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Thai Central Group’s expansion in Vietnam hits road bumps

State intervenes after Big C’s strategy change enraged local textile producers

Dozens of Vietnamese garment suppliers and their employees gather outside Central’s Ho Chi Minh City office to protest after Big C suddenly stopped ordering their products. (Photo by C.T) 

BANGKOK -- A Vietnamese official said Thursday that Central Group will stop sourcing garments within the country for 15 days as some local suppliers had not met regulations and commitments agreed, in a move to clarify the Thai retail conglomerate's actions over the last few days.

Central’s subsidiary in Vietnam sent a letter to local suppliers on Tuesday, stating that Big C in Vietnam would stop purchasing garments immediately due to what it called "a change in strategy of development of our soft-line concept," without stating when the suspension would end. This led to protests at its Ho Chi Minh office on Wednesday by suppliers and their employees.

On Thursday afternoon, Deputy Minister of Industry and Trade Do Thang Hai spoke to media after his department called an urgent meeting with Central Group's supermarket chain Big C and the Vietnam Textile and Apparel Association earlier in the day.

According to the Domestic Market Department under the ministry, Central said that some Vietnamese suppliers had failed to comply with regulations and had not fulfilled commitments they had agreed to.

"We protect and respect the interests of foreign investors, but also firmly protect the interests of Vietnamese businesses and consumers," said a spokesperson from the Ministry of Industry and Trade.

According to Hai, Big C promised after the meeting to continue ordering from 50 local businesses and another 100 in the following weeks.

Dozens of Vietnamese garment suppliers and their employees gathered outside Central’s subsidiary office to protest on Wednesday, holding up placards. One read: "Central Group: unethical in business."

Big C in Vietnam had then released a statement, saying that the company was "in the process of reviewing with more than 200 garment suppliers to develop products with the best quality to meet the conditions not only for the domestic market, but also toward exporting to other countries."

Central Group did not immediately respond to a request for comment by the Nikkei Asian Review.

Central Group is the largest retailer in Thailand, run by tycoon Tos Chirativat. Its Vietnamese subsidiary was established in 2011. Central operates a range of businesses including electronics chain Nguyen Kim and stationary chain LookKool in Vietnam. But Big C is at the heart of its expansion plans.

Central Group bought the chain’s operations in Vietnam from France’s Casino Group in 2016 for 920 million euros ($1.04 billion), beating another Thai conglomerate TCC Group as well as other local and international peers.

"The size of the economy in Vietnam is smaller than us [Thailand] but it’s growing at a fast rate," Tos told reporters back in 2016. "In the coming five years, it will be growing and growing," he added. 

Thailand's economy, on the other hand, has been sluggish, leading Thai companies to seek growth overseas. Analysts said how Central deals with this crisis will have a real impact on its prospects in Vietnam.

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