Retail sales may reach $4.46 billion this year

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)