Monday, February 16, 2009

Liberalising ownership of retail services sector

The Domestic Trade and Consumer Affairs Ministry's impending move to liberalise the distributive trade sector is a good response to Malaysia's economic challenges.

Liberalisation will come in the form of relaxing the ownership rules in hypermarts, franchising, direct-selling, departmental stores, specialty stores and super stores.

It is the relaxation of the conditions imposed by the Guidelines on Foreign Participation in the Distributive Trade Services Malaysia, which came into effect on December 1 2004.

Once in effect, this liberalisation move will encourage foreign companies to own, control and set up companies and businesses in this sector. The Guidelines, as with all foreign ownership regulations in Malaysia, were a drag on foreign investment.

I imagine that the benefits are the influx of foreign capital into the country and, the commercial and marketing strategies used in more advanced markets being applied in Malaysia. This will generate a greater level of retail activity. Malaysians can and, should take out their note pads and learn new sales and marketing techniques.

Like almost all economic sectors, the Malaysian retail sector is on a downward spiral.

If anyone should doubt whether foreign direct ownership of retail businesses has dubious value to Malaysia's general economy, I suggest that they study the significant impact that Norwegian Telenor-owned Digi has had on Malaysia's telco sector. We can learn from these people and, we will benefit in the long term...unless Malaysians choose to remain indolent and docile.


Hasbullah Pit said...

Pembunuhan peruncit tempatan secara halus..

Anonymous said...

As far as retail goes, foreign participation seems like a good idea to me. I am however, a little skeptical when it comes to the financial sector, tho.

This doesn't mean I am opposed to liberalising the financial sector - just a bit apprehensive.

walla said...

If foreign-branded hypermarts see fit to come in and even expand their chains, the question remains why locals haven't done so.

It can't be the knowhow because hypermarts can't be run too differently. You enter by electricals and leave by frozen crab sticks. The software you can buy off the shelf. Don't need much people skills except how to update ever-changing price tags. Buying on credit from the wholesalers, selling for cash to customers.

And one time, Malaysia was the world's testbed for new franchise instruments. Even if it comes with direct marketing, the people get loaded with pricey supplements and other products.

It's moving money from right hand to left hand, with some flowing out of the country. For brand and management.

Of course, there will be the initial seed money for land, plant, equipment and inventory. And maybe that's the reason why locals don't do it so that we can develop our own global brands and niche our retail knowhow overseas.

It's about financing, isn't it?

You wonder if the kedai runcits have an association which can cut national-sized deals with the suppliers direct but send the goods on consignment at factory plus prices to the shops. Rather than individual orders which will have bigger markups. The savings can be passed on to the customers out looking for a tin of milk or something. Or, used to spruce up those kedai's, some of which look decidedly prewar.

oops, bon appetit..

it's odd - 2002, 2004, 2009:

de minimis said...


You put your finger on a key factor. Hypermarts play a volume game in order to come up with such competitive pricing. Foreign-owned hypermarts have an even larger volume and, therefore, can price goods even more competitively.

There will always be kedai runcits because even 7-Eleven cannot reach certain localities.

This is a global phenomenon. It's also a generational issue. Even the moms-and-pops prefer that their children move up the value chain of marketable skills via better education.

The bottom-line is price competitiveness. And, on this score, hypermarts are Masters of the Retail Universe.