VZCZCXRO6468
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #2736/01 1360656
ZNR UUUUU ZZH
R 160656Z MAY 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 6923
INFO RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 03 BANGKOK 002736 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON TH
SUBJECT: FOREIGN RETAILERS DRAW IRE OF THAI SHOPKEEPERS 
 
REF: A. 06 BANGKOK 5706 
 
     ¶B. BANGKOK 2008 
 
¶1. Summary.  Econoff recently attended a National Legislative 
Assembly seminar on the draft Retail Business Law, held to 
solicit public feedback on the proposed act.  Although few 
were aware of the actual details of the draft law, it is 
generally perceived as a means to limit the expansion of 
largely foreign-owned large-scale retailers.  As such the 
response from the participants, mostly representing small 
retailers, was overwhelmingly supportive.  The response 
revealed a strong streak of protectionist sentiment amongst 
Thai retailers.  The debate also brought out attitudes about 
competition, development, and the sufficiency economy that 
reflect current Thai attitudes.  With other major 
stakeholders (consumers, producers, and large scale 
retailers) mostly absent or silent, it is unclear to what 
extent the final law will accommodate the demands of the 
small retailers.  End summary. 
 
------------------------------- 
Explaining the Draft Retail Law 
------------------------------- 
 
¶2. On May 14 the Committee on Public Participation and the 
Committee on Commerce of the National Legislative Assembly 
(NLA) held a seminar on the draft Retail Business Law.  The 
seminar featured panel discussions of experts and industry 
representatives and offered an open forum for public comment 
on the proposed law.  Although there was very little 
discussion of the actual details of the draft law (septel 
will include an analysis of the draft law), the seminar 
provided insight into the attitudes shaping the debate on the 
law. 
 
¶3. Mr. Siripol Yodmuangcharoen, the Director General of the 
Department of Internal Trade, in his comments on the draft 
law characterized "modern trade" (i.e. large scale retailing) 
as a "problem," and noted that the Ministry of Commerce had 
been trying to curb its expansion in Thailand since 2001. 
Although he argued that the objective of the law was to 
promote the mutual benefit of all (consumers, producers, 
large and small retailers), he noted that the RTG had a 
policy to promote Small and Medium Enterprises, as well as 
the sufficiency economy model of the King (Ref. A). 
 
 
----------------------------- 
Economic and Legal Viewpoints 
----------------------------- 
 
¶4. Dr. Narong Petprasert, Dean of the Economics Faculty at 
Chulalongkorn University, discussed the economic aspects of 
the act, arguing that the objective was not to curb the 
expansion of modern trade, but to readjust the relationship 
between small and large retailers, making the negotiating 
power of the small operators more equal to their larger 
competitors.  One major disadvantage of modern trade cited by 
Dr. Petprasert is reduced employment, since one large retail 
outlet impacts 200-300 small shops, each with roughly 3 
family members employed, but itself hires only about 300. 
 
¶5. Another disadvantage of modern trade is its elimination of 
entrepreneurship, replacing scores of small shopkeepers with 
salary employees.  According to Dr. Petprasert, many 
development theorists emphasize the importance of 
entrepreneurship for economic development and growth. 
 
¶6. Dr. Petprasert also sought to include consideration of 
public goods in the debate on modern trade.  He argued that 
modern trade has a negative impact on such things as traffic 
congestion, and light and noise pollution.  He did, however, 
acknowledge that in retailing the customer is king, and in 
that area modern trade had a distinct advantage. 
 
¶7. Mr. Thitipan Cheuboonchai, Dean of the Law Faculty at 
Thammasat University, speaking about the legal aspects of the 
act, acknowledged that Thailand exists in a global economy 
and there are limits on what restrictions should be placed on 
foreign investors, yet characterized the behavior of foreign 
operators as "insulting" in their efforts to find gaps in 
Thai law.  He cited in this context the nominee structures 
currently under challenge by the RTG, ignoring the fact that 
the major foreign retailers do not need to resort to such 
structures under the Foreign Business Act as it now stands 
(Ref. B).  He observed that the framework of the act was 
quite broad, speculating that this lack of precision might be 
intended to allow flexibility in implementation.  Noting that 
foreign investors/operators would be concerned that this 
imprecision would create uncertainty, he argued that the 
scope of the law should not be broad.  As an example he 
argued that it was not clear on what basis the central 
committee, which will be responsible for setting policy for 
 
BANGKOK 00002736  002 OF 003 
 
 
approval of retail operatins, would decide what constitutes a 
restricted business. 
 
--------------------- 
Stakeholders Disagree 
--------------------- 
 
¶8. Mr. Tanapol Tangkananan, Chairman of the Thai Retailers 
Association (TRA), was the only speaker to strongly argue 
against the draft law.  Modern trade brings many benefits, 
including greater consumer choice, expanded distribution and 
logistics networks, stimulation for suppliers, more taxes for 
government, and even a boost to the construction industry. 
With respect to the act itself, limiting competition from 
modern trade will not promote any improvement in the quality 
of traditional retailers, nor will it provide for improved 
consumer choice.  Competition and investment are necessary 
for economic development, and placing restrictions on the 
expansion of modern trade would hinder both. 
 
