Aprindo urges imposition of retail zone restriction

JAKARTA (JP): The Indonesian Retail and Merchants Association (Aprindo) has called on the government to assist small retailers by imposing a restriction against major retail chains in the country.

Aprindo chairman Steve Sondakh said the introduction of a retail zone, which limits the size of a company's retail outlets to specific business areas, was an appropriate measure to protect small retailers.

Steve, a Hero supermarket executive, said a large retailer should not, for example, be allowed to open a retail outlet measuring more 2,500 square meters in the heart of the city.

He said retail chains larger than 5,000 square meters should only be allowed to operate in outlying areas.

He said retailers of medium size properties ranging between 2,500 square meters and 5,000 square meters should be allowed to operate 15 kilometers from the center of a city.

"This retail zone restriction policy should have been applied here a long time ago as it has been for years in Europe and the United States," he said.

He said that currently there was no adequate regulation on retail business zoning arrangements.

"The zoning policy is necessary to help the government create a level playing field among local players as well as between local and foreign retailers."

He denied that the proposal would serve as a business shield to protect local retail chains from the aggressive expansion of foreign retailers.

"It is simply aimed at protecting the existing retailers, especially the small ones and traditional markets, so that they should not have to compete head-to-head with giant retailers in their neighborhoods."

Aprindo has been criticizing a government decision to allow foreign hypermarket operators to open their spacious outlets in the heart of Jakarta.

These giant new stores have caused a down turn in business for medium-size and small retailers already in the areas, said Aprindo executive director Kustarjono Prodjolalito.

"We're not against open competition. But there has been uneven competition, resulting in about a 5 percent to 10 percent drop in revenues of medium and small retailers surrounding the hypermarkets. (They have) lost their regular customers to the hypermarkets, which sell more complete items at prices they claim are cheapest," he said.

Despite the fact that Indonesia is struggling through its worst economic crisis in decades, Jakartans have had the opportunity to shop at several new foreign franchise stores.

Their recent arrival followed the signing last year of a letter of intent between the government and the International Monetary Fund, which required the country to lift its restrictions on foreign investment in the retail and wholesale markets.

Prominent among the newcomers are the French supermarket chains Carrefour and Continent. Operating as hypermarkets since last year, they offer a wide variety of products, ranging from groceries to clothes and household appliances.

Steve said the government should consider the proposal if it was serious about enabling existing local retail businesses to continue operating in the open and free trade era.

He said supermarkets and other medium size retail chains were only expecting about 2 percent growth in 1999 and 2000. He said they would be unable to compete with the hypermarkets, which are predicting growth of more than 10 percent. (cst)