Who needs new malls?

Who needs new malls?

M. Taufiqurrahman, The Jakarta Post, Jakarta

Shopping malls are booming. Developers vie to build new malls on
optimism that consumption, which has become the main driver of
the economy over the past several years, will remain strong. But,
how many malls do Jakartans really need? This week's cover story
highlights the issue.

Aside from its perennial traffic congestion, Jakarta now -- or
at least since its recovery from the economic crisis of the late
1990s -- has a new feature; the aggressive construction of new
shopping malls.

As if the existing malls were not enough to appease Jakartans'
hunger for frittering away their money, in almost every corner of
the crowded metropolitan area one can find heavy machinery
working around the clock to build what is going to be the steel-
and-class construction called a mall.

Along with the construction frenzy, developers are looking for
new ways to hype their products by creating brands such as World
Trade Center (WTC), International Trade Center (ITC), Plaza,
Piazza, Shopping Junction and other names that come to mind, when
in fact there is nothing to indicate that one is all that
different from the other.

If one mall succeeds in finding new ways of luring leisure-
seeking Jakartans, other developers soon make a carbon copy of
the concept in other locations.

Drive around the city and many parts of greater Jakarta and
you can easily spot dozens of malls currently under construction
-- including some in the most improbable of locations, such as
Cibubur and Bumi Serpong Damai -- that took their template from
the first "town square" mall in Cilandak, South Jakarta.

While there has not yet been a comprehensive study about
exactly how many malls are actually needed for the twelve-million
odd Jakartans, developers always base their ventures on the
assumption that the capital is still in need of shopping space.

The construction of new malls was at full-throttle in the wake
of the economic crisis that hit the country in the late 1990s.

The intensified construction of malls is now capitalizing on
the consumption-driven economy, in which lenders believe that
injecting their money into the financing of new malls would
quickly generate profits, rather than engaging in more risky
production-side activities such as the construction of new
factories.

The construction frenzy also relies on the rise in consumption
by the public. Statistics produced by Bank Indonesia (BI) show
that retail sales increased by 18 percent in July this year from
the same period last year.

Statistics also show that the construction of new malls in the
capital and its surrounding regions has reached an alarming pace.

The supply of shopping space over the past five years in
Jakarta and its surrounding regions in fact surpassed the
combined figure of shopping space constructed between 1975 and
2000.

Between 1975 and 2000, the total amount of shopping space
constructed was 3.2 million square meters with a market value of
Rp 46 trillion (US$4.5 billion). The figure doubled only in a
five-year period between 2001 and 2005 and is projected to reach
5.2 million square meters with a market value of Rp 90 trillion.

From a business point of view, a property expert warned in
late 2004 that although the supply of shopping space was still at
a healthy level, an oversupply would materialize in 2005 or 2006.

Meanwhile, an urban planner balked at developers' arguments
that the ultimate objective for the construction of new malls was
to turn Jakarta into a city of commerce or service just like
Singapore.

Architect Yayat Supriatna of Trisakti University said that the
argument was baseless that served as a subterfuge for their rent-
seeking motives.

"The fact is that it is only traders from countries in Africa
who are willing to shop here. And they don't go to those plush
shopping malls, but to the less glamorous Tanah Abang market," he
told The Jakarta Post.

He also said that the argument that Jakarta was still in need
of new malls was implausible as according to a healthy ratio
between the population and the available shopping spaces, the
metropolitan area would only need one or two new malls.

"My estimation is that Pondok Indah Mall in South Jakarta at
six hectares can accommodate 1.5 million people. The figure is
equal to the 20 percent of middle to upper class residents who
are targeted by such a mall," he said.

Most plush shopping malls in Jakarta sell foreign branded
items or are franchises of foreign companies whose price tags are
beyond the reach of ordinary Jakartans.

Yayat also warned that the unchecked construction of new malls
has taken its toll and is degrading the quality of Jakarta as a
livable metropolitan city.

He said that apart from encroaching on the city's green areas,
the construction of new malls would also sap future fuel
reserves.

"Shopping malls need a huge quantity of energy to keep their
air conditioning machines running, which in turn will also
produce more gasses that contribute to the greenhouse effect," he
said.