A more unequal society than ever before
© The Bangkok Post Local small business operators and retailers in Kanchanaburi are protesting against…
In 1982 a major Swiss bank listed Thailand as the most unequal in the world, ahead of Russia and India. In fact, for the past several years, Thailand has been rated by various institutions as one of the most unequal countries.
All these statistics only confirm what we see daily with our own eyes. Slums behind walls of high-rises. Roadside food vendors with pushcarts only a stone’s throw from fancy restaurants. Beggars on pavements and working-class people waiting anxiously at bus stops as Mercedeses and BMWs whiz by.
Tonnes of academic studies have examined the issue and made recommendations to correct the ills, only to be left to gather electronic dust somewhere in the cyberspace.
In Thailand, change moves at a snail’s pace, if it ever comes.
Inequality, of course, does not mean unequal income alone. It encompasses many other factors like educational opportunities, access to the justice system, social connections, social safety net, power structure, etc.
Recently, inequality manifested itself in a major business transaction.
We learned from news reports last week that the Trade Competition Commission (TCC) had, in a 4-3 decision, approved CP Retail Development Company’s acquisition of Tesco Stores (Thailand) Co Ltd, in a deal worth more than 330 billion baht.
CP Retail Development belongs to the massive conglomerate CP Group, the operator of the omnipresent 7-Eleven convenience store chain.
Tesco Stores operates the Tesco Lotus stores with more than 2,000 outlets, including superstores, supermarkets and 7-Eleven-like convenience stores.
With this successful acquisition, CP Group’s market share in modern trade has ballooned from 52% to 69.3%. In many countries, a market share of 50% or even less is considered a monopoly but apparently not in Thailand.
In a typically Thailand-only newspeak, the TCC ruled that while CP has market dominance over modern trade and its merger with Tesco Lotus will increase its dominance even more, it is not considered a monopoly, which raises the question: in what way would the commission consider to be a monopoly? A 100% dominance?
The majority further explained that the merger wa+s considered an appropriate business transaction that would promote business operations. And while it would lead to a significant decrease of competition, it would not cause severe economic damage, nor have significant impact on consumers.
To mitigate the impact of the merger, the TCC imposed a number of conditions on the new company. However, these fall far short of alleviating the anxiety felt by small businesses and suppliers.
We now have a modern trade behemoth that is capable of bending retail trade to its will. Consumers, by and large, remain unaware of the impact of this development on them. Some believe it is CP’s inalienable right to take back the company, which it created and later sold to Tesco of the UK following the economic crisis in the late 1990s. Some even believe the deal will stimulate competition.
CP Group — if anyone needs reminding — is not only dominant in the retail trade but its dominance spans the entire spectrum of food and goods production from producer to supplier to wholesaler to retailer.
This is not the first time CP has engaged in a questionable takeover and the TCC failed to exercise its oversight for the public good. In 2012 the monopoly regulator approved CP’s takeover of Siam Makro, the dominant cash-and-carry wholesale chain.
In an unprecedented move, the three commissioners in the minority felt compelled to explain to the public the reasons why they objected to the merger.
They said the merger would have a serious impact on the economy because it would lead to economic dominance and monopoly. Not only the competitors but suppliers and consumers would also be impacted.
Paisal Sricharatchanya, former Bangkok Post editor, called the merger “a bad deal”. He warned that the country would lose its competitive edge in the international arena if monopolistic dominance were allowed to take hold “because monopoly breeds inefficiency”.
Apart from the economic aspect, monopoly also breeds inequality.
It’s a sense of frustration and powerlessness that people feel when they see economic power being amassed in the hands of a small group of people. The 1% super-rich already controls more than two-thirds of national wealth and it’s not hard to see how deals — perpetuated by official apparatuses — such as this will only increase the wealth concentration.
With the power structure that exists in Thai society, the odds are stacked lopsidedly in favour of the rich, powerful and well-connected. In any major deal, you know almost from the get-go who will come out on top. The processes that are set up purportedly to guarantee transparency and fairness are only for show.
But the show cannot go on forever. Soon the top-heavy structure that supports the business-bureaucratic-politic collusion will topple, if not by its own weight, then by the masses of discontented people.