¶9. In reply Mr. Somchai Ponratanacharoen, Chairman of the 
Thai Wholesalers-Retailers Association, argued that the law 
was necessary to protect Thai people from being taken 
advantage of by modern trade.  Small scale retailers cannot 
compete against the marketing power of modern trade, or their 
unscrupulous pricing practices (dumping).  He argued that 
even the conservative 33% market share for modern trade 
claimed by the TRA was already too much for only five 
operators.  Significantly, he argued against focusing on 
economic growth, saying that "we don't want growth at the 
expense of the poor." 
 
--------------------------------- 
Public Opposition to Modern Trade 
--------------------------------- 
 
¶10. In the open comment portion of the seminar a consumer 
group representative, noting that consumers mainly want good 
quality goods at low prices, criticized several aspects of 
the draft law.  He said that the legal framework of the act, 
and the definitions used are unclear, that it gave too much 
power to the committees, that it is redundant with other 
acts, that it damages the investment climate, and that on the 
whole it hinders modern trade but does nothing to actually 
help small retailers.  Another speaker, identifying himself 
as an academic and an advisor to the government, also 
criticized the draft act for not including any limits on 
advertising, and not clearly stipulating standards for 
selection of the committees which will be responsible for 
approving new retail operations. 
 
¶11. Most of the speakers, however, were from the small 
retailing sector, including members of the Confederation of 
Thais Opposing Foreign Retailers, and were strongly 
supportive of the draft law.  Although few seemed to know the 
details of the law, the pervasive opinion was that it would 
be a means to limit the expansion of modern trade, which 
small retailers view as a threat.  Comments ranged from 
charges that modern trade was destroying the livelihoods of 
poor Thais, to more moderate but NIMBY-laced claims that the 
small operators don't want to negate foreign retailers, but 
don't want them to come to local communities.  Some noted 
that farmers following the King's sufficiency economy model 
grow mixed crops, and that the surplus that they bring to 
market does not reach the volumes necessary in order to sell 
to modern trades. 
 
------- 
Comment 
------- 
 
¶12. Remarks made throughout the seminar, by panelists and 
public commentators, revealed a uniquely Thai slant to the 
debate on modern trade.  Several speakers referred to the 
sufficiency economy model promoted by the King.  The model 
was used to highlight the vulnerability of producers to the 
loss of traditional markets, extol the virtues of small scale 
operators, and condemn modern trade for selling people more 
goods than they need and promoting increased public 
indebtedness. 
 
¶13. Several speakers also criticized modern trades for 
'creating conflict.'  They lamented that modern trade comes 
into communities to 'fight' with traditional small-scale 
retailers.  On one level this reflects a criticism of what 
are viewed as unfair business practices and an abuse of the 
legal system.  On a deeper level it reflects a very Thai 
cultural aversion to conflict.  In that sense the conflict 
that the speakers are complaining about is simply the very 
competition that is central to western concepts of capitalism. 
 
¶14. Although the NLA seminar on the draft Retail Law provided 
little real discussion of the draft act itself, it was 
 
BANGKOK 00002736  003 OF 003 
 
 
instructive for understanding the context of the debate 
surrounding the act.  Clearly the strongest forces driving 
the act is the perceived threat posed by large-scale 
retailers to traditional small-scale Thai shopkeepers. 
Because the large scale retailers in Thailand are 
predominantly foreign owned, the debate frequently takes on 
nationalistic tones.  Additionally, distinctly Thai attitudes 
towards avoiding conflict (competition) color the perceptions 
of modern trade retailers.  This distaste for being forced to 
compete for business exacerbates the distress felt by small 
retailers from the fact that they are generally not 
commercially competitive with modern trade retailers.  This 
may in part explain why the draft act provides mechanisms to 
limit the expansion of modern trade, but does not address 
measures to improve the competitiveness of traditional 
retailers.  The royally-inspired, government-supported 
concept of the sufficiency economy only serves to give 
official sanction to the anti-modern trade sentiment. 
 
¶15. The level of response from the retailing community at 
this public comment session is not surprising, given that 
this is the group most directly affected by the issue.  The 
future of Thai retailing and the extent to which modern trade 
continues to expand in the country is likely to have a 
significant impact on consumers and producers as well.  With 
input largely missing from these groups it is difficult to 
determine whether their views support or oppose those of the 
retailing community.  It is also difficult to determine to 
what extent the final Retail Law will take into account the 
larger community, or only respond to a vocal small retail 
sector steeped in a traditional Thai culture not especially 
in harmony with western economic expectations. 
 
¶16. Septel will examine the details and practical aspects of 
the draft law. 
BOYCE