Whether or not the retail operations of large corporations will have a negative impact on small traders is a debatable point. However, it is beyond debate that the most significant threats to small traders come from government obstruction, corrupt public officials, and poor infrastructure.
This reality is brought into high relief in the treatment of traditional markets and street hawkers that operate in the informal sector. As in other developing economies, these activities constitute a significant aspect of Indonesia's commercial activities. Indeed, more than half the population is active in the informal economy providing income for poor households while serving the needs of other low-income people.
One estimate of the economic contribution to the overall economy of small traders in the informal sector was offered by the Institute for Economic and Social Rights. According to their survey, Jakarta's hawkers and vendors (pedagang kakilima) cumulatively earn about Rp 13 trillion (almost US$1.5 billion) each year. More evidence of the importance of this sector is that a fire that razed kiosks in Turi market in Surabaya was reported to involve losses of about 10 billion rupiah.
Most people living and operating in or depending on unregulated economic activities came to Jakarta to escape rural poverty and find a decent, peaceful existence. But excessive regulations and corruption limit their opportunities to enter into the formal economic sector.
To a considerable degree, the massive number of unregistered businesses is the result of a failure of political governance. Most traders remain outside of the formal sector due to insurmountable hurdles put in their way by governments.
Evidence of the obstacles of engaging in legal commerce in Indonesia is provided by the World Bank report, Doing Business. This study reveals that the time needed to launch a business is 97 days while it costs 86.7 percent of per capita income. Fulfilling procedures for necessary licenses or permits, completing notifications and inspections, and obtaining utility connections require 224 days and costs 311 percent of per capita income. For businesses to have secure property rights through legal registration takes 42 days and costs 10.5 percent of property value.
Little wonder so many small businesses operate outside the law!
Although barriers for foreign-owned businesses have been falling, municipal governments in Indonesia show considerable insensitivity to domestic business operators. While it is foolish to hinder formation of legal businesses that would be subject to taxation, it is grossly insensitive to destroy livelihoods by halting informal businesses.
For its part, the government of Jakarta wrapped themselves in a cloak of responsible civic actions to wage war against the livelihoods and interests of the poorest of the poor. A new public order ordinance issued by the city administration restricts hawkers from trading without official permission from the governor. In turn, actions of thousands of police officers under "evict and arrest" orders destroyed livelihoods in a wanton act of aggression against the weakest elements of the community.
The bylaw bans individuals and institutions from trading with street vendors or to give money or goods to beggars, buskers or car windshield cleaners. The ban would also include the operation of businesses on streets, sidewalks, pedestrian bridges and other communal areas without prior permission from the city council. It also imposes fines ranging from 1 million rupiah to 50 million rupiah for violations.
Claiming that hawkers disrupt traffic in the area, West Jakarta evicted vendors from Deprok traditional market in Kalideres. In wanton disregard for livelihoods and the value of productive capital, fish and flower kiosks along Jalan Barito in South Jakarta were demolished by police. And pet vendors operating nearby will soon face eviction. City administrators claim that the vendors must be evicted so that Ayodhya Park can be restored.
The irony is that Barito market evolved under the support of former Governor Ali Sadikin who declared it to be a flower and fish center. It also received official recognition of municipality offices with the traders registered and supported by South Jakarta's Small-to-Medium Enterprises and Cooperatives Subagency.
Replacement stalls were offered to the vendors at the Radio Dalam market. But vendors objected on the grounds that the new kiosks, costing 68 million rupiah and measuring two-by-two meters were too small and the location was unsuitable.
It would seem that the entrepreneurial efforts of so many poor people should invite bouquets rather than brickbats since they engage in voluntary exchange rather than theft. It is amazing that anyone works so long and so hard for such small compensations. In spite of enormous barriers and mistreatment, they show remarkable forbearance to strive to provide things that people want.
Instead of depicting hawkers as law-breaking encroachers, more attention should be paid to how much they contribute to the economy and add to the comforts of life to others. Viewed in this light, these people should be seen as true Indonesian heroes.
Opponents of economic liberalization often complain that it has not helped the poor. But it turns out that there has been too little liberalization in areas where most poor people work and earn their living, on the street. This implies that granting economic freedom will be most valuable to those at the bottom rung of the development ladder.
Governments should also recognize street vendors as micro-entrepreneurs that generate "cultural capital" while providing a better future for themselves and their families. As such, governments should get out of their way to allow them to peacefully truck, barter and trade.
The writer is Research Scholar at the Centre for Civil Society in New Delhi and Professor of Economic at Universidad Francisco Marroquin in Guatemala. He can be reached at Clingle@ufm.edu
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