RI should brace for foreign retailers

JAKARTA (JP): Liberalized trade in the region is likely to force Indonesia to open its doors to overseas retail chains by the year 2000, says a senior official.

Hidayat, an advisor to the minister of cooperatives and small enterprises, said that Indonesia and the Philippines are the only countries in East Asia barring direct foreign investment in retail businesses.

However, he said, "the Philippines will open the sector in 1998. Indonesia will not be able to remain the only country with such a policy, so the sector will be opened in the year 2000 at the latest."

To strengthen domestic retailers, he suggested that the government prepare a regulation on retailing and distribution.

"If there is no legal foundation for the retail business, I am concerned about a possible free fight in the sector," he said yesterday at a meeting of the Indonesian Retailers Association at the Holiday Inn.

Based on the country's investment law, foreign investment companies are prohibited from directly marketing their own products in the country and from operating in the retail sector.

However, many foreign retailers have entered the country through franchise agreements with local companies. Foreign parties are also indirectly involved in the retail business through technical and management assistance.

The government also needs to encourage the domestic development of small and medium-scale enterprises.

The association's chairman, J.A. Sinungan, said that the association currently groups 182 large-scale shops and supermarkets, 3,855 medium-scale retailers and shopping centers and 98,500 small-scale shops and kiosks.

"These figures represent only 30 percent of the country's total retailers, including small-scale businesses," he said.

He added that the number retail outlets operated by large- scale companies increased 44 percent in the past five years from 393 outlets (operated by 121 firms) to 562 outlets (by 153 firms), including 265 department stores (by 64 firms) and 296 supermarkets (by 84 firms).

"Total revenues in this business increased from Rp 5.3 trillion (US$2.27 billion) in 1994 to Rp 6.2 trillion in 1995 and are expected to rise further to Rp 9.7 trillion in 1998," Sinungan said. (icn)