Although it has been possible since January 2009 to establish 100% foreign-owned distribution companies in Vietnam (or to acquire up to 100% of existing, domestic, Vietnamese distribution companies), successful completion of the necessary licensing procedures remains a challenging and often very time-consuming endeavour. Foreign entry into the wholesale and retail distribution sectors in Vietnam remains difficult and bureaucratically burdensome.
Even when a 100% foreign-owned distribution company is established, it is generally only possible for that company to open a single retail outlet, unless the company is able to satisfy the “Economic Needs Test” prescribed by Vietnamese law. The Economic Needs Test is, however, notoriously ambiguous in its legislative wording, and unpredictable in its application. To satisfy the Economic Needs Test continues to be an elusive goal for many frustrated foreign investors in the FMCG sector. We draw your attention to a legal update which we have previously prepared on the ENT. You will find the article beginning on page 5 of our January 2011 newsletter. Please click here if you would like to read this summary.
Consumer confidence remains strong in Vietnam, but is perhaps not as strong as it has been at other times during the last five years. There are indications that consumers are cutting back on spending on unnecessary items, and that the availability of discounts and promotions is increasingly a key factor influencing consumer spending in Vietnam.
The Vietnamese FMCG market is dominated by local distributors, and for foreign investors to establish distribution entities in Vietnam is possible, but challenging. The FMCG sector will continue to be one of the most exciting growth areas in Vietnam for many years to come, as the Vietnamese economy develops, nation-wide incomes rise, and consumers’ aspirations become more attainable.
Acting for one of the world’s largest and most powerful multi-national FMCG companies on its establishment of a major 40 year manufacturing joint venture project with one of Vietnam’s most significant and powerful State owned enterprises, including advising on the complete restructuring of the foreign investor’s long-term operational presence in Vietnam.
Acting for a major multi-national FMCG company on its proposed acquisition of a strategic shareholding stake in a Vietnamese household and personal care company engaged in importation, manufacturing, distribution, and retail sales activities.
Acting for a major multi-national FMCG company on its acquisition of a majority shareholding stake held by another major multi-national FMCG company in a large-scale beverage manufacturing and distribution operation in Vietnam.
Acting as local counsel for an Australian FMCG company in respect of the establishment of its operations in Vietnam.
Advising and assisting a major multi-national FMCG company in relation to a contentious tax ruling issued by the Vietnamese tax authorities in relation to special sales tax liability.