T

he government is planning to allow alcoholic beverage producers to expand their output in a move to meet increasing domestic and overseas demand.

The plan comes just days after the Supreme Court annulled a presidential decree that barred local administrations from prohibiting the sales of alcoholic beverages.

With the abolition of the decree, local administrations are now free to ban the sale and distribution of the beverages in their areas. More than 22 regencies and municipalities

The ruling will also pave the way for hardliners to raid bars, restaurants and nightclubs across the country.

Benny Wachjudi, the Industry Ministry'€™s director general for Agriculture and Chemical Industries, said on Thursday that the government would revise the negative investment list (DNI) and allow existing manufacturers to upgrade their production capacity.

At present, the alcohol '€” liquor, wine and malt-content liquid '€” industry is barred from investment. By deleting this industry from the list, the government will allow foreign investors to set up business in the country through joint ventures with local firms, particularly existing players.

'€œThere are enormous opportunities in this industry, but the existing rules do not allow business players to expand or attract new investment,'€ Benny told reporters at his office.

The government would still maintain a few restrictions, such as the requirements that new plants must export their products and special permits from local administrations, Benny said.

This policy is still under deliberation at the Coordinating Economic Ministry for a possible roll out in the next few months.

Indonesia, the world'€™s most populous Muslim country, has curbed the production of alcoholic drinks since 1997 through a presidential decree that limited the production of liquor.

In 2010, the government doubled excise tariffs on domestic and imported alcoholic drinks.

While consumption of drinks containing alcohol content of up to 20 percent was set at 2.45 million hectoliters (hl) in 2010, it climbed by 3.82 percent in 2011 to 2.55 million hl. The figure rose by another 3.22 percent to 2.63 million hl last year.

In 2010, production reached 2.49 million hl and rose again by 4.68 percent to 2.61 million hl in 2011. The output increased by 4.23 percent to 2.72 million hl last year.

Alcoholic drink exports totaled 9.07 million liters last year, up by 39.38 percent from 2011, while imports in the same period amounted to 1.89 million liters, down 117.53 percent.

However, as the market has enormous room for growth, global players are eying the abundant business opportunities, especially as more and more foreign tourists flock here.

Diageo, the producer of Johnnie Walker and Jack Daniel'€™s, reportedly sought to set up a manufacturing facility in Indonesia.

Publicly-listed beer producer PT Multi Bintang Indonesia (MLBI), which produces the popular Bintang and Heineken beer brands collected Rp 548.71 billion (US$59 million) in net sales in the first quarter of this year, up by 33.76 percent from a year earlier, while its net profit jumped by 64 percent to Rp 192.18 billion over the same period.

Cosmas Batubara, president commissioner of MLBI, maintained a bright outlook as the firm faced rising demand from foreign visitors, particularly from Australia, Japan and Korea.

'€œWe want to add more capacity and we are ready to do that. We really want to meet domestic demand, particularly in tourist regions, as well as robust overseas demand,'€ he told reporters after meeting
Industry Minister MS Hidayat at the ministry'€™s office.

At present, MLBI runs two breweries in Tangerang, Banten and in Sampang Agung, Mojokerto, East Java, with a total capacity of 1.6 million hl.