Vietnam‘s fall from favour in the retail markets is forcing domestic businesses to find ways to hold sway again, say economists.

According to a recent report on the 2012 Global Retail Development Index (GRDI) by A. T. Kearney, a US-based global management consulting firm, Vietnam has fallen from its top position in 2008 to 23rd last year, and now out of the 30 most favoured retail markets.

Economists attribute the country’s fall in the global ratings to investment barriers such as producers, sites, market fluctuations and unstable growth of macro-economy. Another reason is prolonged inflation in Vietnam has led to a sharp decline in the consumer purchasing power. From 4 percent in 2011 retail sales grew by 6.6 percent in the first five months of this year, too slow to compare with the average growth of 20 percent in previous years.

So, in the long run, Vietnam needs to improve its business climate and stabilize the macro-economy to attract more foreign investors. 

Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, cites poor infrastructure and complicated administrative procedures as obstacles that keep foreign investors away from the retail markets in Vietnam.

Phu’s view is shared by a leader of the Fivimart supermarket chain, who says that foreign investors are not keen on the local retail markets due to the unattractive business environment and low consumer purchasing power. However, he says, for its long-term operations in Vietnam, Fivimart is planning to expand its distribution network, not only in urban areas but also in the countryside.

Tran Xuan Kien, General Director of the Tran Anh Digital Joint Stock Company, says Vietnam’s retail markets are losing ground because of trade barriers, including the Economic Needs Test (ENT), a complicated consideration process to let foreign businesses open more than one retail shop. However, this snag will be ironed out by 2015, and to be sure, foreign investors will be more confident about success retail business.

At the time when foreign investors still hesitate to enter the fray, local retailers should grasp this golden opportunity to gain a leg over on competition and secure a firm foothold on the home turf./.

 (CPV/VOVNews)