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.