Residents shop at the Skouw border market in Muara Tani district, Jayapura, Papua, Saturday (15/7). Most people shop for daily needs as prices are cheaper than in in Papua New Guinea.
JAKARTA, KOMPAS — The assumption that the fall in people’s consumption was based solely on the drop in retail sales should be further studied because the retail category not only comprises consumer goods but also industrial products.
Industry Minister Airlangga Hartarto said in Jakarta on Wednesday that the decline in retail sales should be further studied. "They should be differentiated. There are consumer products and industrial products. If we talk only about the consumer market, it is only a half of the market," Airlangga said, adding he hoped that the purchasing power in the country would increase further.
The manufacturing industry contributed about 80 percent to Value Added Tax (VAT) receipts, he said. "So, if the target of VAT can be achieved, it\'s because of the manufacturing sector. Thus, we see the need to further study the estimated drop in the retail sales.”
Moreover, Airlangga said, consumption-based industries were generally more resilient. This can be seen, among others, from growth in certain industries, such as food and beverage industries, which grew about 8 percent.
Airlangga said investments also affected industrial growth. According to the Investment Coordinating Board (BKPM), the overall industrial sector contributed Rp 52.1 trillion or 40.2 percent of the domestic investment during the first semester of this year.
Revenues
Separately, the vice chairman of the Association of Indonesian Retail Traders, Tutum Rahanta, said there were too many components that contributed to the formation of the prices of goods. This affects the prices of goods being sold in the market.
Lower middle class people tend to limit or reduce the purchase of goods, especially household goods.
According to Tutum, at present, consumer goods are sold indirectly through online market platforms and directly through traditional markets and modern markets. "I monitored only the modern market," Tutum said.
In the modern market, such as in minimarket outlets, which sell products for daily needs, there were complaints that the sales were getting sluggish, he said.
According to Tutum, one of the factors that caused the drop in the sales was the decline in the purchasing power. The purchasing power may decrease, among other reasons, because the income is lower than the spending. In addition, purchasing power may also decline due to the price increases.
In addition to capital and profit margins, there were also other costs that contributed to the formation of the prices of goods, namely supply and demand, Tatum said.
If the demand increases and the supply is limited, the price will rise. The profit margin is closely also related to the competition. If the competition is tight, the profit margin will also decline. "Look at the price war," he said.
Other costs that simply determine the formation of prices, according to Tutum, among others, are the renting costs of business premises, such as shopping centers, including service charges; wages; bank interest rates; rupiah exchange rates; energy costs, such as oil, electricity and gas for fuel; "bureaucracy" costs associated with licensing, logistics and infrastructure issues; as well as illegal levies and thuggery practices.
"With high lending interest rates, we difficulty competing. Bank interest in neighboring countries is only one digit," said Tutum.
The chairman of the Association of Indonesian Food and Beverage Producers, Adhi S.Lukman, said that the decline in the people\'s purchasing power can be seen from the sluggish retail sales during the fasting month and Idul Fitri recently. "Traders complained that many goods were returned," he said.
Slowing down
The growth of production of large and medium manufacturing industries in the second quarter of 2017 slowed to 4 percent in the second quarter of this year from 5.01 percent in the same period last year.
"We are still focusing on commodities so manufacturing is in turn neglected. In the post-reform era, we are late in developing the manufacturing industry," said the chairman of the Development Economics Program at the University of Atma Jaya, Jakarta, YB Suhartoko.
Based on data from the Central Statistics Agency (BPS), the production of micro, small, medium and large-scale manufacturing industries in the second quarter of 2017 grew only 2.50 percent year on year, far lower than 6.56 percent in 2016. The growth rate in the second quarter is the lowest in at least four years.
The growth rate in the second quarter is far lower than in the first quarter, which reached 6.63 percent. In fact, in the last four years, the growth rate of the production in the second quarter has typically been higher than in the first quarter.
