Crackdown On Tesco Lotus, Carrefour, Big C, 7-11

[kat]

As some have noted, the development of these large retailers is a rather recent development in the western countries. One can argue that Walmart does allow the lower classes to purchase goods for less money and thus provides an economic benefit to society. But one can also ask as to what cost. Certainly in the US midwest, the arrival of Walmart in the late 1960s and into the 1970s eviscerated the small towns, eliminating their downtown cores and thus eliminating associated professional businesses such as local newspapers, local professionals such as accountants and lawyers, and other local professionals who needed a community to co-exist from an economic point of view. Were the financial savings worth more than the existence of a local community? And how do we measure the social cost?

Thailand is not at the same economic stage as the US and may or may not go through similar stages, so the long term effect upon the economy is still unknown. Most of Thailand is rural poor, people who do not shop at these megastores located in the major cities. They do not have the ability to travel to the main cities nor do they have the ability to purchase in bulk. In the US Walmart serves the vast lower and lower middle class population. In Thailand these stores serve the smaller middle class. The cost of goods for the people in the mubaans has not lowered and in fact as gone up a bit as the cost of small shop shops purchasing at true wholesale has risen a bit as traditional wholesalers have also been hurt by the large stores. So although a bit of a boon to the newer Thai middle class and many of you ex-pats who are not comfortable with the older style of Thai shopping, these stores are welcome, but there has been little if any benefit, perhaps even an increase in the cost of living, to the rural poor.

My biggest concern is that these large stores ship profits out of Thailand back overseas. Although having wide aisles and clean floors are seen as "development" by many posters here, once again one must ask as to what cost to development are there in other areas such as schools and rural infrastructure as profits are directed outside the country. Is there a net gain to the social good when the savings are equaled by the loss of profits for local usage and reinvestment? There are no easy answers here.

Yes, exactly right. Excellent post. You sound like an urban planner. I wanted to add, even when there is investment in infrastructure, it is usually to attract big box investors at the EXPENSE of the community. For example, in Vietnam and other parts of SEA, a Japanese development bank invests in large infrastructure, such as inter-provincial roads and bridges. They need this heavy infrastructure for their own export-import investments. In less developed areas, big box development comes with an entire set of needs, consumption, and raw materials, to be fully functional. Who do you think is in line to benefit from these needs - the poor? No way, they're going to be cleared out of the way. You could argue that a large highway linking Northern and Southern Vietnam benefits the entire country equally, but that argument becomes much more difficult when the poor are moved from their villages further away from the city and places of economic livelihood to barren areas devoid of contacts and opportunities. Their incomes fall by an average of 30 percent after relocation, which is significant when you are already living day-to-day.

So yes, it is a complicated argument, with no easy sides. Development must go on, because in the end, it is progress, but too bad no one takes the time to decide or analyze what really constitutes progress.

[Scott]

Why doesn't this affect Central Pattana?--oh, yes Thai owned!

[BlackJack]

Thai business can learn a lot from these mega stores

ie managing human and physical resources

Mega Stores can learn a lot from Thai business

ie tax avoidence and corruption

[BPayette]

They secure the owners of the small shope to vote for them and lose 6 million votes from the people who were looking forward to shopping in them. Thai logic, a contradiction in terms.

Not really : the minister just put a hold on the creation of new stores.

So :

-they keep the votes of the people who are already shopping in Tesco/Carrefour etc. (and you're right to say that they're happy with that)

-and they keep the vote of small retailers (who are really angry, we can understand)

After the election, of course, it will be "back to business". The small retailers will eventually loose.

The governement will draft a "cosmetic" regulation. Face will be saved. And more importantly : foreign investments will be saved...

The move is obvious : this is why the multinationals were very fast to say "khrap mai mi pen ha" to the lunatic minister. Because they know that it's pure thai bullshit.

Well said. Love the description in the last paragraph!

[Plus]

Central Patana is affected as well.

Tesco has a local partner Lotus, run by CP, the same guys that own 7 Elevens here. Tesco came in after 1997 crisis when Lotus needed a partner.

It's up to the government to regulate foreign partnership in these companies. Thailand needs their knowledge and experience in retail, they just have to negotiate what the price would be in the long term. Maybe automotive sector is a good example of foreign partnership, maybe they can look at other industries.

What we should be discussing now is that Retail Business Law, not a temporary ban on extensions.

