Malaysia Relaxes Rules for Foreign Grocery Retail Operators

March 2020

Malaysia has relaxed the rules governing foreign operators of large-format grocery stores, following a recent revision on the Guidelines on Foreign Participation in the Distributive Trade Services 2020 that took place in January 2020. Large-format grocery stores in the country include hypermarkets, superstores, and supermarkets. Hypermarkets are stores that measure 5,000 square meter and above, while superstores measure 3,000 to 4,999 square meters.

The Malaysian Ministry of Domestic Trade and Consumer Affairs has stated that the rules were relaxed to ensure progressive development of the industry and to encourage modernization and growth of the domestic economy.

Contrary to the previous rules, foreign operators are now allowed to open superstores without necessarily being an operator of a hypermarket which entails the need to have a 30% Bumiputera shareholding structure. They are also no longer required to have a local partner to operate superstores. The new ruling is expected to help improve occupancy at malls, with the abolition of the population size requirement of 200,000 for foreign operators in order for them to set up such stores.

Local observers anticipated that this will help to ease the ongoing sales process of Tesco Stores (Malaysia) to Thailand’s CP Group and allow foreign retailers such as Japan’s AEON Co (M) Bhd to venture into operating smaller grocery stores. Recently in March 2020, Tesco Plc has given the green light to sell its business in Thailand and Malaysia to a combination of Thailand’s CP Group entities for an enterprise value (EV) of USD 10.6 billion (MYR 44.63 billion). The move is also expected to encourage existing foreign hypermarket operators in Malaysia to restructure their operation in the market. Aside from Tesco and AEON, the current biggest foreign operator in Malaysia is Hong Kong’s Dairy Farm International Holdings (DFI) Ltd.

(Sources: The Edge Markets; New Straits Times)

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