Simplified Retail Establishment Process for CPTPP Investors
In Brief
Starting from January 15, 2024, foreign investors from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) nations will be able to establish retail outlets in Vietnam without the burdensome Economic Needs Test (ENT). This pivotal change offers a significant competitive edge for CPTPP member investors in Vietnam’s dynamic retail landscape.
The CPTPP stands out as the first free trade agreement to introduce this groundbreaking liberalization, poised to facilitate the expansion of foreign brands into Vietnam’s rapidly growing retail sector. According to the Ministry of Industry and Trade (MOIT), this sector is projected to reach an impressive $350 billion by 2025.
Currently, foreign investors looking to open retail locations in Vietnam must navigate the complicated and often frustrating Economic Needs Test (ENT). This requirement applies to retail establishments that are larger than 500 m2 and are not situated in shopping malls or categorized as convenience stores or mini supermarkets. The ENT assesses various factors, including the geographic area of the proposed site, the number of existing service suppliers, market stability, and wider geographic considerations. This rigorous assessment frequently leads to delays in opening new retail locations, with some investors even deciding to forgo expansion altogether.
Fortunately, the CPTPP introduces a welcomed reprieve by removing the ENT requirement for investors from member countries. This change will take effect five years post-CPTPP’s entry into force in Vietnam. The MOIT has further acknowledged Vietnam’s commitment under the CPTPP to eliminate these restrictions, thus paving the way for CPTPP member investors to expand their retail networks without the previous limitations.
It’s worth noting that similar ENT removals will also be in effect under the European Union – Vietnam Free Trade Agreement (EVFTA) and the United Kingdom – Vietnam Free Trade Agreement (UKVFTA), both scheduled for enactment five years after their respective entry into force. For instance, the EVFTA, effective from August 1, 2020, allows EU investors to benefit from ENT removal beginning August 1, 2025.
CPTPP investors will thus find a much more accessible entry point to Vietnam, thanks to the details contained within this trade agreement. The CPTPP comprises eleven member nations: Australia, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and Brunei. Notably, Brunei was the last to ratify the CPTPP in May 2023.
Since the agreement’s inception, five countries—Britain, China, Taiwan, Ecuador, and Costa Rica—have expressed interest in joining. Currently, the UK stands poised to enter the CPTPP following successful negotiations, expected to finalize in 2023.
The CPTPP represents one of the world’s most significant trade agreements, with its member nations accounting for about 13% of the global GDP. What sets the CPTPP apart is its broad focus, transcending traditional WTO rules to encompass vital areas such as investment, competition, e-commerce, regulatory coherence, labor rights, environmental standards, and investor-state dispute resolution.
* * * * *
If you seek more information on establishing a retail network in Vietnam or wish to leverage the benefits of the CPTPP, feel free to reach out to us.
1 Link
2 Decree No. 09, Art. 23.
3 CPTPP Annex I, P. 6.
4 CPTPP Annex I, P. 6.
5 CPTPP: Viet Nam’s commitments in some key areas, p. 13. For detailed information, visit: Link
6 New Zealand Foreign Affairs and Trade, Link