Rules relaxed: For foreign operators of large-format grocery stores

KUALA LUMPUR (Feb 22): With the revised Guidelines on Foreign Participation in the Distributive Trade Services 2020 kicking in on Jan 1, the rules have now “been relaxed” for foreign operators of large-format grocery stores.

This could “make Malaysia more attractive to foreign investors”, reported The Edge Malaysia.

Some industry observers told the weekly that the relaxed rules “will make Tesco plc’s sale of its Malaysian venture more enticing to Thai suitors, and allow retailers such as AEON Co (M) Bhd to venture into operating smaller grocery stores”.

The Ministry of Domestic Trade and Consumer Affairs responded to the business publication’s questions by saying that “the rules were relaxed to ensure an orderly and fair development of the industry as well as to encourage modernisation and grow the economy”.

“Retail is a dynamic sector. The retail landscape has constantly been changing in the past few years. Some existing formats are slowing down, whereas other new formats are emerging,” the ministry added.

The tweaking of the rules were also in reaction to the plunging “popularity” of hypermarkets in the country.

Under the previous ruling, only hypermarket operators with 30% bumiputera shareholding can set up superstores. With the new scenario, foreign operators are allowed to open such stores while the population size requirement of 200,000 has also been done away with. The foreign operators also do not need to get a local partner to open such superstores.

The foreign operators can also open up stores of as small as 1,000 sq m in urban areas, “which fall under the local jurisdiction of either a city council or a municipal council”, the weekly’s report revealed.

This means players such as AEON Co and ISETAN can “expand into superstores”.

“AEON Co, which is already operating the MaxValu chain, will not only be able to open small stores in big towns but also to venture into suburban areas”, wrote the business publication.

“The new ruling is also expected to help improve occupancy at malls that are suffering by bringing in big international brands as often, grocery stores pull the crowds in to malls,” it added.

Read the full report in this week’s The Edge Malaysia