Most of the problems assossiated with superstores can be solved through that law. I think there are several ways to accomodate interests of small local retailers - give them priority at renting space at the malls (that should be compulsory), give them bulk discounts unavailable to anyone else, re-train them to differentiate their services so that they complement rather than compete, offer them cheaper franchises for small retail outlets (Tesco Express or a similar from Big C, I forgot the name) and so on.

The law should also prevent dishonest business practices in the supply chain. Maybe suppliers should be chosen through semi-public auctions, like government contracts.

There's no way of stopping the "development" altogether, but the government should step in on behalf of all stakeholders. Is it competent enough? Does it truly have people's interests at heart? Will it be able to manage superstore growth?

It should give it a try, though I don't hold my breath.

[Jai Dee]

Commerce Ministry to call major retail entrepreneurs for a meeting

Commerce Ministry will call major retail entrepreneurs for a meeting concerning the appropriateness for expanding their branches.

The Chief of Internal Trade Department Siripol Yodmuangcharoen (ศิริพล ยอดเมืองเจริญ) revealed that On September 13th, he will call on a meeting with more than 15 entrepreneurs of retail shops and department stores such as Lotus, Big C, Carefour, Central, and Seven-Eleven. He said that the purpose of the meeting is to create understandings amongst all retail and mega stores in controlling the expansion of mega-stores. He said measures will be touched upon so that small retail stores will be able to continue with their businesses.

Deputy Minister of Commerce Preecha Laohapongchana (ปรีชา เลาหพงศ์ชนะ) has assigned Department of Business Development and The Office of Small and Medium Enterprises Promotion to help develop retail shops, to prevent the possibility of being taken disadvantaged of.

As for laws concerning retail business, Mr. Siripol said that there are no laws and regulations to directly control major retail businesses; however, he said that he will cooperate with Interior Ministry in amending the law and organizing public hearings oncerning the matter.

Source: Thai National News Bureau Public Relations Department - 11 September 2006

[Laulen]

Kat, your reply is most informative and knowledgeable.

I believe, on a wider global scale, there is a continuing struggle between the traditional agrarian societies and nomadic peoples, who see their ways of life continually threatened by the ever greater numbers of people who have abandoned the 'rhythmic living with nature' in favour of the bright lights and expensive consumption of energy that are the cities.

As for me, I live in a city, but regret the loss of that ability to look out upon a starry night without the haze of orange street lamps, erected for some 'health and safety' reason.

Laulen

[jcgodber]

Just a point of interest-

here in Sa Kaeo Makro has started building a new store. Everyday I driveby and see that there are still many construction workers ( 100) working.

Jim

[wolf5370]

I agree with some earlier posts - this is all for the voting public in a run up top an election in a period when party political broadcasts are illegal.

Otherwise these multi-nationals would not be signing anything - some deals have already been struck behind the scenes.

It would not take much for these companies to turn this into a real crisis for Taxsin if there was an real issue - how about a joint advertsiing campaign informing the millions that walk through their doors daily stating that due to new government rules, they were considering closing all there stores in LoS and listing the number opf people who would loose their jobs and the suppliers that would be hurt (including power services as well as stockists) and taxes (including indirect taxes etc) that would go with them.

How much panic would that cause? How much would that hurt the election campaign? With the massive PR and legal resources these mega-rich compant command, TRT would be stupid to take them on - especially in the run up to an election.

[kat]

Kat, your reply is most informative and knowledgeable.

I believe, on a wider global scale, there is a continuing struggle between the traditional agrarian societies and nomadic peoples, who see their ways of life continually threatened by the ever greater numbers of people who have abandoned the 'rhythmic living with nature' in favour of the bright lights and expensive consumption of energy that are the cities.

As for me, I live in a city, but regret the loss of that ability to look out upon a starry night without the haze of orange street lamps, erected for some 'health and safety' reason.

Laulen

Thanks Laulen Along the lines of what you were saying (agrarian vs. industrialization), the Yanomamo Indians of the Amazon Basin come to mind. They are confronted by largescale, multi-national, development and the possible extinction of their way of life.

I think the real confrontrations are going to be around elements that we take for granted right now, but that we need to live: clean water, air, and environmental safety (flooding, landslides, etc.). As always, the haves and have nots will be divided among the rich and poor -as it is now in more than half the world - but it's going to get worse. Large multinational estates have already had an impact here in Thailand with the diversion of water away from small farmers. We will see more of this, on a much larger scale.

