Thailand's demand that foreign retailers halt all plans for expansion could spark legal challenges or disputes with the kingdom's European trade partners, experts say.
The commerce ministry has threatened major retailers, mostly foreign-owned groups, with unspecified punitive measures if they do not suspend development projects, citing the need to better protect smaller local stores.
In talks on Wednesday with 24 retailers including Tesco of Britain and France's Carrefour, Thai Deputy Commerce Minister Preecha Laohapongchana said the measures would take effect in two weeks if the government's order goes unheeded.
But experts say the ministry cannot legally make such a demand, and risks a court battle from retailers who feel they are being singled out.
"The government has no legal power to order giant retailers to immediately stop expansions," said Pornsilp Patcharintanakul, deputy secretary-general of Thailand's Board of Trade.
"If those foreign retailers think they are not treated appropriately, legal action against the commerce ministry is possible," he said.
Others fear the confrontation could damage Thailand's ties with its foreign trade partners if the retailers that have been targeted complain to their home governments.
"If concerns of those foreign, mostly European companies ... of not being treated fairly are taken into consideration by their governments, the dispute could lead to counter-actions in terms of trade with those nations," said Thanomsak Saharat, an analyst at Capital Nomura Securities.
Already, the dispute has transcended the business arena, with angry Thai business owners marching on the British embassy in Bangkok earlier in the week to protest Tesco's aggressive expansion of its Thai unit.
Steve Buckley, director of the embassy's trade and investment department, said such complaints are not new, but have become valuable political capital for candidates ahead of general elections slated for late November.
"The complaints have been happening for years. Now it is the time for the issue to become a government concern with the general election taking place in coming weeks," Buckley said.
British officials have urged the government to be fair to all parties while trying to provide a solution to smaller local retailers, pointing out that the expansion of the superstores has also benefited Thailand's economy.
"Foreign investment is important for Thailand. Any action to be taken by the Thai government must be balanced and fair to every party," Buckley said.
A French diplomat in Bangkok said the investments made by the Carrefour and Casino groups in Thailand would be on the agenda of Commerce Minister Somkid Jatusripitak when he visits France next week.
Somkid was to meet with French officials as well as with Carrefour and Casino executives in Paris to discuss the situation.
Commerce ministry figures show that modern trade, including 400 superstores, controls 60 percent of Thailand's retail sector, up from 40 percent in 2001.
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