The caretaker government is about to enact long-awaited legislation to control the retail sector, under which multinational retailers would face more stringent restrictions when expanding their networks around the country.

The draft bill is ready for the Cabinet's consideration next week, said caretaker Deputy Commerce Minister Preecha Laohapongchana.

The aim of the law, which was drafted many years ago but has had its enactment postponed due to political intervention, is to protect local retailers and promise more revenue to local administrations where giant retailers open branches.

Under the draft legislation, retailers such as Tesco Lotus, Big C and Carrefour - which operate large networks with strong bargaining power over suppliers - would be forced to set up subsidiaries in the provinces where they intend to move. The subsidiaries would then be required to pay taxes to local authorities.

At present, all revenues are sent to the parent companies, which are obliged to pay the one-time corporate tax.

The requirement is expected to add complications to and hence slow down the big retailers as they expand their branches, while indirectly protecting local retailers which have been intimidated by the rapid expansion and the strength of the overseas operators.

 "Local Thai retailers cannot compete with foreign enterprises," said Preecha.

Local retailers have launched complaints whenever retail giants announce a plan to set up a big branch near their area. Many said the rapid expansion had undermined their competitiveness and forced them to reduce their operations, or shut down completely.

To protect local retailers, Preecha said the government planned four measures.

First, the ministry will come up with operating guidelines for manufacturers, wholesalers and retailers. Second, the retail business law will be enacted.

Third, foreign companies will be asked to inform the ministry before expanding into provinces, and they could be asked to delay their expansion. Finally, the government will set up restricted areas where new branches cannot be established.

According to a ministry survey, in five years the size of the modern retail trade business rose by 119.6 per cent, from 1,821 outlets to 3,999. Total retail market value rose by 60 per cent, from Bt208 billion in 2001 to Bt335.39 billion in 2004.

Among them, Tesco Lotus has the highest number of branches. It has hypermarkets in nearly all provinces, aside from its 154 smaller Testo Lotus Express outlets. Threatening local retailers is also 7-Eleven, which has more than 3,000 outlets.

Petchanet Pratruangkrai

 The Nation