This stern move is part of a set of urgent measures proposed by the Commerce Ministry in the draft legislation to halt the rapid expansion of the giant retailers, which have been taking strong foothold in cities, districts and small communities.

A local retailer, who asked not to be named, said the draft legislation is likely to be passed by the National Legislative Assembly within the next two months so that Thailand will have the Retail Business Act for the first time by the middle of this year.

In the proposed draft, the Interior Ministry will assume the responsibility of curbing the expansion of the giant retailers by exercising its power under the City Planning Code and Building Code.

The Surayud government hopes that the Retail Business Act will create a level playing field in the retail and wholesales business.

Netpreeya Chumchaiyo, assistant to the Government House's spokesman, said yesterday that some clauses in the draft have been changed to create more transparency. In addition, the legislation would give and balance regulatory power of national and local commissioners, which would be formed to regulate the retail business.

Last month, the Cabinet rejected the legislation draft, saying some clauses in the draft were ambiguous and that they also gave enormous power to the regulating committees.

Thailand has only a disparate set of individual regulations governing the retail sector, and the commerce ministry has spent years devising a single set of rules for the retail trade.

Foreign investors, particularly from Europe, have been expressing concern over Thailand's attempt to issue the Retail Business Act as well as the draft amendment of the Foreign Business Act, arguing that these laws would make  Thailand less attractive to invest in. The US has also recently showed a similar stance when it cited Thailand's move to introduce the retail business law as one of the reasons for its decision to downgrade Thailand's trade status to "priority watch list".

The country's firstever legislation, once approved, would restrict the building of vast, modern retail outlets, both locallyowned like the small shops or biggest players like Tesco Lotus. They will be subjected to rules and regulations. Most other countries have similar retail laws to protect the small retail shops.

In addition, the law will focus on zoning regulations, assigning specific areas where the  retail outlets can be located.

Small retailers have been putting up a fierce fight against the retail giants, particularly Tesco Lotus, which have expanded their presence to districts and subdistricts nationwide.

The retail sector is worth about Bt1.2 trillion a year, out of total size of the economy of Bt7 trillion.

Thanapon Tangkananan, president of Thai Retailers Association, said yesterday that new retail law will damage the sentiment and confidence in the Kingdom's economy. The implementation of the law during political uncertainty will directly affect foreign investor's confidence. It will also raise domino effects to employment, manufacturing and people spending.

Previously, Thai Retailers Association claimed that retail industry would register flat growth this year if the new act was to be implemented. It said growth in the retail sector slowed to 4 per cent in the first quarter this year. This sector is forecast to grow by 23 per cent this year.

"The Cabinet has stepped back to allow 'old traders' in any areas continue to monopolise market instead of creating more choices to consumer," he said, adding that the restrictions to control business expansion would also limit competition.

However, the association wants to see the draft revised version before giving its comment on the regulatory power of the local and national  commissioners. The legislation still has many ambiguous clauses.

by Business Desk

The Nation