The impact of supermarkets (including hypermarkets) on the existence of traditional markets has recently become a topic of heated public debate. The 1998 liberalization of the retail trade sector provided the impetus for the emergence of various foreign supermarket chains in Indonesia. With the mushrooming of foreign supermarkets in many cities, several parties have expressed the opinion that in the current globalization era, the traditional market is the main victim of competition between traditional and modern markets. In fact, some have expressed the need to limit the number of supermarkets, especially in locations near the vicinity of traditional markets, so they do not compete for traditional market customers.

In the globalization era, are supermarkets indeed the main cause of the decline in the business performance of traditional markets? To answer this question, at the end of 2006, The SMERU Research Institute conducted a study that examined the impact of supermarkets on traditional markets and retailers in urban Indonesia.

The results of our study form the basis of this edition of the SMERU Newsletter, which presents a comprehensive discussion of the problems faced by traditional markets as a result of the presence of supermarkets. It is enriched by the opinions of several observers, from both the Commission for the Supervision of Business Competition (KPPU) and community organizations. We also put forth several cases of problems experienced by traders in urban traditional markets. Apart from making this small contribution to the debate, we hope that the information presented here will become input for the formulation of policies that will strengthen the capacity of traditional markets in the globalized market.