Govt closes regency towns to new major retailers

JAKARTA (JP): The government has closed towns outside provincial capital cities to new big retailers in a bid to promote small and medium traders.

Minister of Industry and Trade Tunky Ariwibowo announced yesterday that big retailers or retail chains already operating in towns outside provincial capitals were required to establish business partnerships with small and medium retailers.

"Big retailers, however, can still set up in areas outside provincial capitals which have very high economic growth but they will need special licenses from the ministers of home affairs and industry and trade," Tunky said.

Tunky was speaking to reporters yesterday after briefing President Soeharto on a joint decree he and the Minister of Home Affairs Moch. Yogie S.M. signed on geographical restrictions for big retailers and coordinated development of small traders.

The decree stipulates that big retail businesses, with special licenses from the ministers, can open outlets in towns with very fast economic growth on the condition that they help develop traditional markets and small traders through partnerships.

The ruling allows existing big retail chains in towns to continue operations provided they gradually form partnerships with small and medium businesses.

"A joint task force will be set up soon to work out technical details for implementing the joint decree," Tunky said.

He said partnerships could be either subcontracting arrangements for consignment or rental space in department stores and modern shopping centers for small firms.

Tunky said his office would deal mainly with the business aspects of retailing, while the Minister of Home Affairs would decide on retail outlets' site placements according to a city's or a town's site plan.

The plan to close towns outside provincial capitals to big retailers was first made public after the first cabinet session on poverty alleviation last month.

Many had speculated that the plan was a political move rather than a rational economic response to the outcries of small businesses.

The Association of Indonesian Retailers has cautioned the government against a blanket ban on big retail chains in regency towns, suggesting that the different economic levels among towns outside provincial capitals should be taken into serious account.

The association said the government should clearly define which regency towns were out of bounds to big retailers.

It argued that some regency towns had reached higher economic development stages than others or were major tourist destinations and badly needed big retail outlets to maintain growth.

The association warned that a complete ban on modern retail outlets in towns outside provincial capitals would keep small retailers uncompetitive, as they would be denied access to new retail technology and concepts.

More than 100 big retail chains operate in towns, the association said.

But some businessmen, including tycoon Sudwikatmono, who owns the Golden Truly chain, have praised the decision.

He said the decision would force big retailers to focus their expansions in provincial capitals or abroad, leaving small retailers to prosper in regency towns. (rid)