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Vietnam Market Watch: 7-Eleven's Expansion, EU Investor Confidence, and Da Nang's Struggles to Attract Investment - Vietnam Briefing News

7-Eleven Expected in 2018

Vietnam’s first 7-Eleven convenience store is expected to open in February 2018 due to easier rules on establishment of a new business and strong growth in the retail sector. In May, the government had announced easier procedures for opening small shops with floor space of 500 square meters or less; the rule is expected to be implemented by the end of the year. The retail market is expected to reach US$179 billion by 2020, thanks to a growing middle class. 7-Eleven Inc. has reached an agreement with IFB Holdings which also runs the Pizza Hut chain in the country to open the store. The first store is expected to open in Ho Chi Minh City and 100 stores are planned in the first three years of operation.

The Vietnam Chamber of Commerce and Industry (VCCI) has stated that local retail market will see strong competition due to agreements from the Trans-Pacific Partnership (TPP) as well as EU investors. Under the TPP, Vietnam will allow more goods and electronic products to enter the domestic retail market. Japan’s FamilyMart and Ministop convenience stores are already present in the country. While local retailers are responding to the competition, the retail market is expected to have strong competition further benefitting consumers.

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EU Investors Upbeat on Business Climate

EU investors plan to increase investment in Vietnam and have indicated positive sentiment on the business environment according to the Business Climate Index (BCI) survey for the second quarter. The survey was conducted by the European Chamber of Commerce in Vietnam (EuroCham). The developments bode well for the implementation of the European Union-Vietnam free trade agreement (EUVFTA), which is expected to help business and investment activities by foreign enterprises in the country. The EUVFTA is expected to come into effect in 2018. EuroCham also stated that it has seen more interest from small and medium-sized enterprises (SMEs) to enter the country.

Statistics from the Ministry of Industry and Trade (MoTT) show that two-way trade between the EU and Vietnam reached US$21.2 billion in the first seven months of the year, up 9.05 percent compared to the same period last year. Vietnam has exported several products including textile, garment, footwear, coffee, seafood and computers. Vietnam also imported machines, equipment tools, pharmaceutical products and milk products which it lacked. Officials at MoTT have further stated that EU is considered one of the key trade and economic development partners and that local businesses should take initiatives to make the most of the preferential treatment offered by the EUVFTA.

RELATED: Vietnam Outlines Customs and Tax Plans to Enhance Competitiveness

 

Da Nang Struggles to Attract Investment

Reports indicate that while the city of Da Nang licensed five FDI projects with a capital of US$8.3 million and US$13 million of domestic projects, they are yet to achieve major success. Covering a variety of sectors including textiles, machinery, engineering and food processing, a recently study showed that Da Nang’s economy continues to be dominated by micro and small enterprises, with only a few businesses reporting turnover in excess of US$100 million. While the city’s authorities have introduced some support policies and incentives, product competitiveness remain low and utilization of these programs has been slow to increase.

Studies have showed that apart from factors such as land, incentive policies and human resources, other cases such as low investment attraction, unfocused investment promotions, lack of coordination among relevant agencies and time consuming administrative procedures have contributed to the worsening business climate in the city. Recent reports indicate that while 30 coastal tourism projects with a total value of US$2.1 billion were licensed since 2006, most have not been started due to financial difficulties. City officials are planning to withdraw licenses and redraw the boundaries so that they can develop the land into public beaches. While Da Nang has great potential to increase FDI, the government will need to make further business friendly policies and offer incentives for businesses to consider it as an investment destination.


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