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New licences for foreign hypermarkets [14-01-2011]  
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The Malaysian government is taking a more pragmatic and flexible approach in granting the licences

FROM 2011, the government will once again issue new hypermarket licences to foreign players instead of merely swapping old ones for new.

In 2009 and 2010, the government decided to cap the number of foreign hypermarket licences at 107 to address the issue of unused ones.

This is because only 78 out of the 107 licences granted were operational. As such, a foreign hypermarket is issued a new licence only if it gave up an old unused licence.

These stores did not open due to land issues, developers unable to carry out the project or the hypermarkets were not able to get state consent.

"As of now, there is no plan to extend swap arrangement to next year (2011)," the secretary-general of the Ministry of Domestic Trade, Cooperatives and Consumerism Datuk Mohd Zain Mohd Dom told Business Times.

He added that under the amended Guidelines on Foreign Participation in the Distributive Trade Services, which came into effect on May 12 2010, licences which have been issued have to be used within two years.

"Otherwise, the ministry will cancel it," he said.

An interesting point that Zain made was that although the guideline stipulates that the number of stores will be based on population count, it is not necessarily a fixed rule.

The general rule is, one hypermarket for every 250,000 people (previously 350,000) or a total of only 108 foreign hypermarkets based on a 27 million poulation and 135 superstores (1:200,000 persons).

However, the government is taking a more pragmatic and flexible approach in granting the licences.

"It is difficult to put a marker on the number of hypermarkets and superstores based on the size of population alone. A rich population may need more hypermarkets," he said.

Foreign hypermarket players in the country include the UK's Tesco, Hong Kong's Dairy Farm and France's Carrefour.

While there continued to be interest for hypermarts by the foreign players, the general consensus is supply is saturated in big cities.

Thus, their tendency is to go for superstore formats targeting other growth areas in new townships and suburban areas, he said.

On the issue of hypermarket targets under the Economic Transformation Programme (ETP), Zain explained that it is focused on assisting the setting up of hypermarkets and nurturing domestic players.

"For example, there are successful big supermarket players which are unable to move to hypermarket status due to constraints. ETP will assist them to move forward," he said, adding that the mechanism is still to be worked out.

According to the ETP announced in late October, Malaysia has 121 hypermarkets, 113 superstores and 113 department stores, run by local and foreign players.

The Entry Point Projects (EPPs) for the retail sector call for the setting up of 61 hyperstores (stores measuring over 5,000 sq m), 163 superstores (between 3,000 sq m and to 5,000 sq m) and 356 supermarkets within department stores (2,000 to 3,000 sq m) in the next 10 years.

However, Zain said that foreign applications will be considered outside the ETP scope.

"There is a lot of local interest to do hypermart format but I do not expect an influx very soon as it is not easy to get prime land and there are huge capital outlay to set up systems for both back-end and front-end," he said to a question on whether local players will have a bigger involvement in the hypermarket scene.

"I expect a more gradual increase from new players. Existing players who have made their mark may expand more if they take a more aggressive approach," Zain added.

Popular local hypermarket players include Mydin and Econsave.

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