LARGE RETAILERS

'Aggressive expansion must stop'

Preecha threatens tough rules if MoU not signed

The Commerce Ministry has threatened to issue stringent ministerial regulations within the next two weeks to temporarily curb the expansion of multinational retailers in Thailand if the companies refused to sign a memorandum of understanding to stop their expansion by next Wednesday.

Caretaker Deputy Commerce Minister Preecha Laohapongchana reiterated yesterday that the measure was necessary because multinational companies have never helped improve the operations of small shop owners, while continuing "aggressive" expansions.

"If the MoU agreement cannot be reached, a ministerial regulation will be passed through the Cabinet in the next two weeks," said Preecha.

Preecha announced the move after the ministry failed to persuade 15 large retailers, including Tesco Lotus, Big C Supercentre, Carrefour and Siam Makro, to sign an agreement to halt their expansions until solutions are created on how to minimise the impact on small and traditional retailers in their areas.

Gwyn Sundhagul, director of Tesco Lotus, said that when issuing retail regulations and controls, the ministry should be concerned about optimum benefits to all related stakeholders including consumers, employees and suppliers, not just small retailers.

He said that he could not sign the MoU because the ministry had not yet revealed its details.

"As a representative, I need to ask our board of directors for approval before any agreement will be made," he said.

Representatives from other large retailers yesterday refused to sign the agreement on the same grounds - that they have not been presented with the contract language and that they need approval from their boards abroad.

The Commerce Ministry wants related ministries and authorities - including the Interior Ministry, the Department of Public Works and Town and Country Planning, and the Natural Resources and Environment Ministry - to also issue strict regulations to ensure that giant retailers are completely monitored and controlled.

Preecha said that after the MoU was signed, an open forum would be conducted with all stakeholders including the government, large retailers and vendors of small and traditional shops to hammer out retail guidelines which would benefit all parties.

At least 1,000 small retailers from many regions of Thailand plan to rally at the Commerce Ministry on Wednesday to protest the opening of large retail stores in their communities, which they claim are forcing them out of business.

"We have high hopes that all giant retailers will agree to sign the MoU with us to temporarily stop their expansions," said Preecha. "Otherwise, we need to find more stringent measures to control them. Our priority is to protect small and traditional retailers."

Under the MoU, all superstores would immediately suspend new outlet expansions and construction on new stores.

According to the ministry, the market share of traditional retail shops in Thailand has decreased gradually from 60 per cent in 2001 to 40 per cent in 2005.

Stunhagul of Tesco said that according an AC Nielsen retail study, 87 per cent of Thai consumers still buy products from small traditional retail shops and 78 per cent regularly visit fresh markets.

The number of transactions at small traditional retail shops has increased from 17 times a month last year to 19 times so far this year, while the number of visits to modern hypermarket stores have dropped from four times a month last year to only two times this year.

Stunhagul said that Tesco Lotus would build three to four hypermarket stores in the rest of this year, including one at Rangsit Kong 7, as well as 18 Tesco Lotus Express outlets.

"We have already recruited new employees for our new stores. Our contractors have already purchased construction materials and part of the construction work has been already finished. These represent concerns of major losses to us," said Stunhagul.

Petchanet Pratruangkrai

Kwanchai Rungfapaisarn

The Nation