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July 2, 2018

Vietnam Suspends Controversial Proposed Decree on Distribution Sector

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Last week, Vietnam’s Ministry of Industry and Trade (MOIT) decided to suspend the drafting process for a controversial new decree that had been proposed on the development and management of the distribution sector (the “Draft Decree”). It was anticipated that the drafting process would be completed this summer and the Draft Decree would be submitted to the government for adoption in the fall.

The news of the suspension was welcomed by companies in the distribution sector who felt that the proposed decree would be a step backward in that it would require more approvals for businesses in the sector, and also contained various provisions that intervened too far into commercial issues.

The proposed Draft Decree would have added many requirements for trade centers, supermarkets, traditional markets, retail stores, and convenience stores, and touched on various aspects of distribution. For example, the new decree would have specified certain size requirements for supermarkets. A “supermarket” would be required to be at least 250 m2 in area, but less than 10,000 m2. Facilities 10,000 m2 or more in area would be considered “trade centers.” Signage would be required to correctly specify in the Vietnamese language if a facility was a supermarket (“sieu thi”) or trade center (“trung tam thuong mai”). Inappropriate use of English names such as “Hyper Market”, “Big Store”, or “Plaza” was specifically prohibited under the Draft Decree.

Other controversial provisions included:

  • Supermarkets and trade centers can only hold three sales per year, and during sales periods, 70% of all goods must be on sale. Sales periods must be pre-approved by authorities, and must extend at least 30 days, and be spaced no fewer than 30 days apart. No “buy-one-get-one-free” promotions are allowed for products on sale.
  • 30% of all goods in supermarkets must be sourced from small and medium-sized Vietnamese producers.
  • No fewer than 50% of employees must be Vietnamese citizens.
  • Supermarkets and trade centers must be open every day of the year, including holidays, and must be open until at least 10 p.m.

In view of the fact that the MOIT has recently eliminated many administrative burdens for businesses, the requirements proposed under the Draft Decree, which would have replaced Decree 2 of 2003 and Decree 114 of 2009, would have been a move in the opposite direction. Therefore, the scrapping of the proposed Draft Decree is a welcome sign for the retail sector in Vietnam. It remains to be seen if some of the provisions of the Draft Decree resurface under other legislation in the future.

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