[Jai Dee]

Mr. Boonchai : Commerce Ministry should control expansion of major retail branches

An official from the Thai Chamber of Commerce, Mr. Boonchai Chokwattana (บุญชัย โชควัฒนา), suggested that the Commerce Ministry should be neutral in solving the problems regarding the expansion of major retail businesses.

Mr. Boonchai said that small retail stores are being affected from the expansion of the fifth branch of modern trade. He said the Retail Business Act, which was proposed to the Cabinet in the year 2001, has not been approved yet. He said such act should be revised and proposed to the Cabinet again to protect the benefits of retail businesses.

He added that the government should control and amend the shares in the market for retail operators. He stated that major businesses are holding the shares of more than 50 percent in the market, and small retail businesses are being affected from it.

Source: Thai National News Bureau Public Relations Department - 12 September 2006

[Jai Dee]

Small retailers gather at the Thai Chamber of Commerce yesterday to draw up a letter to British Prime Minister Tony Blair, protesting about the expansion of UK giant Tesco ‘hurting local Thai retailers’.

Source: The Nation - 13 September 2006

[BlackJack]

crackdown on visas

crackdown on company setups

crackdown on land and house ownership

crackdown on foreign shopping malls

so what am I to make of this

after the next crackdown I think i will see the writing on the wall

possibly

foreigner go ----

[george]

Commerce threatens to issue regulations to curb expansion of giant retailers

BANGKOK: -- The Commerce Ministry threatened to issue stringent ministerial regulations within the next two weeks to temporarily curb multinational retailers' business expansion in Thailand, if the companies refuse to sign the memorandum of understanding to stop their expansion next Wednesday.

Caretaker Deputy Commerce Minister Preecha Laohapongchana reiterated Wednesday that the measure is necessary now that those multinational companies have never helped improve the operations of small shop owners, while keeping on the aggressive expansion.

"If the MoU agreement could not be reached, the 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 modern retailers, including Tesco Lotus, Big C Super Center, Carrefour, Siam Makro, to sign the MoU on a consensus agreement to halt their expansions until the clear solutions will be created on how to assist small and traditional retailers in the area and any measures will be launched to avoid impacts occurred by aggressive expansions of modern retail giants.

-- The Nation 2006-09-13

[jdinasia]

I ouldn't sign it either if it included projects I had already started ... either the planning or the building!

[OlRedEyes]

The Commerce Ministry threatened to issue stringent ministerial regulations within the next two weeks to temporarily curb multinational retailers' business expansion in Thailand, if the companies refuse to sign the memorandum of understanding to stop their expansion next Wednesday.

A slippery slope indeed.

Quick regulation changes to suit the govt of the day... There goes the hope of attracting big business for many years to come. All industries will take note, not just retailing.

The spiral continues....

[LaoPo]

What an absurd country this is sometimes....

...if I don't get what I ask from you guys..............I'll ask Daddy; he'll give it to me...

Remember: Elections coming up

LaoPo

[happydays]

Having lived on Samui for 7 years I have experienced life pre & post Tesco Lotus. Before, fags, beer, noodles bought from Mom & Pop stores, meat & veg from local market. Now, meat from Lotus (sick of meat covered in flies), veg from market (fresher & better selection), fags & beer from Mom & Pop store. In other words I don't see that Mom & Pop have been overly affected by Lotus. However, 7-11 opening down the road & this will have an impact - brighter, cleaner & altogether more inviting (open 24 hours as well). There definitely needs to be planning controls for large stores for traffic purposes but I think the Mom & Pop stores have picked the wrong target. Maybe because the convenience stores are owned by locals?

[Tornado]

Governments need people with brains to run them.

[Margo]

Err, there's no parliament in Thailand to pass any new laws and there hasn't been an elected government since February to make these sort of policy decisions. Sounds like Thai Rak Thai electioneering to me. Nothing more, nothing less. The commerce ministry can act on its political master's behalf by issuing the halt letters, but it can't pass laws.

[sriracha john]

Thai retail row could end up in the courts: experts

BANGKOK - Thailand's demand that foreign retailers halt all plans for expansion could spark legal challenges or disputes with the kingdom's European trade partners, experts say.

The commerce ministry has threatened major retailers, mostly foreign-owned groups, with unspecified punitive measures if they do not suspend development projects, citing the need to better protect smaller local stores.

In talks Wednesday with 24 retailers including Tesco of Britain and France's Carrefour, Deputy Commerce Minister Preecha Laohapongchana said the measures would take effect in two weeks if the government's order goes unheeded.

