RI should brace for foreign retailers

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)