Dialogue Series II on Distribution Services: Enhancing Domestic Efficiency, Identifying Trade Opportunity

Jakarta, 25 March 2015

Dialogue Series II on Distribution Services: Enhancing Domestic Efficiency, Identifying Trade Opportunity

March 25 2015, Double Tree Hotel by Hilton, Jakarta

 “We are not producers. We are distributors. We distribute various types of nutrition and health-related products for Indonesian children, men, and women from Sabang to Merauke,” said Dwisesanti Wibowo, General Manager PT. Tigaraksa Satria Tbk., when giving presentation in ISD Dialogue Series II on Distribution Services “Enhancing Domestic Efficiency, Identifying Trade Opportunity”.

It is clear from the presentation that distribution services have significant impact to the real sector and consumers. A factory might increase its production volume to achieve optimum economy of scale, but it would not be useful for consumers unless there are sufficient support from distribution services which is conducted in an efficient manner. The fact that up to 50% of final price of a consumer good is contributed by distribution-related costs, higher efficiency in distribution services will promote overall efficiency, and lower final price for consumers.

“Distribution-related costs can make-up up to 50% of the final price of a consumer good, whereas the efficiency of the distribution services sector widely influences consumer welfare and plays a major role in price formation,” said Noke Kiroyan from ISD Board of Founders in his welcoming remark. He continues, “In Indonesia, wholesale and retail trade dominate services with 14.34% share of GDP in 2010 and over the period of 2000—2007, wholesale and retail trade accounted for 40.2% in value-added creation, making it the biggest contributor from the services sector.”

Mark Magee (General Manager IKEA Indonesia), Dwisesanti Wibowo (General Manager PT. Tigaraksa Satria Tbk.), and Anthony Cottan (Chief Operation Officer PT. Mitra Adiperkasa Tbk.) are representatives of the private sectors. Four panelists with expertise and authority in the distribution services sectors participate and share their views to build a productive dialogue. They are: Ahmad Junaidi (The Director of Case and Decision Proceeding Commission for the Supervision of Business Competition – KPPU), Jimmy Bella (Secretary of Directorate General of Domestic Trade Ministry of Trade Republic of Indonesia), Amir Karamoy (Chairman of Advisory Board Indonesia Franchising and Licensing Society), and Setijadi (Chairman of Supply Chain Indonesia).

Representing private sector, Mark Magee emphasizes the importance of clarity and stability of policy and regulation in retail business. With clarity and stability, private sector will have strong foundation to arrange their future plan as well as business models with more opportunity to be more efficient.

“IKEA commits to collaborate with local partners with world-class standard quality services. However, clarity and consistency in regulation is a must, Indonesia need to have export-economy thinking,” described Mark Magee.

While Mark Magee put policy and regulation in the spotlight, Anthony Cottan of PT. MAP views at times regulations are not in sync with the readiness of the local producers in the retail sector. He illustrates this issue through Starbucks Coffee’s experience.

“Starbucks in Indonesia is the only Starbucks that doesn’t sell mugs due to China’s anti-dumping policy. Starbucks cannot import the mugs, however local producers are reluctant to produce smaller quantity, say 10,000. For them, 10,000 mugs are too small,” said Anthony Cottan.

Ahmad Junaidi of KPPU explains that private sector needs to firstly understand the essence of distribution services before entering the business. According to him, agent and distributor are different entities in legal definition. Agent acts on behalf of principal while distributor act on its own. He also says that KPPU will not go too far into business process of each agent and distributor, as long as there are no indication of unfair business practices.

“Law No 5/1999 on business competition is very clear. The articles cover prohibited agreements, prohibited unilateral conduct and abuse of dominant positions,” said Ahmad Junaidi.

At the end of Dialogue Series II, Jimmy Bella of Ministry of Trade underlines the importance of distribution services and shows how President Jokowi’s administration is very concerned to encourage this sector to grow.

“We can say that distribution services sector is a priority. That’s why President Jokowi’s main program is Sea Toll Road. On another hand, Ministry of Trade shall examine deeper about trading term in order to increase export in goods and services. Ministry of Trade is open for suggestions and input from the private sectors as to the drafting of relevant Government Regulations and Ministerial Decrees under the newly issued Trade Law No. 7/2014 which is currently undergoing,” closed Jimmy Bella.