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Thai retailers up in arms over foreign
chains
By Chayanit Poonyarat
BANGKOK - Thailand's small retailers are looking
with trepidation at the continued inroads made by
foreign-owned multinational retail chains in just the
past few years, saying they wield too much power and are
already driving many small ventures out of business.
Just this month, a coalition of local retailers
from Chanthaburi province, 290 kilometers southeast of
Bangkok, rejected a letter from British-owned retailer
Tesco-Lotus saying that it plans to go ahead with
opening a branch in the province in 2004.
In a
letter dated August 1, Chanthaburi retailers objected to
the store's planned expansion to the eastern province,
asking the chain not to go ahead with opening a branch
there until the Thai government's retail act comes into
force.
"We plan to go on with the project which
is expected to be finished by 2004. We foresee that the
government's retail act should be in force by then,"
said Tesco-Lotus in a letter dated August 8.
Small retailers fear that Tesco-Lotus's presence
in the province will drive them out of business as it
can hold down prices and bargain more aggressively with
suppliers to gain better prices. Ultimately, this will
translate to customers abandoning small stores for the
big lights and big discounts of the mega-stores.
"I go to these superstores at least once a month
to buy things and sometimes just for window-shopping,"
said a teacher, Surang Ongpaiboon. What is better about
the superstores is their pleasant atmosphere, variety of
goods and cheaper prices, she said.
Surang says
that although the disappearance of small venues will not
directly effect her, she says she "feels sorry for small
retailers if they have to close down. They are part of
our neighborhood, not only as sellers and customers, we
are friends."
Thailand's retail landscape has
undergone huge changes over the past five years,
hastened to a large extent by the entry of multinational
players into the market in the wake of the 1997 Asian
economic crisis and attempts to further liberalize the
economy.
The retail sector has been able to
attract the largest share of foreign direct investment
into Thailand since the economy was opened to foreign
competition in 1998.
Leading the charge is
Tesco-Lotus, a joint venture between Tesco Group of
Britain and CP Group of Thailand.
It currently
has 35 branches nationwide - 16 in Bangkok and 19 in the
provinces - and plans to have five more by the end of
2003, requiring a total investment of 40 billion baht
(US$945 million).
Tesco-Lotus is just one among
a stable of majority foreign-owned retail chains making
a strong presence in the country, the others being the
two French-based firms Carrefour and Casino Group's Big
C, Dutch-based Royal Ahold's Tops supermarkets and
Makro, and the Belgium-based Food Lion.
Currently Thailand has about 100 such stores,
compared with 50 in 1997, and multinational retailers
expect this number to grow to about 200 within the next
two or three years.
In the space of five years
foreign retailers have captured about 40 percent of the
Thai retail market, up from 10-20 percent in 1998, say
market analysts.
Meanwhile, small grocery stores
nationwide have been declining steadily at a rate of
about 10-20 percent per annum.
"People love
spacious areas to walk around, prominent displays of
products, cheapest prices and better service," said a
woman who runs a small grocery store. "With our limited
budget, compared to the superstores, we can never
compete."
The speed and extent of this
multinational-led drive has generated a great deal of
anxiety amongst local retailers who are pressuring the
government of Prime Minister Thaksin Shinawatra to curb
the growth of multinationals.
"We see examples
from neighboring provinces and we are worried," said the
secretary of the Chanthaburi Traders' Club, Kamhaeng
Sorntanarat.
Saraburi province, 108km northeast
of Bangkok, had about a thousand local retail stores
before Tesco-Lotus set up one of its hypermarkets, but
now it has only about 200, he said.
Calls by
local retailers for government protection are putting
Thaksin on the spot, with his government having to
decide whether to back foreign multinationals at the
expense of domestic retailers.
The retail bill,
originally drafted in a bid to help small retailers by
applying zoning and opening hour restrictions on
hypermarkets, is currently on the cabinet's agenda for
approval, before it is sent to parliament for a vote
some time next year.
The deputy commerce
minister, Newin Chidchob, has come out saying that the
bill will empower local authorities to regulate
hypermarkets, but hopes are far from high that the
legislation will prevent these stores from expanding
given the government's ratification of the World Trade
Organization principles guaranteeing equal treatment for
multinationals.
"We all know that the laws can't
really help much but it's better than nothing," said
Kamhaeng.
In the midst of this debate, the
Thailand Development Research Institute (TDRI) last week
released findings of a study focusing on the retail
sector, which said that nine out of 10 local retailers
have been affected by the arrival of big retail chain
stores.
However, the TDRI concluded that
hypermarkets had not had an overall negative impact on
Thai society, because consumers have largely benefited
through cheaper goods.
But Kamhaeng warns that
the matter is not so simple, although some would say the
small retailers' is natural given the big competition.
"Customers are now happier with their cheaper prices.
But once all local retailers are gone, they can take
control over the market and fix prices as they want," he
said.
He adds that the debate about the foreign
chains is not all about business, because smaller stores
have long been a standard feature of neighborhoods in
Thailand.
"Foreign stores will benefit from the
community and take out all the money from the local
economy, while small traders are not here only for
profit. We have created a society in which shoppers and
traders have social relationships," said Kamhaeng.
(Inter Press Service)
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