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Domestic sales can help counter global recession

Update: February, 23/2012 - 10:33

Nguyen Loc An

 

Nguyen Loc An

The promotion of domestic products is very important, especially in the current context of the slowdown in export markets. Deputy director of the Ministry of Industry and Trade's Domestic Market Department Nguyen Loc An discussed the issue.

How do you assess the development of the domestic market in recent years, especially considering the economic crisis spreading in countries that are key importers of Vietnamese products?

According to 2009 statistics, a Vietnamese person spends an average of VND438,000 per year on goods and services. In 2010, the total retail sales value of goods and services was VND1,565 trillion, up 28.87 per cent over 2009. Last year's figure was more than VND2,004 trillion, up another 24.18 per cent compared to 2010 (if inflation is excluded, the increase is 4.7 per cent). This proves the viability of the domestic market.

However, the spending level is still quite modest when compared with the country's population of over 86 million people, meaning there is still potential to grow.

The growth of the domestic market in past years has been mainly due to the increased expenditure of urban consumers. The rural market, which accounts for 70 per cent of the nation's population should have consumption demands trippling that of urban areas, but it has not been fully exploited.

Although Vietnamese enterprises have created substitutes for imported products, their domestic consumption is still very modest.

For example, our country puts out 700,000 - 800,000 tonnes of coffee each year. However, coffee consumption in the domestic market is only 3.6 per cent of the volume, while the figure should be at about 10 per cent.

What do you think about the country's distribution system?

The country's distribution method of goods and services has changed significantly in recent years. The country had only 10 supermarkets and two shopping centres in 1995, but the figures surged to 140 supermarkets and 20 shopping centres in 2007 and to 638 supermarkets and 117 trade centres by 2011.

Despite the rapid growth of the modern distribution system for the past several years, traditional and outdoor markets are still the foundation of the country's retail market, as 90 per cent of goods and services are circulated in roughly 8,653 traditional markets.

Therefore, the domestic market is very vulnerable when there are fluctuations and it is difficult for authorities to control the market. For example, a spike in rice prices in 2008 was caused by the poor distribution network, which was not organised to become a professional distribution system.

Does the market remain attractive to foreign retailers?

Total retail value of goods and services in the domestic market is estimated at approximately $100 billion this year. In the 2011-20 period, the growth of the local retail market will be at roughly 10 per cent yearly and the proportion of domestic goods in circulation will account for 20 per cent of GDP.

In fact, the domestic retail market remains attractive to foreign retail groups. Therefore, if domestic retailers do not practice self-reliance, it will become hard to compete against foreign retail giants.

Domestic enterprises should also have comprehensive plans that extend from production (to improve quality and reduce costs) to distribution.

Policies that target certain market segments, especially the low- and medium-income earners who account for 90 per cent of the population, could be a successful avenue for local producers.

What policies are needed to develop the local market?

To build up strategies to develop the domestic market, we first need to carefully analyse the country's commitments to the World Trade Organisation.

In my opinion, the Government needs to resolve the problems of high interest rates and inflation that hinder the development of the local market. In addition, officials need to streamline the mechanisms that control the domestic market and bring them into accord with the process of international economic integration.

In the long run, we must also tailor the legal system to address smuggling and counterfeit goods, as well as add incentives to support Viet Nam-made products.

The Government should support local producers and encourage them to co-operate to develop the distribution system.

A change in the psychology and habits of domestic consumers would also be necessary. — VNS

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