THAILAND: Govt Turnabout on Retail Trade Irks Small Businessmen

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Nov 19 2002 (IPS) - Thai Prime Minister Thaksin Shinawatra is receiving a barrage of brickbats for turning his back on a pledge made to the country’s small trade retailers – that he would protect them from being driven out of the market by the foreign-owned gigantic retail stores.

Leading the charge have been some of the local traders’ clubs and chambers of commerce, who are angered by the premier’s unexpected announcement over the weekend that his administration had scrapped a piece of legislation aimed at regulating foreign-owned retail giants.

”We are discouraged by the prime minister’s decision,” says Kamhaeng Sontanarat, secretary of the Chanthaburi Traders’ Club. ”If we cannot rely on our leader, I don’t know who else we can rely on.”

”This is a dangerous decision because it will allow a few people to be rich and take advantage of others,” he adds.

Similar sentiments have been expressed by other small retailers, who fear that the government’s move would destroy the economy of the country’s many corner shops and ”mom and pop” stores.

”It’s too early to say exactly what we will do next. But for sure we won’t be standing still,” Tawisan Lonanurak, vice-president of the Nakhon Ratchasima chamber of commerce, was quoted as having told Monday’s ‘The Nation,’ an English-language daily.

Thaksin’s announcement, made during a speech Saturday to a chamber of commerce in Udon Thani, also took some of the retail giants operating here by surprise. For some of the companies, the government’s move was a welcome measure but they felt it was too premature to take the announcement as a victory.

The bill in question – the Retail Business Act – was seen by local retailers as an affirmation of Thaksin’s pledge during the January 2001 election to help push through measures to boost the local economy.

Had it been passed in the Thai parliament, where Thaksin’s party enjoys a thumping majority, it would have curtailed the activities of retail giants such as Tesco-Lotus, Carrefour, Big C, the Tops supermarkets and Food Lion.

The restrictions on these hyper-markets included regulating prices of goods sold and limits on expanding the chain of stores.

But such measures, the prime minister had declared over the weekend, would have undermined Thailand’s quest to attract more foreign investment and also go against current global free-trade policies.

This, however, does not mean that the governing Thai Rak Thai (TRT – Thais Love Thai) party is abandoning the country’s small retail traders, says Pimuk Simaroj, a Bangkok parliamentarian and deputy spokesman for the TRT. ”The critics have misunderstood the prime minister.”

According to Pimuk, the Thaksin administration will stick to its ”dual track” economic plank articulated during the election campaign. Under that, the TRT committed itself to pursuing populist economic policies, including shielding the local retail trade, while at the same time seeking to attract foreign investors.

”Khun Thaksin felt that the Retail Business Act was not necessary, because there are other laws available to regulate the foreign-owned large stores,” Pimuk explains. Among them are zoning laws to determine where giant retail stores could be built and regulations to determine the hours they stay open.

It is an argument that does not convince the country’s opposition. ”By dropping the act, the prime minister has gone back on a campaign promise made two years ago,” says Abhisit Vejjajiva, deputy leader of the Democrat Party.

”The retail issue is a very sensitive one for Thailand,” he adds. ”If the prime minister wanted to take this line, he should have been more honest, than constantly making a case for policies promoting economic nationalism.”

For some economic analysts, Thaksin’s shift – giving more leeway for the foreign owned retail giants to function here at the expense of the local small retailers – also reveals the limits of his populist economic plank.

Waving the banner of economic nationalism through such bills as the Retail Business Act would have driven away much-needed foreign direct investments (FDI) the country needs to boost its stagnating economy since the 1997-98 regional financial crisis.

And the retail giants are significant in that regard, since they have been the largest foreign investors in Thailand following the financial meltdown.

The British-owned Tesco-Lotus heads this list of retail firms that have pumped money into the Thai economy. It has invested 44 billion baht since 1998, which, according to the company’s records, represents 5.4 percent of FDI into Thailand.

The company has 41 giant stores, close to half of which are based in the Thai capital Bangkok. Some 97 percent of those supplying goods to the retail giant’s outlets are Thai producers.

In addition, a separate arm of this company purchases Thai products for its stores in Britain and Europe. Last year’s exports of goods such as clothing, food products and furniture amounted to two billion baht.

Thailand, according to market analysts, currently has nearly 100 giant retail stores, a number that is expected to grow to around 200 within the next two to three years.

Since setting foot in Thailand in 1998, the foreign retailers have captured around 40 percent of the country’s retail market, up from 10 to 20 percent in 1998, the analysts add.

Saraburi province, 108 km north-east of Bangkok, is typical of those regions where the retail trade has been transformed. It had about 1,000 local retail stores before Tesco-Lotus established one of its giant supermarkets. Now has only about 200.

The Thaksin administration cannot marginalise either group, ‘The Nation’ argued in an editorial Tuesday. Yet mismanaging this fractious issue could trigger a political backlash from retailers who feel they are being ”wiped out by low-prices-every-day hypermarkets”.

”The government, especially the prime minister, should establish clear and concise guidelines that are satisfactory to all,” it points out, ”otherwise this issue could blow out of all proportion with nasty elements of nationalism that will benefit no one.”

THAILAND: Govt Turnabout on Retail Trade Irks Small Businessmen

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Nov 19 2002 (IPS) - Thai Prime Minister Thaksin Shinawatra is receiving a barrage of brickbats for turning his back on a pledge made to the country’s small trade retailersthat he would protect them from being driven out of the market by the foreign-owned gigantic retail stores.
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