Retail sales may reach $4.46 billion this year

JAKARTA (JP): Continued strong consumer confidence might boost this year's retail sales to Rp 42 trillion (some US$4.46 billion) an increase of 20 percent from last year's Rp 35 trillion, according to a retail association on Friday.

Chairman of the Indonesian Retail Merchants Association (Aprindo) Kustarjono Prodjolalito said he expected this year's sales growth to equal that of last year's growth by 20 percent.

He said the retail industry began posting strong sales since early last year, after a meager four percent growth in 1999.

"The turning point was the early 2000 Lebaran season (the Idul Fitri festive season)," Kustarjono told reporters in a press meeting.

He added that this year's estimated sales figure also included sales of wholesalers and hypermarkets, like Makro and Carrefour, which were not members of Aprindo.

The association comprises of 260 retail companies running supermarkets and department stores such as Hero, Sogo and Ramayana.

Aprindo based its annual retail sales on that year's economic growth rate, Kustarjono went on.

"We still hope to achieve a 20 percent retail growth rate because we expect a four to five percent economic growth rate," he said.

He then attributed this year's high retail sales to continued strong consumer confidence.

"People think it is better to spend their money on consumption, rather than keeping it in banks that offer unattractive interest rates," he said.

He said dropping interest rates on saving deposits, which fell from as high as 60 percent to the current 12 percent, drove consumer spending up.

"It's like the surging car sales; where does all the money come from?" he said.

Last year's car sales more than tripled when it hit 300,000 units from about 90,000 units in 1999.

He said that unattractive interest rates had encouraged people to start trading on their own.

"People opened their own shops and bought products from retailers; this of course has benefited retailers," he added.

Meanwhile, Kustarjono also urged the government to revoke its new tax policy on agricultural and animal husbandry products sold at supermarkets.

According to him, the new tax policy would not only lower sales at supermarkets, but would harm farmers.

"For us it is just a matter of lower sales, but it will hurt farmers," he said, adding that these products made up only seven percent of a supermarket's total sales.

The government issued a series of new tax policies in the last few months, which among others imposed value added taxes of 10 percent on agricultural and animal husbandry products sold in supermarkets.

It argued that the value added taxes would only burden supermarket shoppers, and help sales of traditional markets.

But the new tax policy drew criticism from the Minister of Agriculture Bungaran Saragih, who said he had not been consulted about it.

Kustarjono said that supermarkets bought vegetables, fruits and animal husbandry products from farmers who had specialized as supermarket suppliers.

"These farmers have standardized their products and cannot simply switch sales to traditional markets; they already have their own suppliers," he said.

Mastur Fuad, a farmer supplying vegetables for several Hero supermarkets in Jakarta, said he had to spent 30 percent more in production costs to meet their product standards.

But because of the new tax policy, orders have dropped by around 20 percent, he added.

Mastur, who earns about Rp 360 million in annual sales, criticized the government for its lack of understanding the farmers' industry.

Kustarjono further said that imposing value added taxes on fruits that were sold as fruit, contradicted the meaning of the tax name.

"We don't change the value of a fruit, like turning a piece of metal into a chair. What we are doing is just raising its price, and that can only be taxed under sales taxes," he explained.

He added that the tax policy hampered local farmers' efforts to improve the quality of their products.

"We want our farmers to export their products, but with this policy this will be more difficult to achieve," he said. (bkm)