DRAFT TRADE ACT
Retail law wins backing from Cabinet
Bill set for implementation 'within two months'; Interior Ministry to get power to curb retail giants' expansion
The Surayud Cabinet yesterday approved a draft retail business law, which will give power to the Interior Ministry to curb the expansion of the mega-retailers through its city planning and building codes.
The move is part of a set of urgent measures proposed by the Com-merce Ministry in draft legislation to halt the rapid expansion of giant retailers, which have grabbed a strong foothold in cities, districts and small communities - and caused the demise of thousands of "mom and pop" stores.
A local retailer, who asked not to be named, said the draft legislation was likely to be passed by the National Legislative Assembly within the next two months so that Thailand will have a Retail Business Act for the first time by the middle of this year.
Under the proposed draft, the Interior Ministry would assume responsibility of curbing the expansion of giant retailers by exercising its power under the City Planning Code and Building Code.
The Surayud government hopes the Retail Business Act will create a level playing field in the retail and wholesale sectors.
Last month, Cabinet rejected the legislation draft, saying some clauses were ambiguous and also gave enormous power to regulating committees.
Netpreeya Chumchaiyo, assistant to the Government House spokes-man, said yesterday some clauses in the draft had been changed to create more transparency. The new law would balance the regulatory power of national and local commissioners, who will regulate the retail business.
At present, 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 expressed fears about the Retail Business Act, and draft amendments to the Foreign Business Act, arguing that the laws would make Thailand less attractive to invest in.
The US took a similar stance last week when it cited Thailand's move to introduce the retail business law as one of its alleged reasons for downgrading Thailand's trade status to "priority watch list".
Once approved, the retail trade laws would restrict the building of vast, modern retail outlets, whether locally owned like smaller shops - or bigger players like Tesco Lotus.
Supermarkets or hypermarts would be subject to rules and regulations. Most other countries have similar retail laws to protect small retail shops. The law will also focus on zoning regulations, and assign specific areas where retail outlets can be located.
Small retailers have been putting up a fierce fight against the retail giants, particularly Tesco Lotus, which has expanded its presence to districts and sub-districts nation-wide.
The retail sector is worth about Bt1.2 trillion a year, out of an economy totalling about Bt7 trillion.
Thanapon Tangkananan, president of Thai Retailers Association, said yesterday that new retail law would "damage the sentiment and confidence" in the Thai economy. And implementing the law at a time of political uncertainty could affect the confidence of foreign investors.
This could also have a domino effect on employment, manufacturing and people's spending, he said.
Previously, the Thai Retailers Association claimed the retail sector would register flat growth this year if the new Act was passed and implemented. It said growth in the retail sector slowed to 4 per cent in the first quarter this year - and was forecast to grow by 2-3 per cent over the whole year.
"The Cabinet has stepped back to allow 'old traders' in many areas to continue to monopolise the market instead of creating more choices for the consumer," he said. Restrictions to control business expansion would also limit competition.
The association said wanted to see the revised draft before commenting on the regulatory power of local and national commissioners.