Controversy over expansion heats up in Thailand

In Thailand, the Commerce Ministry has established a special committee, which met yesterday for the first time, to establish new rules, principles and guidelines for the expansion of retailers. The ministry plans to announce its results in 30 days. Karun Kittisataporn, permanent secretary for the commerce ministry, has also threatened hefty fines or even prison sentences for big retailers who mistreat their suppliers. According to ministry guidelines unveiled earlier in the week, retailers are prohibited from "unfair practices" such as selling products below cost, asking suppliers for deep discounts, demanding higher "introduction fees" for new products, and returning products without valid reason. Violators may be fined up to THB6 million (USD160,000), or jailed for up to three years.

Tesco has said it will go ahead with its expansion plans in Thailand, while nine large retail chains, including Carrefour, have agreed to freeze their outlet expansion this month. "You cannot stop the world moving for 30 days, and it is the same for our business," according to Darmp Sukontasap, director of corporate and legal affairs of Tesco's Thai unit. "Everything will go ahead as planned. We can't follow the instruction to halt expansion as we have already committed ourselves to the trade partners and staff we recruited." Tesco is scheduled to open four more hypermarkets before the end of the year and about 100 Tesco Express outlets.

Carrefour has agreed to delay the opening of an outlet in the southern resort town of Phuket by two weeks, until the temporary ban ends on October 28. "We don't want to see the row intensify," said an executive of Carrefour's Thai unit, speaking on condition of anonymity. "But we do hope there will be no more delays from the 30 days we have already agreed with the ministry." The commerce ministry, now under control of the military, has shrugged off the risk of international concerns about free trade and investment policies in Thailand. "We have to implement these short-term policies to protect local operators. They are only temporary steps until proper measures are sorted out, " according to Siripol Yodmuangcharoen, head of the ministry's internal trade department. "Giant retailers have operated in many countries that have their own market protection," he said. "Compared to those, Thailand is a more open market."

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