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Jakarta rethinks supermarkets

Asia Times - March 3, 1997

Ong Hock Chuan, Jakarta – One economic casualty of the spate of riots to strike Indonesia over the past few months may be the owners of supermarket chains, a sector that was expected to see huge expansions throughout the country this year with the entry of international retailers such as Wal-Mart.

In a little publicized move last week Home Affairs Minister Yogie Suardi Mehmet instructed provincial governors to review plans to build supermarkets in small cities and district capitals.

Yogie said a review was needed to protect the interests of traditional traders and shopkeepers in the provinces. "If these supermarkets are built, what will happen to the small shops? They could die off," he was quoted as saying in Republika newspaper.

He said, however, that the move did not mean the government was banning further construction of supermarkets in the smaller cities and district capitals. Rather it was a call for governors to be more selective when approving plans to build supermarkets in these areas.

Yogie added that there was no problem with setting up supermarkets in Jakarta or in provincial capitals.

Analysts said Yogie's instructions to the governors may have been spurred by unrest over the past five months, especially the riots in Tasikmalaya and Situbundo in Java. Political analysts had said that one of the causes of the unrest was the entry of supermarkets into these towns.

The entry of these supermarkets, usually part of a conglomerate, take business away from traditional traders. The fact that many of these conglomerates were owned by ethnic Chinese only increased resentment among residents.

In the Tasikmalaya riot, which was split along racial lines between indigenous Indonesians and their ethnic Chinese neighbors, for instance, one of the buildings razed was a department store belonging to Matahari, Indonesia's largest retailing chain. Until recently the Matahari chain was controlled by ethnic Chinese tycoon Hari Darmawan.

Yogie's directive to the governors comes at a time of increased activity and competition in the retail sector, especially with the entry of foreign-based retail chains such as Wal-Mart and K Mart. These large retailers are expanding their outlets to take advantage of the country's growing middle class market. In Jakarta alone there were 109 supermarkets in 1995. In the greater Jakarta area, six huge supermarkets were completed between 1995 and March 1996, and three more are due to be completed by next year.

The Dutch-based retailer, Makro, has been operating in Indonesia since the early 1990s and now has at least three outlets in Jakarta. It also has outlets in Surabaya and Bandung. Other international chains which have a presence in Indonesia include Japan-based Sogo and Seibu as well as United States-based JC Penny and Britain's Marks and Spencer.

But the most dramatic entry has been that of Wal-Mart, whose presence has been strengthened by its partnership with Multipolar, a subsidiary of the Lippo Group, controlled by the ethnic Chinese Lippo family.

Multipolar earlier this year bought into Matahari, which has outlets catering to four economic segments of Indonesian society: Galeria for the middle to upper-middle class, Mega M for the middle class, Matahari for the lower-middle class and Super Economy for the lower class.