SINGAPORE After years of debate, India s government recently announced that will open the country s retail sector to foreign investment.

Business can encounter significant barriers when striving to invest in foreign distribution (retail or wholesale) markets.

The importance of active adults to the retail market are significant.

Moreover, continuing investment in real estate makes it all the more difficult to wean the economy off its real estate addiction, and the real estate market off its addiction to government support.

The informal retailing sector will have a role to play once markets are opened and formal retailing expands. FDI facilitates the switch from informal to formal retailing.

Since the Indian retail sector is still in its infancy, the opening to FDI needs to be gradual in order to give the domestic industry enough time to adjust.

The process of opening the retail sector in China began in 1992 when foreign investment was allowed in retailing on a trial basis.

Not all developing countries and LDCs that seek to attract foreign investment to develop their retail services sector are successful, since developing countries represent low value markets on average, and for FDI to come, sufficient volume of sales should be available.

China s e tail market is the world s second largest (after that of the United States), with an estimated 210 billion in revenue last year.

After Sweden eased planning laws in its retail sector during the 1990 s, the country posted the strongest retail productivity growth in Europe (and outstripped that of the United States) between 1995 and 2005.

Retail sales in the Russian Federation totalled 194.6 billion in 2004, with the distribution sector's contribution to GDP amounting to 22 per cent.

As a result, China s retail sector seems more likely to follow a two stage development path, with e tailers emerging as the major national players.

Construction is booming, and foreign investment is surging.

The distribution sector includes commission agents, wholesalers and retailers who act as enablers of trade.

The retail sector is characterized by economies of scale and scope as well as vertical integration and the existence of large retail chains.

The presence of large chains in the retail market is usually conducive to the improvement of local worker skills, especially in logistics.

Regulation and regulatory issues emerge as the next frontier or opportunity for ensuring sustained growth in the retailing sector.

OECD countries still use diverging approaches to regulate the retailing sector, with countries such as Belgium and Spain imposing a large number of regulatory restrictions, and countries such as France, Japan, the United Kingdom and Turkey having relaxed a number of them.

The debate around opening the retail sector to foreign investment is currently being framed, on the one hand, by the need to modernize supply chains and, on the other hand, by the desire to protect small shopkeepers livelihoods.

Neither the economy in general, nor the retail sector in particular, should be adversely affected.

In 2004, the retail market in Viet Nam was worth about 20 billion.

In the Colombian market large scale retailers coexist with SMEs, each one serving a different segment of the market.

The shift of FDI to services

Its share price might decline toward zero, but its retail customers will be blissfully unaware of its difficulties.

Limited progress has been made in the non agricultural labour market and in political life.

The size of the retail market in Ecuador might not make it attractive for new entrants, as no leading international retailers are active in the country.

Online retail and supporting logistics is expanding in a wide range of advanced and developing economies. In China, where the expansion is occurring extremely quickly, estimates suggest that only part of the expansion is at the expense of traditional retail.

In 2002, for example, China's retail market was worth 4,000 billion, larger than all non Japan Asian countries combined, and represented 5 per cent of worldwide retail sales.

Online sales are less common in retail trade (B2C) or in services' industries, with sales accounting for only 1.7 and 1 per cent of total sales, respectively.

This shadow system includes structured investment vehicles (SIVs), conduits, money market funds, hedge funds, and investment banks.

In the context of a market with a high number of small retailers this practice can be seen as a barrier to entry.

Foreign companies can, however, enter the Indian retail market through manufacturing, franchising, sourcing locally, test marketing, and so forth.

Of course, hypermarkets will do well in a few locations, but they are unlikely ever to dominate India s retail sector.

Some, observing the crash of the sub prime mortgage market, say, Don t worry, it is only a problem in the real estate sector.

The retail sector is a huge source of inefficiency that effectively places a massive tax on India s poor by driving up prices.

A number of lessons can be drawn from the OECD experience in countries where regulations were less restrictive, structural changes in the retail sector have generally been easier to implement, employment has been higher and performance has improved.

Giving micro finance institutions access to national and regional payments systems and electronic retail facilities will go a long way toward meeting the requirements of the retail and business sector in terms of banking facilities.

By 2020, China s e tail market could be as large as today s markets in the US, Japan, the United Kingdom, Germany, and France combined.

Pension funds, mutual funds, and investment banks are all long in the stock market.

Business coverage gained prominence in the 1990s, with wider investment in the stock market.

In the retail sector, which employs a huge number of Japan s unskilled workers the so called mom and pop shops Japanese productivity is now 25 lower than in Western Europe.

Investment in agriculture in Africa must focus on creating a dynamic smallholder sector.

FDI is negligible in primary activities and low in manufacturing. An exception is Mexico, from which relatively more outward FDI has been in manufacturing.

The secretariat should also follow up on the work undertaken on FDI in services (e.g. by looking at the tourism industry, which is of special interest to developing countries), as most recently presented in the World Investment Report 2004.

The second was investment in buildings, once again centered in the US, driven by the housing boom.