign retailers establishing an outlet of 500 square metres or less in an approved area with complete infrastructure.

“The ENT exemption provided for small and medium-sized retail outlets is a significant development that is likely to be embraced by foreign investors,” he said.

Dinh Thi My Loan, chairwoman of the Vietnam Retailers Association, in a recent retail seminar argued that Vietnam in reality had opened its market earlier than committed with the WTO. “The changed regulations make it easier for foreign retailers to open small outlets,” she said.

“Modern retail currently accounts for only 25 per cent of the distribution in Vietnam, meaning there is plenty of opportunity left for foreign investors,” she said.