But experts say the ministry cannot legally make such a demand, and risks a court battle from retailers who feel they are being singled out.

"The government has no legal power to order giant retailers to immediately stop expansions," said Pornsilp Patcharintanakul, deputy secretary-general of Thailand's Board of Trade.

"If those foreign retailers think they are not treated appropriately, legal action against the commerce ministry is possible," he told AFP.

Others fear the confrontation could damage Thailand's ties with its foreign trade partners if the retailers that have been targeted complain to their home governments.

"If concerns of those foreign, mostly European companies ... of not being treated fairly are taken into consideration by their governments, the dispute could lead to counter-actions in terms of trade with those nations," said Thanomsak Saharat, a senior analyst at Capital Nomura Securities.

Already, the dispute has transcended the business arena, with angry Thai business owners marching on the British embassy in Bangkok earlier in the week to protest Tesco's aggressive expansion of its Thai unit.

Steve Buckley, director of the embassy's trade and investment department, said such complaints are not new, but have become valuable political capital for candidates ahead of general elections slated for late November.

"The complaints have been happening for years. Now it is the time for the issue to become a government concern with the general election taking place in coming weeks," Buckley told AFP.

British officials have urged the government to be fair to all parties while trying to provide a solution to smaller local retailers, pointing out that the expansion of the superstores has also benefited Thailand's economy.

"Foreign investment is important for Thailand. Any action to be taken by the Thai government must be balanced and fair to every party," Buckley said.

A French diplomat in Bangkok said the investments made by the Carrefour and Casino groups in Thailand would be on the agenda of Commerce Minister Somkid Jatusripitak when he visits France next week.

Somkid was to meet with French officials as well as with Carrefour and Casino executives in Paris to discuss the situation.

Commerce ministry figures show that modern trade, including 400 superstores, controls 60 percent of Thailand's retail sector, up from 40 percent in 2001.

- AFP

[pascharay]

Such protectionist policies are only bad in the long run for Thailand.

I mean if you give planning permission to build a hypermart and then pull the plug before it's competition you're going to seriously damage the confidence of foreign investors.

Other than beer what can you really buy in a 7/11?

Phone cards. soda. small packages of diapers and lots of really processed foods designed by the people who bought the world America the land of the fat.

C-four I like because they sell Normandie cider and french sausages, but when I heard Big C was building a mega shop on the Beach road of pattaya, I almost didn't make my weekly visit to the one on Pattaya tai in protest.

megastores are protectionist in that they kill every stores for three miles and you have to drive to them and no one else when you want something fast.

No one counts the time and gas of these trips into the cost of the items.

Plus my corner store sells beer cheaper than 7/11

Edited September 15, 2006 by pascharay

[opebo]

This issue is a complicated one because while I hate the chains, I also fear this anti-foreigner government. The large chains sell such inferior products than the traditional markets (i.e. processed, unfresh foods). I come from the Land of the Fat, and I know that it is exceedingly difficult to find a decent meal there - not so Thailand.

But, as someone said above, apparently the third worlders all want to be fat and eat Oreos and Ding Dongs rather than the delicately prepared foods of their forefathers. Anyway, this regulation is about xenophobia, not preservation of quality or culture - even the Thai retailers of the future will be moving away from fresh foods towards the disgusting processed trash popular in the West.

As someone said above - we may love the old Thailand, but it is time to say goodbye. It is already mostly gone. Ah for a time machine, eh?

[marshbags]

An article taken from the Telegraph.co.uk today.

Thailand halts Tesco expansion

By Richard Fletcher, Deputy City Editor

(Filed: 15/09/2006)

Supermarket chain Tesco is in crisis talks with the Thai government as it attempts to see off proposals that could scupper ambitious expansion plans. Thailand is Tesco's third largest market in the world – after Korea and the UK – generating sales of just under £1bn a year and the retailer had planned to open 170 new stores in the country this year.

advertisementBut Thailand's ministry of commerce has blocked international retailers until rules and regulations have been put in place to protect small shopkeepers. The move follows a campaign by small shopkeepers in Thailand who directly lobbied King Bhumibol Adulyadej and staged protests against the government, which is facing an election in November.

Deputy commerce minister Preecha Laohapongchana met international retailers including Tesco and Carrefour this week and asked them to sign a voluntary agreement that would freeze expansion until new rules were drawn up. The retailers are understood to have refused to comply.

"We are waiting to see the details of the proposals," said a Tesco spokesman.

