Consumers ignore economic 'problems'

A'an Suryana and Emmy Fitri, The Jakarta Post, Jakarta

Indonesia is a land of controversy. When statistics announce that consumption rates are dropping and economic growth is rapidly shrinking, consumers still go to shopping malls, movie theaters and music concerts, paying hundreds of thousands of rupiah to be entertained and buy retail goods.

In addition, in recent months, a significant number of trade centers have broken ground and are under construction in Jakarta, and according to developers and businessmen, those were continuing full steam ahead despite a real possibility of a downturn predicted by economists.

In light of these unscientific indicators, it is hard to believe the economic "experts" when they attempt to paint a gloomy picture of the Indonesian economy.

Despite the specter of serious economic problems in the coming months as a consequence of the terror bombings in Bali on Oct. 12, people were still shopping, and not only on weekends but also mid-week. Throngs of shoppers regularly clog the traditional markets and small street businesses, creating traffic jams and continual nightmares for traffic police.

A tenant at ITC (International Trade Center) Mangga Dua, Central Jakarta, Louisa Widjaja, admitted she could earn at least Rp 5 million (US$543.5) per day and if "sales are good, which is usually on weekends, Rp 10 million is possible."

Buyers at ITC were both retail and wholesale shoppers.

For consumers, trade centers like Mangga Dua and Fatmawati in South Jakarta could be the right options to shop due to the cheaper price and also the practicality reasons.

The trade centers' concept of one-roof-shopping might be the strong magnitude to attract consumers who usually shop at malls and department stores or other retail outlets to turn to the trade centers.

With a better plan than the impulsively built malls, the trade centers have grown into more comfortable shopping places. Although there is not yet any clear evidence of adverse environmental impact as a result of all the new construction, environmental scientists see a big problem in the future.

Most of the superblocks have prepared spacious parking lots, food corners, public facilities and, the most important thing, the strategic location in the heart of the city.

"It's like a mall but with cheaper prices," said Wasti, a resident of Cilincing, North Jakarta.

Greater Jakarta has been experiencing a surge in trade center construction in recent years with a large number of buildings currently under construction while others are in the pipeline.

Among other projects are WTC Mangga Dua in West Jakarta, the Bekasi Trade Center in Bekasi, ITC Permata Hijau in South Jakarta and Cilandak Town Square in South Jakarta.

PT Procon Indah property consultant firm has predicted that a total of 1.65 million square meters will have been built by the end of this year in the Greater Jakarta.

And the numbers are still growing.

"Next year, the number will grow by 15 percent or, in other words, there will be 221,500 square meters of new trade center buildings in 2003," Lini Djafar, advisory group director at PT Procon Indah, told The Jakarta Post.

The thriving business also triggers a big question mark: Why is the trade center business on the rise, while at the same time the country's consumption level has yet to return to its previous level prior to the financial crisis of 1997?

The answer lies in the fact that the market is still there for retail products, says retail analyst Kustardjono Prodjolalito.

Kustardjono, a former executive with the Indonesian Retail Association (Aprindo), said Indonesians spent approximately Rp 200 trillion on retail products last year.

Some Rp 35 trillion was spent on products sold in modern retail stores such as ITC Mangga Dua, Hero supermarket, Mega malls and others while Rp 165 trillion was spent at traditional markets such as community shops, he said.

"Judging from the figures, the potential market for modern stores, including the trade centers, is huge," he told the Post.

According to Kustardjono, another reason behind the mushrooming trade center business was there was also bubbling optimism among retailers and petty traders over the country's future economic performance.

Indeed, he acknowledged that consumption has yet to reach pre- crisis levels, as Indonesia and global economies were still suffering from a hangover as a result of the global economic downturn.

This theory was confirmed by market research firm PT ACNielsen, who said that consumers bought retail products at the same rate as they did prior to the 1997 economic crisis.

Kustardjono's revelation may explain why the demands for space in trade centers remains high. In addition, the evidence is there.

According to Procon, the occupancy rate for trade centers in Greater Jakarta has never been lower than 90 percent since the year 2000.

Striking examples may be found at WTC Mangga Dua, which has been able to sell 70 percent of its space, despite construction still being underway.