Tesco, the UK's leading supermarket operator, is going from strength to strength in Thailand and expects to open a further 17 hypermarkets by 2004.

The group currently operates 33 hypermarkets in Thailand, a market it entered by buying the Lotus chain of retail outlets in the late 1990s. Tesco has invested some 44 million baht (US$1.03bn) in its Thai operations since its 1998 arrival, and partners with local agribusiness conglomerate Charoen Pokphand.

Moving ahead from the hypermarket format, Tesco is set to roll out a convenience store chain, currently being trialed, as well as a string of other new services.

Industry onlookers expect Tesco to use Thailand as a launch pad for a large-scale Asian expansion. The group will next week open its first store in Malaysia, and is considering moving into China and Japan. It is already active in Taiwan and South Korea.

Tesco Global CEO Terry Leahy last week spoke to Thai Prime Minister Thaksin Shinawatra. Leahy said he had been reassured by the meeting with Thaksin that "Thailand places a high worth on foreign investment". Foreign retailers operating in Thailand will be relieved to hear Thaksin's words, as the Prime Minister has earlier made no secret of his desire to protect small local retailers from unfair competition from large foreign hypermarket groups. Nevertheless, only negligible measures have been announced.

Tesco is helping allay the Prime Minister's fears by making efforts to source raw materials for its products locally, thereby helping the Thai economy.