FEATURE ARTICLE
Ms. Asia´s Waterloo
Eco Pointers
Will globalization and liberalization be a cause for celebration?
Or will it spell a tragic turn of events for local businessmen?
Economist and writer Dr. Walden Bello analyzes the effects
of the retail trade lib on the country's economic landscape.
Throughout Southeast
Asia, reaction is setting in to the policies of globalization
and liberalization promoted by multilateral agencies such
as the World Trade Organization (WTO) and the International
Monetary Fund (IMF). In Indonesia, small merchants are
pushing the government to oppose further liberalization
as big foreign marketing giants like French-owned Carrefour
have, in a few short years, achieved an overwhelming position
in retail trade.
In Thailand, small
retailers threw their support behind Prime Minister Thaksin
Shinawatra’s Thai Rak Thai ("Thais Helping
Thais") Party during the recent elections. They hope
the new government would take up the cudgels for them
in their battle against Carrefour, Makro, Tesco, and other
giants that are now said to control over 50 percent of
retail trade.
In the Philippines,
the Philippine Congress denationalized retail trade last
year, under pressure from the now-ousted Estrada administration.
It is likely that, despite some safeguards in the Retail
Trade Liberalization Law, the country is poised to repeat
the experience of Thailand and Indonesia.
This would be tragic
since retail is a great absorber of labor. As analyst
Rolando Hiro Vaswani points out, with its low barriers
to entry, the retail trade sector employs some 11 percent
of the work force, or over three million people.
"Even the World
Bank has warned that the retail trade sector is the economy’s
safety net," says Vaswani. "It absorbs rural
people being displaced from agriculture and urban workers
being displaced by industrial downturns. It is the national
shock absorber. You open it up to foreign participation
and you will likely see a rise in open unemployment, with
all the implications for social stability."
" The landscape
will be changed in other ways. With over 200,000 retail
outlets, the Philippines has had one of the best ratios
of retail outlets to population, according to an AC Nielsen
study, with one grocery store servicing 321 people, compared
to 1,531 in Japan, 1,503 in Hong Kong, 876 in Singapore,
and 509 in Malaysia. This situation was one of intense
competition, and it was good for consumers.
As Edmundo Aguila,
a director of the small and medium retailers group Katapat,
claims, "the intense competition has made the margin
of profit in Philippine retailing the lowest in Asia and
possibly the world."
The entry of the big
foreign players will change all that.
Is this a Hollywood
horror scenario? Not at all if one looks at the experience
with Wal-Mart in the United States. Wal-Mart, whose sales
of $130 billion is around 40 percent bigger than the Philippines’
GNP, is likely to be one of the beneficiaries of liberalization
in Asia, along with mass retailing giants like Carrefour,
Auchan, Mitsukoshi, Sogo, and Tesco.
Analyst Donella Meadows
reports that in Massachusetts, a typical Wal-Mart adds
140 jobs but destroys 230 higher paying jobs. In Iowa,
"within three or four years of Wal-Mart’s arrival,
retail sales [of competitors] within a 20-mile radius
goes down by 25 percent; 20 to 350 miles away, sales go
down by 10 percent."
In the US as a whole,
some 17,000 retail firms have been going bankrupt annually
since 1991, partly as a result of the predatory pricing
practices of mega-retailers like Wal-Mart.
As Canadian journalist
and bestselling writer Naomi Klein points out, so deep
are the reserves of this transnational giant that many
of its smaller competitors claim they pay more for their
goods wholesale than Wal-Mart charges retail. In the US,
Wal-Mart and other mega-retailers like Home Depot and
Makro "are all known as ‘category killers’
because they enter a category with so much buying power
that they almost instantly kill the smaller companies."
That is the first phase.
Once they dominate a market, the giants resort to controlled,
oligopolistic pricing. In Britain, for instance, control
of the retail trade by mega-retailers has resulted in
consumers spending 40 to 60 percent more on food, cars,
and computers than elsewhere in Europe, where retailing
is much less concentrated.
Groups like Katapat,
the Philippine Retailers Association, and the National
Market Vendors Cooperative pointed out the dangers of
denationalizing and liberalizing retail trade during a
five-year long debate over the liberalization of retail
trade. However, interests seeking partnerships with the
big transnationals like the Lopezes and Henry Sy threw
their support behind the American Chamber of Commerce
and the Australian-New Zealand Chamber of Commerce to
win the denationalization of retail trade.
This behavior is not
at all strange, according to Jimmy Regalario, secretary
general of Katapat, who claims that the big Filipino retailers
see the concentration of global retail trade in the hands
of some 20 transnationals as inevitable.
"They are smart
people," Regalario says, "and they have come
to the conclusion that when it comes to retail, they would
prefer to move from a competitive stance and specialize
primarily in providing space or real estate for the transnationals."
Local-foreign partnerships
will overshadow local-foreign rivalry, with the result
being "not free market competition but controlled
monopolistic competition marked by higher and higher prices
at the retail level, as in the oil industry."
The big boys will survive.
The small players will be thrown to the wolves. Unless,
of course, we as a nation develop the political will to
oppose and reverse this process of globalization and liberalization
whose advocates fraudulently claim will shower benefits
on all of us.
ABOUT THE AUTHOR:
Dr. Walden
Bello is a professor of sociology and public
administration at the University of the Philippines and
co-director of Focus on the Global South, a research,
analysis, and advocacy program of the Chulalongkorn University
Social Research Institute in Bangkok, Thailand. He is
also the author and co-author of numerous articles and
ten books on Asian political and economic issues, including
Dragons in Distress: Asia’s Miracle Economies in
Crisis (London:Penguin, 1991) and the recently published
A Siamese Tragedy: Development and Disintegration in Modern
Thailand (London: Zed 1998). Dr. Bello is also a columnist
of the Far Eastern Economic Review.
HIGHLIGHTS:
1 Tragedy number 1
"Retail is the economy’s safety net,
employing some 11 percent of the work force, or over three
million people. Foreign participation will give rise to
open unemployment, with all the implications for social
stability."
2 Tragedy number 2
"Partly as a result of the predatory pricing
practices of mega-retailers like Wal-Mart, some 17,000
retail firms have been going bankrupt annually since 1991
in the United States. With so much buying power, these
retail giants almost instantly kill the smaller companies."
|