Removal of cap on advert spending has little effect on local firms

Removal of cap on advert spending has little effect on local firms

VietNamNet Bridge – While foreign-invested enterprises applauded the removal of the cap on expenses on advertising, Vietnamese businesses, mostly small- and medium-sized, have shown little interest in the new change.

Under the old laws, businesses must not pay more than 15 percent of their total expenses on ads and marketing campaigns.

With the new law taking effect on January 1, 2015, businesses can figure out ad budgets as they want.

Though appreciating the new law, Van Duc Muoi, general director of Vissan, a meat processor and supplier, said he still had not decided on whether to spend more money on ads, because it was difficult to measure the benefits.

“As our resources are limited, if we budget bigger expenses on ads, we will have to cut expenses on other items, which would weaken our competitiveness,” he explained.

The director of a Hanoi-based small business noted that the new law would only benefit foreign-invested enterprises, which always draw large budgets for ads.

“They (foreign invested enterprises), with powerful financial capability, would spend big money to lease the most advantageous positions in commercial hubs to place their billboards,” he noted.

The businessman said the new law would bring disadvantages to Vietnamese enterprises.

“The more the foreign-invested enterprises spend on ads, the more famous their products become. Meanwhile, the land for Vietnamese businesses will be narrower,” he noted.

Nguyen Tri Kien, general director of Minh Tien Company, which makes Miti brand handbags, said his budget on marketing and ads is only a small percentage of total annual expenditure.

“I dare not pour big money into ad campaigns,” he said.

However, an ad expert commented that the new law would not have big impact on foreign-invested enterprises as well, because most of the ad programs are implemented overseas by multinational conglomerates and entered in accounts as “reasonable expenses”.

Nguyen Quy Cap, chair of the HCM City Ad Association, said that, though there are no official statistics about the growth rate in the ad industry, one still can see that the market is “grey” now from counting the number of ad pages in local print newspapers and empty billboards on streets.

Meanwhile, Pham Ngoc Hung, deputy chair of the association, noted that the new policy, though having a progressive outlook, cannot help Vietnamese businesses at this moment because it came out at an unreasonable time.

“The new policy came out too late, when most businesses are worn out after due to the economic recession,” Hung noted.

He said that if the policy had been laid down earlier, businesses would have been able to take full advantage of the policy to develop their brands.

Kim Chi

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