Asia Business Investor Blog

Vietnam has moved into first place as the most attractive emerging market destination for retail investment according to global management consulting firm A.T. Kearney and will be a global hotspot for franchsing in 2009.

In the Global Retail Development Index (GDRI), a study of retail investment attractiveness carried out among 30 emerging markets, Vietnam moved up to replace India as the most attractive retail destination. "The critical factors that have powered Vietnam to the top of the index this year are rapidly growing per capita income of the Vietnamese consumer and drastically opening up of regulations for new entry. Now is the “perfect time” to get involved in Vietnam’s retail market, said Mike Moriarty, a partner with A.T. Kearney and co-leader of the GRDI.

While Vietnam 's 20-billion USD retail market pales in comparison to India or China, the absence of competition and 8 percent GDP growth make it an attractive expansion opportunity for global retailers, the study said. Moreover, Vietnamese consumers are among the youngest in Asia, with 79 million below the age of 65, and increased their consumer spending by more than 75 percent between 2000 and 2007, the firm added.

Given the excellent prospects for retailing in Vietnam, franchising holds very high promise. This is especially the case due to reforms in franchising laws that allow foreign entrants in early 2009. Before the reforms of commercial law, a franchise was regarded as a type of technology transfer or licensing agreement and was governed by Decree No 45/CP/1998. The decree tended to have a freezing effect on the establishment of franchises, imposing a maximum royalty of 5% of net sales such that parties to franchise agreements were not free to agree a higher rate of return. Lack of confidence in IP rights protection in Vietnam also contributed to the concerns of foreign franchisors. 

With the new commercial legal reforms Vietnam has developed a legal foundation for all aspects of franchising. The legal framework in conjunction with the strong economic performance make Vietnam a priority market for franchisers.