The retailers and the government are due to meet again early next week. After eight years in Thailand, Tesco is the largest international retailer ahead of Carrefour and Casino. Tesco has opened almost 200 convenience stores in the country which compete directly with Thailand's traditional fresh food markets and shophouses. The retailer has also opened 10 larger supermarkets and has trailed a discount format in the north of the country.

Tesco is also facing a government investigation – alongside 15 other international companies – after claims that foreign firms were breaching rules that prohibited them from owning majority shares in Thai companies.

The url is :-

http://www.telegraph.co.uk/money/main.jhtm...MC-mcn_15092006

Who does Casino represent please.

I note that they plan an additional 170 stores, where are they going to put them all bearing in mind most larger cities already have them, along with the other companies.

This would put more than a few local businesses out of action after many years of building up a customer base and putting in personal investment along with their money.

marshbags

Edited September 15, 2006 by marshbags

[LoveDaBlues]

Thai business can learn a lot from these mega stores

ie managing human and physical resources

Mega Stores can learn a lot from Thai business

ie tax avoidence and corruption

crackdown on visas

crackdown on company setups

crackdown on land and house ownership

crackdown on foreign shopping malls

so what am I to make of this

after the next crackdown I think i will see the writing on the wall

possibly

foreigner go ----

wanna see a real crackdown.....try getting a Visa into the USA for a poor Thai girl

[Plus]

Casino is Big C, I believe.

The government has a golden opportunity to step in and find the best solution for everyone involved and display great conflict resolution skills, competence, and benefits of CEO government. They chose to come down heavy on foreigners instead and face lawsuits and loss of confidence. Could they manange the situtation any worse? I doubt it, short of asset confiscation.

I never drive to Carrefour or Tesco for a bar of soap or a tube of toothpaste, but I also never do weekly shopping in local mom and pop shops either. There are dozens of new developments in the area, tens or thousands of people moving in. Where are they supposed to buy their stuff? Can little shops supply the demands of all the new customers who move to suburbs?

Suburban Thais themselves don't have time to go out and buy every carton of milk or every pack of noodles separately, are they any different from the rest of the world? Should they try and be more traditional?

I live in a relatively new area, there aren't any real "traditional" shops here - they all moved in when the mooban was built. Some opened beauty salons, some coffee corners, some convenience stores, some Internet shops. I don't feel I'm somehow obliged to support them - why??? They stock up at the same Tesco or Macro btw.

[jcgodber]

I note that they plan an additional 170 stores, where are they going to put them all bearing in mind most larger cities already have them, along with the other companies.

This would put more than a few local businesses out of action after many years of building up a customer base and putting in personal investment along with their money.

--------------------------------------------------------------------------------------------------------

Ah! Excuse me please! The entire province of Sa Kaeo has not even one “big box” store. I am forced to make the very long 2-hour drive anytime I need to shop, wasting, fuel, time and money.

[Bryan in Isaan]

Such protectionist policies are only bad in the long run for Thailand.

I mean if you give planning permission to build a hypermart and then pull the plug before it's competition you're going to seriously damage the confidence of foreign investors.

Other than beer what can you really buy in a 7/11?

Phone cards. soda. small packages of diapers and lots of really processed foods designed by the people who bought the world America the land of the fat.

.

.

Plus my corner store sells beer cheaper than 7/11

Here in Kalasin province there are no Foreign owned giant box stores, only a giant Chinese box store in Muang Kalasin - just like a Chinese mini mart, only bigger. Nothing against Chinese, I just miss the European stores in other provinces if I ever need anything other than village food.

7-11s are a life saver out here in the rice paddies. They have whole wheat bread, fresh milk, hot dogs, good potato chips and other good snacks besides the sweet-sour-pepper-shrimp flavored whatever in the native owned stores. And internet cards - noone else sells them within an hours drive.

Our produce markets are actually good here. The fresh meat is OK and BBQ chicken better than I could find in the city. I just have a craving for western food once in a while and other things only sold in European owned stores.

[dog412]

since there is such a small number of super wealthy "thai chinese" running this country, i cannot be hopeful that this type of "bad publicity", will create the necessary effect to counter it. however, this country cannot hide forever. that being said, it may be able to do so long enough. never "underestimate" chinese "cleverness".

[Plus]

Most of those planned Tesco outlets are small 7-11 like Tesco Express stores. We have them at some ESSO gas stations here in Bangkok. They are great, unlike 7 Elevens they sell fresh vegetables and accept credit cards.