The controversy in India over the government's policy to allow foreign direct investment (FDI) in its retail sector and open the door for giant multinationals like Walmart, Tesco and Carrefour is a clear reminder that the benefits of globalism also come with major drawbacks. Many large multinationals already operate in the country, but they are only allowed to sell to smaller shopkeepers, not directly to consumers. The ruling party's controversial plan would allow them to compete with local retailers in an attempt to attract further foreign investment and boost the economy.
Protests against the policy, supported by the opposition Bharatiya Janata Party and the Communist Party of India (Marxist) (CPM), caused disruptions in major cities last week, as well as delays in train services in Uttar Pradesh and Bihar. Those opposing retail FDI are promising widespread strikes if the government doesn't back down.
Also putting pressure on Prime Minister Manmohan Singh to reverse course was the withdrawal on Friday of the Trinamool Congress from the ruling coalition, United Progressive Alliance, over the decision to allow direct overseas investment, as well as other controversial economic reforms. Trinamool Congress leader Mamata Banerjee, said: ''We are not in any way going to accept the decision to allow foreign direct investment in multibrand retail. We will continue protesting FDI in retail no matter what the consequences.''
In a statement last week CPM said that by undertaking the policy the ''Singh government has taken the single biggest step of destroying the livelihood of the largest number of people engaged in retail trade in India''.
Yet Prime Minister Singh seems determined to go ahead despite all of the opposition and on Friday addressed the nation to give his reasons. He denied that allowing FDI in retail would hurt small traders, pointed out that organised and modern retailing was already present in India and growing, and said that in Delhi, despite the increasing number of shopping centres, there was a threefold increase in the number of small shops. The prime minister concluded by saying that ''the fear that small retailers will be wiped out is completely baseless''.
It is hard to believe that not so long ago a similar debate was raging in Thailand, one which has not entirely gone away. While the vast majority of Thais appreciate the convenience and choice offered by the multinational giants, and in many instances they also offer more attractive options for Thai producers and growers, it can't be denied that the large chains have hurt local ''mom and pop'' operations.
Be that as it may, there is little chance of a return to the old days in Thailand or elsewhere in the developing world, and Mr Singh can't be faulted for seeing the writing on the wall and moving in accordance with the times. After all, the benefits of globalism do not go only from developing to developed countries, as is sometimes portrayed. As has often been pointed out, it is globalism that has allowed Indians to be the beneficiaries of relatively high-paying IT jobs which are outsourced from the United States, where the loss of these jobs has affected many families. Those in opposition to the large retail chains in India have no trouble raising large vocal protests, but there are probably many more millions who are quietly looking forward to the chance to shop in them, and no doubt they will fill the aisles at the first available opportunity.
But while opening up to FDI may be inevitable, there are obvious pitfalls. In this respect Thailand offers a good example, one that goes back to the days of King Chulalongkorn, who looked on at the increasing colonisation of Southeast Asian neighbours with some concern. The king welcomed Westerners to Siam and allowed them to live and to do business here, but he yielded nothing in the matter of sovereignty.
Today, Thai laws limiting foreign ownership of land are widely criticised by many, and they may be too strict in some instances. At the same time they are a necessary safeguard as they ensure a measure of local control in important industries.
A case in point is the British multinational giant Tesco, whose Thai operations are registered as a local company with the Commerce Ministry. Among other things, this promotes direct stimulus of the Thai economy, as when Tesco announced last year that it would begin reallocating some of its hypermarket stores to a Stock Exchange of Thailand-listed property fund, in part to avoid problems relating to property laws.