The presidential regulation on the modern retail market scheduled to be issued in March will not restrict the operation of foreign retail chains, which have been criticized by some for the massive inroads they are making into the Indonesian market.
Speaking Monday at a seminar on foreign investment in the modern retail market, the Trade Ministry's market development and distribution director, Gunaryo, said speculation that the regulation would be aimed at restricting the expansion of foreign retailers was groundless.
"The regulation is aimed at creating harmonious competition between the modern and traditional retail markets. Don't be mistaken. The regulation will not restrict foreign ownership," Gunaryo stressed.
Gunaryo said that this was because all matters related to foreign investment were governed by the existing Investment Law, which was currently being amended by the House of Representatives.
"The presidential regulation on the modern retail market will be in line with the legal procedures set out in the Investment Law, as amended," he said.
House member Didik J. Rahbini, who takes an active interest in economic affairs, explained that the issuance of the regulation had actually been recommended by the House, and was supposed to have been finalized in December.
"We gave the Trade Ministry one full year, but they still couldn't finish it. This is a pressing issue. There is unbalanced competition in the market, which has resulted in losses to traditional retailers," he said.
Didik said that even developed countries, such as Japan and Germany, had regulations that protected small retailers and traditional market outlets from the large retail chains.
Asked how the amended Investment Law would affect the role of foreign investment in the country's retail industry, Didik said that he could not comment as the amendment bill was still under discussion.
Nevertheless, the amended law would definitely protect the interests of traditional market outlets.
According to a study by AC Nielsen, the total value of the Indonesian grocery trade stood at Rp 63.5 trillion (about US$7 billion) in 2006, which was 14.3 percent higher than in 2005. Of this total, the value of groceries sold through traditional outlets grew by 9.6 percent, while the value of those sold through modern outlets increased by 23.8 percent.
However, the study also found that 99 percent of Indonesian people still do their shopping in traditional markets, and that the market share of modern markets in revenue terms stands at about only 16 percent.
Also speaking during the seminar, Association of Indonesian Modern Retail Outlet Suppliers (AP3MI) chairman Susanto said that with their financial strength and superior bargaining position, modern retail chains had the power to impose cutthroat terms on their suppliers.
He also complained that the ability of modern retailers to sell items at a loss in order to attract more customers could undermine fair competition.
"They can sell eggs that cost Rp 7,000 per kilogram at Rp 6,000, and advertise this in the media. While they lose Rp 1,000 per kg on the eggs, they make more on the other goods purchased by customers attracted by the promotion," he said.
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