Advertising spending to fall 39% of target

JAKARTA (JP): Total advertising spending in Indonesia is estimated to reach only Rp 5.3 trillion (US$1.51 billion) next year, or 39 percent below the expected target of Rp 8.80 trillion.

The reduced spending would be because of the impact of the country's monetary problems, an industry executive said yesterday.

Indra Abidin, a director of advertising firm PT Fortune Indonesia said that total spending this year would be around Rp 4.8 trillion, or 27 percent lower than the initial estimate of 6.42 trillion.

"But the actual amount of total advertising spending in 1998 will be 5 percent higher than that in 1997," he said.

Spending on advertising in 1996 was Rp 3.5 trillion, slightly above the 1995 figure of around Rp 3.3 trillion.

He attributed the decline in spending to most companies in Indonesia cutting their advertising budgets, as they face both declining sales and profit and increased operating costs because of the sharp depreciation of the rupiah.

The rupiah has lost almost 35 percent of its value against the American greenback since early July in the domino effect of the Thai baht's devaluation.

Indra said that the property and financial sectors, which accounted for around 25 percent of total advertising spending in 1996, would decline next year to around 10 percent due to the currency crisis.

These two sectors, which were the hardest hit by the currency crisis, have yet to consolidate due to a lack of liquidity in the market.

"While they are in the consolidation process, the advertising budget will be reduced," he said.

"The sectors which decline next year will be those which have dollar-denominated debts, like the property and financial sectors," he said.

"The share of the property sector, which accounted for 15 percent of total advertising spending in 1996, will decline to just 5 percent in 1998," he said.

Quoting data projections from the Indonesian Association of Advertising Agencies (PPPI), Abidin said that TV would account for 51.6 percent of total advertising spending in 1998, with newspapers accounting for 34.3 percent, billboards and banners 5.7 percent, magazines 5.6 percent, radio 2.6 percent and the remaining 0.2 percent being spent in cinemas.

He said the distribution of advertising spending in 1997 would be similar to the projection for 1998. (aly)