Hypermarkets to be banned from regencies

Hypermarkets to be banned from regencies

Adianto P. Simamora, The Jakarta Post, Jakarta

The government is currently revising the existing regulations
on the retail sector with the aim of preventing modern retailers
from entering regencies, to protect local traditional markets, a
senior official at the Ministry of Industry and Trade has said.

The move would also allow small retailers to develop their
businesses in regencies.

"We want to prevent modern retailers, such as hypermarkets,
from expanding to regencies because we still need to protect our
traditional markets," Rifana Erni, director general for domestic
trade affairs at the ministry told The Jakarta Post on Thursday.

She said that the current ruling on retailing -- jointly
signed by the ministers of Industry and Trade and of Home Affairs
in 1997 -- was no longer appropriate to protect traditional
markets and small retailers, particularly following the
introduction of regional autonomy law, and the entry of giant
foreign retailers.

She said that the current regulations did not strictly control
the location of modern retailers.

In Jakarta, however, modern retailers are not allowed to
operate less than 500 meters from traditional markets, according
to a recently revised bylaw.

"I'm afraid local (regency) governments will easily allow
modern retailers to open outlets in their areas if we don't make
a new regulation quickly," Rifana said.

She added that the planned new regulation might no longer be
in the form a ministerial decree, but a presidential decree.

"We are now still discussing it with several related parties,
including business players and local governments," Rifana said.

The country's retail sector enjoyed a golden era in 1996 but
was hit hard by the financial crisis that rocked the country in
mid-1997.

In 1999, the government removed the retail sector from the
negative investment list, which then allowed foreign retailers to
operate in the country without restriction.

The regulation provided more leeway for foreign retailers,
such as Sogo, Makro and Carrefour, to strengthen their foothold
in local markets.

However, local retailers viewed the presence of foreign
players as a serious threat to their survival, particularly the
expansion of French hypermarket operator Carrefour.

Meanwhile, Carrefour spokesman Triyono P. said that Carrefour
had no plans yet to expand its business into regencies.

"I don't know yet the impact of such a limitation (from the
revision), but one thing is clear: As of now we don't have any
plans to expand our business into regencies," Triyono told the
Post.

Carrefour opened its first outlet in 1998 in Jakarta.
Currently, the company operates 10 in the capital city.

The company will also open a new outlet in Bandung, the
capital of West Java, this year.

"We have carried out surveys into the possibility of opening
new outlets in other provincial (capitals)," Triyono said.

Beni Sindhunata, executive director of the Investment Banking
Research Agency, said that the presence of large retailers, owned
by both local and foreign companies, would hurt small retailers
in the regencies.

He urged the government to control the retail business through
the issuance of a zoning law.

Beni predicted that the market share of hypermarkets like
Carrefour would increase to 38.5 percent in 2005, from 32.3
percent in 2001.

He also said that the total turnover of retail businesses was
predicted to reach Rp 87.5 trillion (US$9.83 billion) in 2005,
far higher than the Rp 36 trillion recorded in 2001.