UK presses Korea to drop supermarket law
By Cho Jin-seo
A letter from former British business minister to his Korean counterpart in December 2009 has revealed that the U.K. government has been pushing the Korean government to drop its plan to regulate large supermarkets.
The letter warned that the regulations on so-called SSMs (super supermarkets) will be regarded as a trade barrier and would send a “wrong signal” of protectionism to the world ahead of the G20 Seoul Summit and the ratification of the free-trading agreement between Korea and the European Union.
Many politicians and association of small shopkeepers have claimed that Tesco, the giant British retailer, has been lobbying its government to put pressure on the Korean government. The SSM law has become a highly sensitive issue in Korea as public opinion is turning unfavorable as a result of the profit gap between large and small businesses.
“I am writing to you about possible future legislation which may restrict supermarket and hypermarket opening and expansion in Korea. You will recall that I raised the matter with you during my recent visit to Seoul in October,” reads the document, which has the letterhead of Peter Mandelson, then the Secretary of State for Business, Innovation and Skills. The recipient was Choi Kyung-hwan, the Minister of Knowledge Economy.
“The imposition of such barriers to trade is not consistent with the Korean government’s commitment to fighting protectionism in its role as incoming chair of the G20,” it read. “The restriction of trade in a high profile sector, such as retail, would also send the wrong signal at a time when British companies are eagerly looking forward to the ratification of the EU-Korea FTA.”
The British Embassy in Seoul refused to comment on the document at the request by The Korea Times on Monday.
The letter is dated Dec. 6, 2009. It was obtained by
, a Seoul-based daily, via a National Assembly representative. Mandelson did visit Seoul from Oct. 6 to 8 of 2009, according to the blog of Martin Uden, the British Ambassador.
The majority of Korean citizens are opposed to the expansion of large retail companies into the SSM sector, due to concerns that they would kill local grocers and turn neighborhoods into “Tescotowns,” as similar places are referred to in the United Kingdom. SSM refers to stores larger than ordinary supermarkets but smaller than hypermarkets.
Politicians from both the ruling and opposition parties have been working to pass two sets of regulations, which will make it difficult for the supermarket chains to open or expand shops in small towns and neighborhoods with small allies.
Mandelson could probably sense what the situation was like in Korea. In the letter, he explicitly mentioned the changes to be made in the Business Adjustment System (BAS) and the Distribution Industry Development Act. “Of particular concern are the changes which give incumbent store owners a role in the authorization processes for new supermarkets and hypermarkets, such as via the recent changes to the BAS,” it said.
Tesco owns 94 percent of Home Plus, which is one of three major retail chains in Korea along with Shinsegae E-mart and Lotte Mart. It pays a commission to use the well-established Samsung brand in Korea.
In its defense the U.K. retailer has done a great deal for the industry. According to the Korea Chamber of Commerce & Industry, it ranked fourth among all businesses in Korea for creating jobs between 2005 and 2009. During the period, the firm doubled the number of stores to 80, and increased the number of employees to 16,024 from 11,537.
The letter pointed out this contribution to the Korean job market. “Retailers from the United Kingdom have made major investments in Korea in recent years, showing real commitment to the Korean economy. They have positively contributed to the development of a competitive retail sector to the benefit of Korean consumers and they have created thousands of jobs, both directly and indirectly through their supply chains.”
But public sentiment is becoming more and more unfavorable to the large chains. Critics say that more jobs were lost at small grocers, and this is leading to the collapse of town communities.
Public outrage heightened when Lee Seung-han, CEO of Samsung-Tesco, did not appear at a National Assembly hearing last month, explaining he couldn’t make it because of a business trip to Hong Kong.