Friday, January 02, 2009

Vietnam Opens Wider For Business

Oliver Massmann and Giles T. Cooper12.31.08, 12:00 AM EST

With new 2009 trade rules, it's the year to invest.



On Jan. 1, Vietnam opens its retail sector to wholly foreign-owned investments according to its World Trade Organization obligations. Lucrative opportunities await in Asia's new No. 1 retail market.

Times are changing in Vietnam's capital city. While tourists from all over the world are still flocking to Hanoi's picturesque market stalls, the heart of daily life is no longer confined to the old merchant quarters. Western-style shopping malls are popping up overnight, and they are attracting high-end retailers from the U.S. and Europe.

Vietnam officially joined the World Trade Organization (WTO) as its 150th member on Jan. 11, 2007. The WTO requires that tariff regulations, trade rights, national treatment and most-favored-nation treatment be incorporated into domestic law. Essentially, trade barriers must be torn down and the Vietnamese market opened to other WTO members.

Although Vietnam has taken solid steps to restructure and meet these requirements, challenges for foreign investors remain. The economy is still in a developmental phase, relying heavily on traditional sectors such as agriculture.

At the same time, it is leapfrogging other Asian markets in retail thanks to rapidly growing consumer demand and low barriers to market entry. According to a 2008 ranking by consultants AT Kearney, India has yielded its position as first in "retail investment attractiveness" and fallen to second behind Vietnam, formerly in fourth. Russia and China dropped to third and fourth respectively. While the retail outlook in the U.S. is grim, Vietnam provides corporations with an alternate growth strategy.

As Vietnam strives to emulate a Western standard, transitioning from a socialist system to an internationally integrated market economy is a bumpy process. One WTO requirement is to end import tariffs that had been imposed to protect local businesses against foreign competitors. The country has been reluctant to adapt this rule in the case of agriculture, given that entire villages depend on it as a main source of income.

The 2006 Law on Intellectual Property, by comparison, has been better received. Recent high-profile trademark infringement cases represent remarkable progress.