The Cabinet yesterday rejected draft legislation for the country's first-ever Retail Business Act following strong opposition from Prime Minister Gen Surayud Chulanont and other key ministers.

Krirk-krai Jirapaet, the commerce minister, sought to win Cabinet support for the draft by explaining its merits. If approved, the law would have curbed the expansion of retail giants through zoning and other regulations, created a level playing field for retail competition, and establish an independent body to regulate the retail business.

But Surayud opposed the draft from the outset, as did Dr Kosit Panpiemras, the deputy prime minister and industry minister, Dr Chalongphob Sussangkarn, the finance minister, and Yongyuth Yuthavong, the science and technology minister, a Cabinet source said.

The Cabinet instructed Krirk-krai to revise the draft on two main issues. First, it must come up with a better structure for the retail and wholesale commission, formed to regulate the retail business. The selection process of the commissioners at both the national and provincial levels must be spelt out.

The Cabinet was afraid the draft might give too much power to the commissioners, dominated by officials from the Commerce Ministry.

Second, the Cabinet wanted the draft to spell out more clearly the retail and wholesale system, so that both small and big retailers or wholesalers could co-exist. For instance, large-scale retailers must be kept at a certain distance from local communities.

Finally, the Commerce Ministry must conduct a public hearing on its draft legislation to get feedback from the public before resubmitting it to the Cabinet for approval.

"The ministers' comments focussed on the potential excessive authority of the commissioners, who might become a tool of politicians," a source at the Cabinet meeting said.

The Cabinet's rejection of the draft came as a surprise to Krirk-krai. Last Saturday he told a

seminar in Nakhon Ratchasima that he hoped to get approval from the Cabinet before the Council of State vetted its legal language. Afterward, the National Legislative Assembly would debate and vote on the proposed legislation before passing it into law in July.

Krirk-krai was disappointed with the rejection because earlier he had not detected any signs that it would be shot down. He left for China yesterday at the head of a delegation to hold talks on how to improve bilateral trade and promote Thai rice exports.

Small local retailers have been calling for the Surayud government to introduce stringent regulations to curb the rapid expansion of retail giants, particularly Tesco-Lotus. The small retailers met Krirk-krai in Nakhon Ratchasima last Saturday with a message that Tesco-Lotus should halt its expansion immediately, pending the promulgation of the retail legislation. Tesco-Lotus is expanding its outlets rapidly in upcountry districts and its Tesco Express has also grabbed a foothold in local communities and threatened the survival of traditional stores.

Without a new retail law, the superstore giants are free to expand their outlets throughout Thailand without restrictions.

The Cabinet also wants the Commerce Ministry to come up with a clear-cut definition of the retail business and the authority of the independent committees to regulate it.

Another source from the Cabinet revealed yesterday that the government was divided over the issue; certain ministers opposed the draft law while others sympathised with it.

Some ministers believed the Cabinet should impose a moratorium on outlet expansion of the retail giants until the law is passed. But the Cabinet ignored the proposal, the source added.

"It seems the key ministers have already decided to oppose the draft legislation, even before listening to Krirk-krai's explanation. They did not pay attention to the details but only asked the Commerce Ministry to revise the draft," the source noted.

Although the act was drafted in 2002, the interim government ordered the ministry to amend the draft last year in order to bring it up to date to ensure fair competition in the retail business.

Siripol Yodmuangcharoen, director-general of the Internal Trade Department, said Krirk-krai ordered the ministry to immediately revise the law in accordance with the Cabinet's wishes.

The ministry will call a meeting with the drafting committee and representatives from local and giant retailers to rewrite it.

Skol Harnsuthivarin, secretary to the commerce minister, said the ministry would not surrender on the issue but would resubmit the draft to the Cabinet.

Nirut Vacharapichart, coordinator of the Opposition to Multinational Retail Business Union, said local retailers want the Cabinet to immediately stop the retail giants from expanding until the retail legislation was approved.

"Small retailers will perish before they see the retail business law," he said.

The union's president, Panthep Suleesatira, said small local retailers were very upset at the Cabinet's decision. He said the government favoured the multinational companies instead of trying to protect local retailers, who are being squeezed.

The union will call for a meeting to explore further measures to block the expansion of the retail giants.

Darmp Sukontasap, a senior vice president of Ek-Chai Distribution System, which operates Tesco-Lotus, said the company agrees with the need for Thailand to have a retail business law, and it should be implemented within a suitable period.

He said foreign investors now had less confidence in the interim government and it must find proper ways to bring in regulations that will boost foreign investor confidence.

Chadatip Chutrakul, managing director of Siam Piwat Co Ltd - the operator of Siam Centre and Siam Discovery, as well as a co-investor in Siam Paragon shopping complex - asked the government to carefully consider all the benefits and weaknesses before approving a new retail law.

She said the government does not have to rush the new law as her company and others was happy to wait for the best legislation that would not hurt retailers, international investors and tourists.

Petchanet Pratruangkrai,

Piyanart Srivalo

The Nation