Lotte Mart setback.
13/05/2009
Leading South Korean department store operator Lotte Mart has had its bid to open a second shopping centre scotched by the authorities in Ho Chi Minh City.
Lotte Vietnam Shopping Company, a joint venture between Lotte Mart and the Vietnamese Minh Van Trading Company, had planned to open its second outlet this year on the first five floors of the EverRich apartment buildings, which is being built in District 11.
The joint venture, in which Lotte holds an 80 per cent share, invested $75 million to build its first three-storey shopping centre in Saigon South in December 2008, two weeks before Vietnam opened up its market to 100 per cent foreign-owned retail enterprises under its World Trade Organization (WTO) commitments.
“We have not stopped Lotte Shopping from opening a second outlet. However, we did not give permission for the company to open a shopping centre in the EverRich complex after serious consideration to the area’s population density and transport situation,” Tran Vinh Nhung, deputy director of Ho Chi Minh City Department for Industry and Trade, told VIR.
The complex sits at the intersection of Districts 5, 6, 10, 11 and Tan Binh district, close to Tan Son Nhat airport, some colleges and schools. “The possibility of overcrowding and traffic jams in this area are our main concerns,” Nhung said. These districts are already serviced by other supermarkets and trading centres, such as Saigon CoopMart, Big C, An Dong Trading Centre and Ky Hoa Entertainment.
Under Vietnam’s WTO commitments, from January 1, 2009, foreign investors have been able to set up wholly foreign-owned retail firm in Vietnam with the right to open one retail store in the country. However, they have to seek permission from the local authorities to open subsequent outlets. The local authorities will use the economic needs test (ENT) to evaluate how many retail outlets a foreign investor will be allowed to operate.
Vo Van Quyen, deputy general director of the Ministry of Industry and Trade’s Department for Domestic Market, said the ENT criteria included the local population, the concentration of stores in the area and the stability of the market. The foreign business community and experts have expressed concerns over the definition of the ENT criteria, which will lead to confusion and delays in getting permission to open multiple outlets in Vietnam.
In a recent working session with leaders from the Ministry of Industry and Trade, European Chamber of Commerce chairman Alain Cany stressed that the ministry needed to build clear, transparent and objective regulations to grant permission for foreign distributors to perform in the local market.
“Criteria for economic needs test and guiding methods must be clarified and issued [by the ministry] as soon as possible,” Cany said. Lotte Mart received its licence to invest in Vietnam in late 2006. It plans to open up to 30 department stores and supermarkets in Ho Chi Minh City, Hanoi, Danang, Can Tho, Haiphong and Hue within 10 years.
It has 90 department stores in Asia, including 62 in South Korea, 19 in Indonesia, eight in China and one in Vietnam.
By Lien Huong - VIR
