Foreign hypermarkets still looking for bumiputera partner

KUALA LUMPUR (Feb 20): Three out of the four foreign hypermarket players in the country “have yet to meet the local shareholder requirement”, The Edge reported this week.

They are Japan’s AEON BiG (M) Sdn Bhd, the UAE’s Lulu Group Retail Sdn Bhd and, Thailand’s Lotuss Stores (Malaysia) Sdn Bhd (Lotus’s Malaysia) (formerly Tesco Stores [M] Sdn Bhd).

According to the report, it is difficult for a foreign hypermarket “to find a bumiputera investor to take up a 30% stake in the enterprise given the huge sum needed”.

Foreign hypermarket owners must sell 30% of their business to a bumiputera investor within three years of entry.

“Based on my eight years at Carrefour, it was not easy to find a good commercial partner. With the retail giants’ large paid-up capital, 30% take-up is too expensive,” said ExaStrata Solutions Sdn Bhd CEO and chief real estate consultant Adzman Shah Mohd Ariffin.

Etiqa Insurance and Takaful Bhd chief strategy officer Chris Eng is also of the same opnion: “Given that the whole industry has evolved with online distributors, wet markets and local provision stores catering for the mass market while premier grocers cater for the higher end, the market share of the hypermarket has been squeezed significantly.”

“As such, it will be a tough challenge for these foreign entrants to find a commercial partner willing to take up the 30% stake. Either they will appeal for a repeated time extension or they may have to secure a partner at commercially unfavourable terms,” he added.

So, should there be greater flexibility to the 30% requirement?

“As to whether the local shareholding requirement should be more flexible, it all depends on how the foreign players can be made accountable to ensure the interests of local players and that the public is protected, and to have wealth sharing with local businesses,” said Adzman.

Eng opines that requirement for local participation was meant to “to build up local capabilities and ensure knowledge transfer”.

“Since then, the hypermarket business model has matured and many local players have come up in the grocery sector, indicating that local capability has developed,” he said.

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

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