MORE BUREACRACY HINDERS ADVERTISING IN VIETNAM

1. MORE BUREACRACY HINDERS
ADVERTISING IN VIETNAM
October 30, 2014 - ALERT 31/14
Management Digest
The advertising business is very difficult and frustrating in Vietnam. Although there have
been regulatory reforms there have also been setbacks. Some years ago the Government of
Vietnam decided to move from a centrally controlled economy to a market led economy.
Advertising plays a vital role in a market led economy, as it is a driver of growth. It is
therefore essential that encouragement be given to the advertising industry to enable ethical
advertising in a best practice regulatory environment but with the minimum of Government
interference. If this does not occur then in the longer run the economy will suffer.
There has been a huge struggle with the implementation of best practice advertising
regulation in Vietnam – when a forward step is made it is counteracted by another one
backwards.
This ALERT is an overview of the situation.
Advertising and the Economy
It is well settled that advertising is a driver of economic growth – see ALERTs 19/14 and
11/13. A useful measure of the health of advertising and its impact on the economy is
adspend as a % of GDP. It is also accepted that 1% is a useful benchmark and those
economies that exceed 1% on a consistent basis enjoy high GDPs. Developing countries have
understandably low adspend ratios to GDP but in order to assure long term economic
growth there should be consistent improvement over time.
In 2000 adspend as a proportion of GDP in Indonesia was 0.34%. In 2010 it had increased
to 0.65%, this year is predicted to reach 0.86% and by 2016 1.06%. This trend is greatly
assisting economic growth.
However the comparative figures for Vietnam are 0.62% in 2000, 0.54% in 2010, 0.51% in
2014 and 0.48% in 2016. It is the opposite trend to that of Indonesia.
All data has been sourced from ZenithOptimedia
Law Change
Significant progress was made in 2012 with the enactment of the Law on Advertising that
replaced the mishmash of conflicting national and local laws that hindered advertising.
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2. Control was vested in one State agency – the Ministry of Culture, Sports and Tourism
(MOCST). There was also some liberalization – the cap on advertising in newspapers was
lifted from 10% to 15% and the cap for magazines increased to 20%. There are numerous
caps in Vietnam and for free-to-air television and radio it is 10% of airtime. However
capping Internet advertising posed practical difficulties and a complex proposal to limit the
proportion of pixels was abandoned. Although no cap was placed on outdoor advertising
there were other restrictions relating to construction, road safety, lighting, local authority
permissions, etc. In October last year the Ministry of Construction issued a 17 page Circular
on the Technical Regulation of the Construction and Installation of Outdoor Advertising.
The predicted adspend growth data for 2014 of the various media are, in our view, a mix of
world trends combined with the differing restrictions in the various media.
- Growth for both newspapers and magazines is predicted to be 0%
- TV is predicted to grow 9.6%
- Radio is predicted to grow 5.9%
- Cinema is predicted to grow 25%
- Outdoor is predicted to grow 8.8%
- Internet is predicted to grow 28.6%
The Internet is also predicted to grow at similar rates over the next couple of years but its
market share is still tiny at 1.2% in 2013 compared with market giant TV with 85.2%.
Two significant new provisions in the Law on Advertising were;
- The establishment of Advertising Appraisal Council that would determine whether ads
were in compliance with the law. The Council would include experts – presumably from the
advertising industry. As we understand the position the Council is still to be established.
- The establishment of an advertising self-regulatory organization that had a number of
powers including the development and implementation of codes. It also had rights to work
with the Advertising Appraisal Council. In practical terms it would operate a self-regulatory
organisation as found in other countries. It was generally agreed that the Philippines model
was the best one to copy as it has a highly effective system based on pre-approval of ads
rather than complaints. This would dovetail in well with the Advertising Appraisal Council.
The Vietnam Advertising Association (VAA) did considerable work in a short time to
establish a self-regulatory regime. The established costs were budgeted at US$170,000 and
thereafter the organization would be self-funding and was ready to go early 2013. It was
planned to raise the establishment funding from large advertisers and agencies operating in
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3. Vietnam – these were largely multi-national companies. Unfortunately the funds were not
forthcoming and the opportunity was lost.
More Restrictions
The gap left by the lack of establishment of a self-regulatory body allowed the Ministry of
Health to promote a Decree that subsequently came into force in November 2013. A number
of product categories including medicines, cosmetics, certain foods including children’s milk
products, chemical preparations for household use and a number of farming products had
restrictions placed on their advertising. Furthermore ads for the listed products needed to be
pre-approved by the appropriate Government agency – rather than the Advertising
Appraisal Council or the self-regulatory organization. The same Decree contained
restrictions on outdoor advertising and the operation of overseas ad agencies in Vietnam.
The Decree came into force on 1 January this year.
Still More Restrictions
Last month the People’s Committee of Ho Chi Min City (HCMC) promulgated a Directive
regarding the management of advertising regulation in HCMC. Thirteen different
Government agencies were appointed to oversee various aspects of the Law on Advertising.
For instance the Department of Fire Prevention and Firefighting is “responsible for
directing the subordinate units to strengthen the inspection and dealing with
organizations, individuals and businesses which install signs, billboards improperly under
the regulations of fire safety.” Seven further agencies also deal with other aspects of outdoor
advertising.
Some of the Directive is very detailed – The Department of Information and
Communications is tasked with the responsibility along with MOCST, other relevant
agencies and the People’s Committee “to preside over the inspection and handling of phone
numbers hung, placed, stuck or written on power poles, poles of traffic signals and trees in
public places affecting the urban aesthetics.”
It is probably only a matter of time before other cities and districts issue similar Directives.
Discussion
The difficulty of changing from a centrally controlled economy to a market led economy
should not be underestimated. There is little doubt that advertising in Vietnam is over-regulated
and that this is stifling its development and in turn hindering economic growth.
The enactment of the Law on Advertising by Government was most progressive. Industry
was given the chance to introduce a self-regulatory regime that would work with
Government – in effect a co-regulatory system. A number of Vietnamese industry people
worked tirelessly to establish the self-regulatory regime based on the successful Philippines
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4. model. They were assisted by a few international folk to raise awareness with international
business of the opportunity.
There were two difficulties
– The first was explaining to multi-national head offices in Europe and the US of the issue
and the opportunity. The issue was complex and cannot be adequately explained in a one-pager.
It difficult to get the topic on the agendas of international meetings and if it was on
the agenda no more than five minutes was allocated.
- The second was getting commitment to provide establishment funding. There are various
reasons for this including lack of support from some local managers of large companies who
were accustomed to detailed Government regulation. This resulted in a paradoxical dilemma
for some multi-national advertiser and agency companies who enthusiastically support and
encourage advertising self-regulation globally but not in Vietnam where the need is probably
greater than elsewhere.
The game is not yet over. A viable self-regulatory regime can still be established in a short
time – all it needs is one-off establishment funding. Once established the regime can operate
as a normal self-funded self-regulatory organization, working closely with Government and
its various agencies to ensure advertising is effective and not inhibited by a raft of
regulations. It would be a win-win for the advertising industry and the Vietnam economy.
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Glen Wiggs
Director
Foundation for Advertising Research
Adjunct Professor of Advertising Regulation
University of the Sunshine Coast, Queensland