This article was first posted on International Financial Law Review (Oct 2018)
On January 15 2018, the Vietnamese government issued Decree 09/2018/ND-CP which came into force on the same day. Decree 09/2018/ND-CP replaced Decree 23/2007/ND-CP in governing trading goods and other directly related activities by foreign investors and foreign-invested companies in Vietnam. Decree 09/2018/ND-CP sheds light on some issues which were not clear under Decree 23/2007/ND-CP, but on the other hand raises doubts on others. Here are five takeaways regarding retail business from this piece of legislation.
First, as the applicable entities under Decree 09/2018/ND-CP are clearer, foreign investors will find it easier to engage in the retail business by making investments through a Vietnam-domiciled corporate vehicle wherein they do not hold a 51% or more stake (though the foreign investors may still control the business by adopting a flexible structure).
Second, if a domestic retail company is acquired by a foreign investor, it will have to obtain a special retail licence for its existing business and every single retail outlet it has opened in order to continue its operations, regardless of the foreign ownership in the company. This requirement was not so clear under the former decree.
Third, foreign-invested companies may now retail rice, sugar, video records, books, newspapers and magazines, which were not permitted under the former decree, in their own supermarkets, minimarts and convenience stores.
Fourth, the economic needs test (ENT) will now be applicable to the opening of a convenience store or a minimart even if it has an area of less than 500 square metres and is located in a shopping mall.
Fifth, the opening of the first retail outlet of a foreign-invested company will have to pass the ENT if its foreign shareholder already has a retail outlet in Vietnam or it bears the same brand as an existing retail outlet operated by another foreign-invested company in the country.
While some are positive changes, others will force foreign investors to expend more of an effort to be able to set foot in this lucrative market with a 93 million population.
Truong Huu Ngu (in cooperation with Akira Hiramatsu)
