Laurensius Tirta Widjaja, the marketing director of PT Indomarco Prismatama (Indomaret) recently talked with The Jakarta Post’s Kornelius Purba about the prospects of and problems facing retail business for next year. The following is an excerpt of the interview:
Question: What is your outlook for your retail business for 2010?
Answer: We feel optimistic for 2010. Why? In 2009 our business growth was almost 28 percent. We are projecting a higher growth next year that we are confident about.
First reason, we have held the general elections. Our government is fairly credible.
The general public also supports President Susilo Bambang Yudhoyono.
Second reason, he has done much to improve our infrastructure. This is one of our concerns regarding deliveries.
How about business permits in the region?
It is true that there are things we have to improve to receive business permits. Not all regions are open to our business. But we try to approach the local governments and share our business platform with them. This is not easy.
We do not have the same mindset yet. Bali is one example. We are facing big difficulties there. The retail business greatly contributes to regions.
First, we provide job opportunities.
Second, we give opportunities to local people to develop local products.
Third, we add local revenue.
Why are many regencies or cities reluctant to accept your business?
They perceive the entrance of the modern retail business does not provide balance in the development of their local market. Our presence can be disturbing. But we share with them our view why the region does not grow, or is stagnant. According to a well-established survey, the retail market is huge. Modern retail controls only 10 percent of the total market. So it has further opportunity to grow.
How about your business expansion now and in the future?
So far our business is concentrated in Java and the Greater Area of Jakarta. We have been entering Sumatra and Kalimantan in the last two years because the growth of the natural resources economy is quite high there.
Public purchasing power is increasing. Like Medan in North Sumatra and Palembang in South Sumatra, we also have been present there. We have not reached Aceh yet. We just entered Medan and have about 80 outlets there. The potential of Medan is equal to Surabaya.
We have also penetrated Palembang, although we are still in the surrounding area near the city. In Lampung we are welcome. The population of Palembang is bigger than Lampung with natural resources, product and oil. South Sumatra is undergoing impressive progress. They have built new and big roads.
The modern market is also growing rapidly there and in East Kalimantan. We have also surveyed Makassar in South Sulawesi. Its sea trade is quite progressive, its agricultural products also are growing well. We have prepared our human resources to go there.
Makassar is our first priority, because 20 top factories have operated there. So we do not need to send goods from Java. We only need to send imported goods. I am optimistic with the outlook for next year. The modern retail business is rapidly growing now. But we hope that next year the government will reduce the big differences of policies in the regions.
How about the difficulties to obtain a business permit?
This is also a new development. Each region has different understandings regarding regional autonomy. There are some who said that the rule of the game at the national level should be adjusted to the condition of their region. Yogyakarta is an example. It imposes restrictions on the number of mini-markets there based on postal code. For instance, there can only be three outlets in a postal code area. Jakarta has been closed regarding new mini-markets. But in the meantime, supermarkets and hypermarkets are facing no restrictions at all.
How about local levies?
Let me give you an example. We told our customers that we provided free parking. But in realty, it is almost impossible to materialize. There are other levies. We were told the levies were all official, but we never know where the money goes.
We definitely support the local government’s levies, and as long as they are in line with local regulations, we have no problem. The amount varies among the regions. If we protest, they will tell us not to compare their regions with others.
But as long as the business there is visible, it is still OK for us. But if it is too high, then we refrain to create business there. It also needs about 3-6 months to get a business license. Often we do not receive the official document, we are just given a receipt.