More stores opening in the offing

More stores opening in the offing

By Hendarsyah Tarmizi

JAKARTA (JP): Signs of recovery in the country's retail sector
have become more apparent lately with the opening of more
shopping centers in the capital and surrounding areas.

Lippo Supermall in Karawaci, Tangerang has reopened about
9,000 square meters of its east wing, which was closed following
the bloody riots that hit the capital in May 1998.

Several other outlets, which were damaged during the riots,
are also scheduled for reopening before the end of this year.
They include Glodok Plaza and Mal Daan Mogot, both in West
Jakarta, Plaza Kebayoran in South Jakarta, and Plaza Pondok Gede
in East Jakarta.

In addition to the refurbished outlets, several newly built
shopping centers such as Plaza Cengkareng in West Jakarta and
Wisma Maspion in Central Jakarta have also opened for business.

The other new retail outlets such as the expanded area of
Pasar Raya in Blok M, Sport Trade Center in Senayan and The Town
Square in Cilandak, South Jakarta, are also scheduled for opening
this year, PT Procon Indah reports in its second quarter property
market review.

Hundreds of shopping centers in the capital were seriously
damaged or burned during the riots, which had led to the fall of
former authoritarian leader Soeharto. Most of the damaged outlets
have been under extensive refurbishment to meet the growing
demand from local retail chains and department stores.

The higher demand had caused an increase in the rent contracts
by between 5 percent and 20 percent during April-June, while
fixed exchange rates of the rupiah against the U.S. dollar rose
by between Rp 200 and Rp 500 during the second quarter.

According to the Jakarta Property Trends 2Q01 property market
review issued by PricewaterhouseCoppers (PWC) recently, offering
rents for typical floors were approximately US$80, $34, $32, $28
and $18 per square meter a month for Grades A+, A, B, C, D in
Jakarta, respectively.

In Bogor, Tangerang and Bekasi (Botabek), the average for all
grades was about $25 per square meter per month.

The average exchange rate of the rupiah against the U.S.
dollar during the April-June period was Rp 5,100 for Grade A+, Rp
4,900 for Grade A, Rp 4,000 for Grade B and Rp 3,900 for both
Grade C and Botabek area. On average there was an increase of
between 3 percent and 4 percent .

There was no increase in service charges despite higher fuel
and electricity rates during the quarter, the publication said.
Average contract service charges remained at $8.5 and $7 per
square meter per month for Jakarta and Botabek, respectively.

PWC estimates that the expected increase in demand will
further push up the rents.

Retail expansion

Several local department store chains recently announced their
plan to build more outlets this year to anticipate an improvement
in the country's economy.

PT Matahari Putra Prima Tbk will, for example, open four new
outlets this year, three of which will be opened in Pontianak,
Madiun and Lampung.

The retail chain, which recently reopened its Mega Mall Pluit
in North Jakarta, will spend some Rp 80 billion for the expansion
of its outlets.

Matahari, which operates 78 outlets (27 of which are located
in Jakarta) in 35 cities throughout the country, expects a 25
percent increase in sales this year to Rp 5 trillion from Rp 4
trillion in 2000, partly due to the opening of the new outlets.

The promising outlook in the country's economy has also lured
other retail chains to expand their operations. Like Matahari, PT
Ramayana Lestari Santosa and PT Rimo Catur Lestari are also
planning to expand their businesses.

Ramayana, which specially caters to the low and middle income
group, will open 10 new outlets, two of which will be located in
Ciledug and Mauk, Tangerang to replace the old stores, which were
destroyed during the May riots.

Another outlet will be opened in Jakarta and the remaining
seven will be built outside Java.

"We have allocated about Rp 300 billion for this year's
expansion," the company's corporate secretary Richard Sentosa
said.

He said with the increase in the number of outlets, the
company expected sales to increase by 23 percent to Rp 2.9
trillion this year from Rp 2.3 trillion last year. With the
projected sales, net profit is estimated to reach Rp 318.6
billion, a 25 percent increase over the previous year.

Future growth

The retailers' expansion programs were announced amid a
slowdown in the country's consumption demand during the second
quarter of this year.

But analysts said the move as a right step to anticipate
future growth.

The recent ascendance of Megawati Soekarnoputri as the
country's fourth president will certainly bring more certainty to
the business climate. However, the impact on the country's
economic performance for the rest of the year will be limited.

Raden Pardede, a senior analyst at state investment bank
Danareksa, said the economic growth would stay at last year's 4
percent despite the change.

"A favorable political environment is just a bonus," he said
in a recent seminar.

Chairman of the Indonesian Retail Merchants Association
(Aprindo) Kustardjono Pudjolalito shares the same view on the
country's economy.

He said the retail sector had not yet fully recovered as many
people thought. "Many people go the mall, but mostly just for
window-shopping," he told The Jakarta Post.

He acknowledged that although its sale performance was not
remarkable, the overall activities of the industry was
impressive, with almost all of the retail outlets in the capital,
which were burned or damaged during the May riots, being
renovated.

"Physically, the retail sector has returned to the pre-May
riot level," he said.

According to him, the performance of the retail sector was
strong during the first quarter of this year. However, the
bullish situation could not be sustained due to growing political
uncertainty in the following months.

"In June and July, sales started to decline again," he said.

Kustardjono said the change in the country's leadership had
significantly improved the business confidence in the country.

The significant increase in the value of the rupiah against
the U.S. dollar during the past several weeks indicates how
people have positively responded to the new leadership, he said,
adding that if the value of the rupiah can be sustained, the
prices of goods, especially imported products, can be lowered.

"Results in September will determine in which direction we are
going to. If we pass the month with good results, then we will be
able to fully recover next year," he added.

Kustardjono said that retail sales of the association's 260
members were estimated to increase by 20 percent to about Rp 33.9
trillion this year from Rp 28.3 trillion last year.

This year's projected sales growth of 20 percent, which is the
same as last year's, is quite high compared to a meager 4 percent
growth in 1999.