Distribution Services: Vietnam
Case
Dang Nhu Van
Hanoi 23-27 May 2005
Outline
Overview
Vietnam Case: Legal Framework
& existing regulations
Vietnam: Sector profile
Benefit of liberalization
Overview - GATS Classification
Distribution Services Include:
1. Commissioned Agent
2. Wholesale
3. Retail
4. Franchise
Overview – Role of distribution
Link between producers & consumers
Facilitate trade in goods (e.g. promote
export of goods) and other services
Contribute to competitiveness of other
sectors
Create jobs
Integrated part of the domestic/global
value/supply chain
Overview – Common barriers to trade in
distribution services
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Economic needs test
Forms of investment
Trading rights (e.g. import for domestic sale)
Types of goods to be distributed
Using domestic suppliers & services
Advertisement regulations & restrictions
Zoning and location restrictions
Foreign ownership restrictions
Regulations on shop opening hours
Rules of competition and trademark protection
Restrictions in goods trade (e.g. customs, TBT, parallel
imports, etc.) due to close link
Vietnam Case:
Legal Framework and existing regulations
Regulations on distribution services and foreign
service suppliers are scattered in different laws
and sub-law decrees:
 commercial code,
 foreign investment law,
 decree on export and import,
 price control,
 restriction on exports and imports by foreign
companies’ branches and representative offices,
 negative list of goods.
Vietnam Case - Legal Framework and
existing regulations
Regulations by mode of supply:
Mode 1:
- Only regulations on trade in goods, export
and imports are found.
- VN-US BTA commitments: unbound
Legal Framework and existing regulations
Mode 2:
- No direct restriction on consumption
abroad,
- But there are foreign exchange control
regulations
- BTA commitment: none, but existing
regulations are inconsistent with
BTA/GATS rules.
Legal Framework and existing regulations
Mode 3:
- Subject to Prime Minister decision or competent authority on ad hoc basis
- Trade balance requirements and restrictions of export and import items for
branches or rep office
- Foreign commissioned agents are not allowed
- Trading rights are provided in the licence on the case by case basis
- Conditionality: investment in own store facilities
- Inconsistency between regulations, practice, and international
commitments:
 No wholly foreign owned firm is allowed by regulations.
 Metro is German wholly owned.
 BTA: jointventure allowed from 2004, 49% by 2007, and 100% by 2008.
WTO: case-by-case approval
 Foreign distributors are not allowed to buy goods in Vietnam to sell in
Vietnam (Metro is doing this).
Legal Framework and existing regulations
Mode 4: General regulations on expatriates
applied across the board.
Vietnam case - Sector Profile
A market of $20 billion of private
consumption in 2004
Retail sales growth of 30% in big cities
10% accounted for by supermarkets
Inefficiency – producers distribute own
products, rather than outsourcing
Foreign distributors show big interest in
enterring.
Poor statistics
Vietnam case – Foreign presence
Very limited compared to the region
Existing
Metro Cash & Carry (Germany)
Big C - Bourbon (France)
Seiyu (Japanese)
Parkson (Malaysia)
Coming soon
Dairy Farm (Hong Kong)
Vietnam Case – Metro Cash & Carry, a
link between service and goods trade
 Lisenced foreign wholesaler, 100% foreign
ownership (Mode 3)
 Lisenced as pilot for distribution service
liberalization
 90% of goods supplied to Metro supermarkets
are sourced from Vietnam (exception to the rule)
 Export agricultural and fishery products from
Vietnam: buying directly from farmers to sell
globally through its supermarket chain
Benefit of liberalization
Higher efficiency thanks to competition,
rationalization, economies of scale
Facilitating trade in goods (e.g. agricultural
product export by global distributors)
Poverty reduction by connecting poor
farmers with world market
Liberalization on MFN basis would avoid
market concentration and power by a few
large foreign firms
Challenges of liberalization
Social impacts of displacement of small
traders
IPR enforcement, especially in franchising
and commisioned agents
Institutional capacity in regulating health,
environment, and preventing fraud (abuse
of direct selling).
Thank you for your attention