“It is necessary to be well aware that developing the domestic market in the integration time does not mean giving priority to developing the import-substitute industry. It should be regarded as a fulcrum for Vietnamese businesses to have more self-confidence in going to the high sea,” stressed Mr Nguyen Loc An, Deputy Head of the Domestic Market Development Department under the Ministry of Industry and Trade, in an interview.

- How do you judge the development of the domestic market in recent time, particularly after the economic crisis spreading in many main export markets of Vietnam?

Mr. Nguyen Loc An: According to the statistic figures in 2009, on average, each Vietnamese spent VND 438,000 annually on goods and services. In 2010, the total retail sales of goods and services was put at VND 1, 546,189 billion, a 28.87% increase against 2009, while the total retail and social and service turnover in 2011 was estimated at VND 2,004,361 billion, a 24.18% increased over 2010.

This shows that there is a lot of prospect in terms of the Vietnamese consumers’ confidence and demand, but in comparison with the population of over 86 million, the above-said spending is still at a modest level, the domestic market potential is still great for businesses. The growth of the domestic market in the past few years has relied mainly on the growth of spending of the urban consumers, whereas the rural market has accounted for 70% of the total population with the consumption scope being three times greater than that in the cities, but this market is yet to be fully exploited so far.

In terms of the distribution system, even though the forms of distribution of goods and services in Vietnam are gradually changing (in 1995, Vietnam had only 10 super markets and two trade centers, in 2007, there were at least 140 super markets, 20 trade centers, in 2011, there were about 638 super markets, 117 trade centers with 8,653 markets of different kinds).

However, in recent time, the form of modern distribution has seen a rapid growth, the traditional business form is still being served as a foundation of the retail business market in the country with 90% goods being circulated in the traditional markets and the upfront street shops.

It is, therefore, very easy to get hurt when there is any change and the control of the market is very difficult. For instance, the fever of rice price in 2008 had the main reason that the domestic distribution network was still weak, badly organized and designed to become the professional distribution system.

In terms of products for the domestic market, Vietnamese businesses have produced a lot of items of import-substitutes, but the consumption of these goods in Vietnam remains modest, not on a par with its potential. For example, annual coffee output in Vietnam is put at 700,000 to 800,000 tones, while domestic consumption of coffee only reaches 3.6% when it could reach the 10% level or the annual garment market could obtain 15% growth with the population of 86 million plus annual tourist arrivals of 6 million.


- When the domestic market is determined as such an important market, with the characteristics of Vietnam, which policy is to be given priority by the Ministry of Industry and Trade?

Mr. Nguyen Loc An: To formulate the strategy for developing the domestic market, first of all, it is necessary for us to study and analyze carefully the commitments of opening the door of distribution services Vietnam had made when it joined WTO.

The world’s experience for many years now has showed that those countries that have followed the development of the import-substitute industry have always seen a lower economic growth, poorer competitive abilities and the lesser effective use of resources, human force and capital than those countries that have chosen the path of export-oriented economic development.

Such countries as Japan, South Korea, Singapore and recently China and such territories as Hong Kong and Taiwan are the typical successful cases of implementing the strategy of export-oriented economic development.

At the same time, Brazil and Argentine are the cradles of the theory of development based on the domestic market, yet they have to abandon the domestic-oriented development strategy and follow the export path.

In Vietnam, if Vietnamese businesses only pay much attention to occupying the domestic market without attaching importance to export, trade deficit will increase ever more, national foreign currency reserve will run ever drier, thus causing the shortage of the capital source for the economic development in the future.

So, with the characteristics of Vietnam, it is necessary to have the synchronous solutions from the production link to raise quality and reduce production costs to the link of building a distribution system of products, thus changing the psychology and habit of consumers.

- Would you please go into details of the orientation and policy needed in the future?

Mr. Nguyen Loc An: In my opinion, on the part of the State, in the current situation, it is necessary to help businesses overcome the difficulties in banking interest rate, to protect the right to assets ownership, to have a good administrative apparatus, a contingent of well-trained and highly disciplined labor force, a low inflation level and a mechanism of domestic market operation suitable to the process of integration of international economy.

In the long term, a system of policies on the fight against smuggled and fake goods and the support of Vietnam-made goods should be perfected. Efforts should be focused on the market research and study of consumers’ demands. In the long term, a master plan and a plan of developing the distribution network in the domestic market with attention being paid to the rural market should be built.

With the above-said orientations in mind, in the time to come, priority will be given to the support to Vietnamese businesses in cooperating in building the distribution system in accordance with the network development plan in order to create conditions for businesses to occupy the profitable positions in the distribution network.

According to the forecasts, in 2012, in face of the changes of the world, it is estimated that the total retail sales of the domestic market is put at USD 100 billion. In the 2-11-2020 period, it is estimated to have an annual growth of 10%, the volume of domestic circulation of goods at home will account for 20% of GDP.

At present, the retail market of Vietnam remains one of the attractive markets for foreign retail groups. If domestic businesses cannot be self-supporting, it will be difficult for them to compete with the large foreign groups.

In the angle of businesses, it is necessary to be ware of the fact that to limit or stop the import of the items of goods which have been domestically produced in a stable and standard manner is the very important objective to develop the domestic market.

Especially the strategy of classifying the market, determining the right object of customers suitable to the development strategy with their own advantages and abilities, in which attention is to be paid to market segmentation, particularly the products for the medium and low income earners (occupying up to 90% of the population) will be the element of success.

Thank you./.