THERE IS A parliamentary ban on Foreign Direct Investment (FDI) in retail. Large multinational retailers like Wal-Mart (US), TESCO (UK), Carrefour (France) and Metro (Germany) are forbidden from opening retail stores in India. But now these powerful companies are aggressively lobbying with the Indian government to allow 100 per cent FDI in retail. In anticipation of this, many Indian companies like Reliance have announced aggressive plans to enter or expand retailing business.

 

Retail is the world’s largest industry, and is controlled by a handful of powerful corporations. These corporations from the West have saturated home country markets and are now looking to expand into India, where organized retail trade is only 3 per cent and they see huge growth potentials. These companies will operate in food retail, along with all other retail goods. Because of the tremendous market-power these corporations will have, devastating impacts on the agricultural and retail sectors — the two largest employment sectors in India — is feared. With more than 12 million small kirana stores, India has the largest number of small businesses in the world.

 

India FDI Watch Campaign seeks to prevent FDI in retail in India and the take over of corporate retail generally. Specifically, they want to prevent the insertion of giant MNC retailers from entering and expanding in the Indian market unless they make satisfactory guarantees that would protect communities; ensure the livelihoods of retailers and farmers; guarantee fair wages and working conditions for their own employees and source employees along with union protection and agreements; and ensure that a significant percentage of sourcing is derived from the Indian market.

 

Broad-based coalitions are currently being organizing in Bangalore, Chennai, Delhi and Mumbai to oppose the entry and expansion of foreign retailers. Coalitions are working to build a broad-based grassroots movement by spreading awareness among mass-based constituencies that stand to be impacted. These constituencies are: consumer cooperative stores, farmers groups, hawkers unions, shopkeepers associations, traders associations and unions.

 

The India FDI Watch is working at the city, state and national level to develop policy and legislative demands that will either bar the entry of MNC retailers or ensure that local communities and livelihoods are protected and/or enhanced.

 

Global experiences Comparison with China is often cited as a convincing example for allowing FDI in retail. However, in the case of China, FDI was allowed with a cap of 26 per cent in 1992, and 10 years later with maximum limit of 49 per cent. Only recently, that is 2004, it was made 100 per cent. Even with the 100 per cent allowed FDI in China, there continues to be caps on the number of permitted outlets and the locations of these outlets. Additionally, Wal-Mart, a vehemently anti-union company, was forced to allow a union for the store workers.

 

In the United States, thousands of small and medium businesses have closed down because of Wal-Mart. Wal-Mart currently faces a number of workers’ violations suits. Studies have shown that Wal-Mart drives down wages in local communities where they operate and on average two small stores are closed down for every one Wal-Mart store built. More than 300 local communities have blocked the entry of Wal-Mart in their neighborhoods. Small businesses, labor unions and community groups have been successful in keeping Wal-Mart out of major US cities like New York and Los Angeles. Upon being allowed to open their first store in the city of Chicago, Wal-Mart was ordered to pay a living wage to their workers.

 

An eminent Indian parliamentarian has rightly said: "A retail supermarket encompasses the entire chain and shrinks the intermediaries – lowering costs and removing jobs. In a country with no social security net, the replacement of thousands of retailers and farmers by a single large intermediary will shrink jobs by the millions. What option will these millions have, except to take to the streets?”

 

France enacted the Raffairin’s Act in 1996 that regulated the growth of hypermarkets larger than 300 square feet. Even in as liberal an economy as Japan, the large-scale Retail Location Law of 2000 stringently regulates factors such as garbage removal, parking, noise and traffic. Recently, Carrefour decided to exit Japan by selling off its eight struggling outlets after four years.

 

Eight countries of Latin America, namely, Mexico, Puerto Rico, Costa Rica, Argentina, Dominican Republic, Brazil, Uruguay and Chile-joined together to condemn "predatory practices’ and wrote national laws to prevent Wal-Mart from having a high concentration of stores in their countries. In the province of Sante Fe, Argentina lawmakers passed legislation that no business could control ore than 30 per cent of the market in one sector. In Malaysia, demands have been raised that FDI should be routed through joint ventures, with a minimum of 30 per cent of the equity held by indigenous Malayans (Bhumiputras). In less than 10 years of entering Mexico, Wal-Mart has gained control of over 50 per cent of the market. The government is now evaluating laws to protect domestic businesses.

 

Philippines Has imposed "sourcing" and reciprocity requirements on foreign retailers. Wal-Mart entered Puerto Rico in 1993 and soon became the largest retailer. Over the course of several years, approximately 130 small businesses went bankrupt. A study showed that for every $15.8 million of sales Wal-Mart generated, it caused one small business to go bankrupt. As a result, six business groups joined together to form a coalition to stop Wal-Mart from expanding on the Island. They were joined by labour unions and other civil society groups to successfully block Wal-Mart’s expansion.

 

In Thailand, more than 60,000 small shopkeepers have been adversely impacted since the opening of FDI in retail. The Thai government, which once opened its doors to MNCs, has now set up a separate fund to help local retailers. Local laws have also been enacted such as prohibitions from mega-retailers opening within 15 km of city centers.


Share your opinion by participating in merinews's ongoing debate on the topic Wal-Mart hijacks the livelihood of small and medium retailers


Related Articles:
Who is scared of Wal-Mart
Bid to stop big-fish entry in retail