Traditional market offers cushion during hard times

Traditional market offers cushion during hard times

Erna Witoelar is one of the pioneers of the consumer movement
here and was president of Consumers International from 1991 to
1997. Erna, 51, is now the executive director of Gema Madani
(Echo of Civil Society), a new non-governmental organization. She
said recently that Gema had offered to help channel the World
Bank's US$1 million in humanitarian aid to the country's needy.
Last week she spoke to The Jakarta Post's Reiner Simanjuntak on
the traditional markets' role in helping consumers and what she
sees as necessary changes in related policies.

JAKARTA (JP): Traditional markets were left behind during the
country's economic boom due to government policies favoring big
businesses. But last month's riots and the ongoing crisis have
proved that traditional markets and the small business sector are
more resilient to external shocks than big businesses. Erna
Witoelar says this shows the new government must change its past
economic policy. The following are excerpts from the interview:

Question: How do you see the role of the traditional market in
serving city dwellers?

Erna: From the perspective of the consumer, both the
traditional market and modern supermarkets have the right to
exist, because they serve two different groups of customers.

The traditional market, however, is the more desirable for
many consumers because prices are... more affordable. The
traditional market mainly serves middle- to lower-income
households. In addition to cheaper prices, some prefer the
traditional market because of its shorter distance (from
home) ...and bargaining is allowed.

The two types of markets also serve different classes of
producers and distributors. The traditional market is preferred
by small farmers for selling their farm products because of its
accessibility and a pay-on-delivery system.

However, the government must make sure that supermarkets don't
open (too early) to compete with traditional markets.
Supermarkets should only be opened after 10 a.m.

Q: During last month's riots, supermarkets were closed for days
but many traditional markets kept on operating. Why was this?

E: It's because traditional markets have a capital structure that
is more decentralized. Each small player in the traditional
market chain, from farmers to middlemen to shopowners, operate on
small capital.

So this kind of structure is much more resilient to external
shock. In comparison, the supermarket industry is backed up by
only a few distributing conglomerates, which were also hit by the
recent rioting. So when this distribution system was disrupted,
the supermarkets failed to operate. The supermarket industry is
monopolized by a small group of businesspeople.

Q: What do you think about the government's policies that affect
traditional markets?

E: The government has been biased toward the modern and well-
capitalized supermarket. In terms of financing facilities, for
instance, the government has adopted a free market system in
which big businesses have better access.

The distribution system has also preferred to focus on the
supermarket because it makes purchases in bulk quantities. This
has enabled the supermarket to sell certain consumer products at
lower prices.

It's easier to obtain licenses and other government facilities
to open supermarkets or malls because the owners are usually
large business groups which have better financing capabilities.
The government also sees them as large taxpayers.

Overall, the government's economic policy in the past has been
biased toward large conglomerates and monopolies. Contact with
the government involves bribes, causing higher costs which large
businesses can better cover. Under such an environment, few dare
to open a traditional market.

Q: How have supermarkets complied with government regulations?

E: Very poorly. Many of the regulations have been violated. Many
supermarkets open as early as 8 a.m. They are supposed to open
after 10 a.m. (according to a 1985 Jakarta municipality
regulation on supermarkets) so they cannot compete directly with
smaller markets.

Some supermarket operators have also violated location
arrangements. A supermarket is not allowed to exist within a
certain radius from a traditional market. This has been ignored
by some.

Over the past five years, large conglomerate interests have
been preserved. All of the country's resources have been directed
to serve these large conglomerates. This has caused an
overdevelopment in large businesses.

The recent rioting and the economic crisis prove that such a
policy is not healthy.

Q: What do you expect from the new government?

E: The government must be proactive in supporting small
businesses, including those catering to traditional markets.

Boosting the role of small businesses would make the economy
more resilient to external shocks like the rioting.

Credit facilities can't be expected from private banks because
small businesses usually don't fall under the technical
requirements. This must be provided by the government, especially
amid the current high interest rate environment.

The state-owned distribution companies should also lend a hand
to small businesses and traditional markets.

There must be a strong political will to implement these kinds
of policies because the government has been used to serving a
monopolistic economy for quite a long time.

Q: How do you see the role of the traditional market amid the
crisis?

E: The traditional market provides a large employment potential,
especially since unemployment this year may reach 20 million,
from the farm-producing level to the many small middlemen and
small traders in the traditional market chain. The employment
opportunities are much larger than those in the supermarket
industry.

The traditional market also serves as a facilitator for the
people's economy. Farmers, for instance, would be better off
selling their products through a small economic chain, in which
they could have better bargaining power. In contrast, the giant
retail operations tend to exploit farmers.

Reversing the government's economic orientation, however,
might not be easy and could take time because the bureaucracy has
been used to serving large businesses.

Q: Do you see any role for non-governmental organizations (NGOs)
in this?

E: Yes. NGOs have extensive experience in developing small
businesses, including traditional markets and farm produce units.
They have provided alternative financing mechanisms, including a
revolving fund scheme which doesn't involve rigorous business
requirements or collateral. The schemes also help improve
technical skills of small business owners.

The government should treat NGOs as partners in developing the
economy. It must change its attitude toward NGOs and should be
willing to share responsibility. NGOs could play a very
significant role, especially since the government is facing a
budget deficit in covering huge subsidy commitments.

Q: How has the government treated NGOs in the past?

E: The government has been very oppressive. It has tried to make
NGOs dependent on the government, because officials thought that
an independent NGO would be a threat to the status quo. The
government often cut funding sources for NGOs, especially
international support.

But this must change now. I hope the new government can be
more accommodative. It must see that now is the time to accept
the fact that not everything can be done by the government.

Q: Is there enough funding for NGOs amid the economic crisis?

E: The international community is willing to channel funds for
humanitarian purposes and developing small businesses. But they
want these grants to be channeled through NGOs with good track
records. I'm currently trying to get international funding for
the development of small businesses and to curb poverty.