T

he government plans to revise two trade ministry regulations on modern retail shops and franchises, which it claims will improve the business climate in the domestic retail industry.

The changes in both rules may include removing the trade minister'€™s requirements on the sourcing of goods and scrapping the maximum number of retail shops and franchises permitted for business owners, according to Trade Minister Muhammad Lutfi.

The proposed revisions might help eliminate uncertainties and grey areas inherent in both regulations, Lutfi said Tuesday. '€œI will attempt to ensure how Indonesian products can get a place in a shop, but at the same time I want to create a conducive climate to trade and investment,'€ he told reporters on the sidelines of a dialogue with stakeholders regarding the issue. Under the 2013 Trade Minister Rule on modern retail shops, ownership of company-owned shops is limited to 150 outlets. It also stipulates that the shops must source 80 percent of goods they trade locally, although exception can be procured through the approval of the trade minister. Apart from that the rule applies retroactively, demanding changes to business entities which have existed even before it was introduced.

In the same spirit, under the 2012 Trade Minister Rule on franchises, business owners can only build 250 outlets by themselves and upon reaching that ceiling they should partner with third parties to allow the distribution of business opportunities to small and medium enterprises.

Both rules, passed under the leadership of former trade minister Gita Wirjawan, have aimed to tap into the enormous opportunities available in Southeast Asia'€™s biggest economy. As its economy has grown robustly, Indonesia, the world'€™s fourth most populous nation, has seen more than half of its 240 million people join the ranks of middle class with stronger purchasing power, the driver behind retail business.

Such an improvement would also allow both regulations to comply with the newly-passed trade law, Lutfi further said. The issuance of the revised versions, which tried to '€œclarify the unclear'€ and were made through consultations with Coordinating Economic Minister Chairul Tanjung, was expected soon, he added. Chairul, a local tycoon who owns CT Corp, controls all shares in one of the country'€™s major retail groups, PT Carrefour Indonesia, previously a subsidiary of French Carrefour SA, through its unit PT Trans Retail.

Indonesian Retailers'€™ Association (Aprindo) deputy secretary general Satria Hamid appreciated the government'€™s move to revise the rules, saying that it would make implementation more feasible. At present, the requirement for sourcing 80 percent of goods locally becomes a burden, especially for high-end and international retailers. '€œWe also hope that retailers who already achieve 80 percent domestic sourcing can obtain incentives as a reward for their commitment,'€ he told The Jakarta Post.

Satria added that similarly the government should provide attractive incentives to encourage business owners to sell licenses to third parties instead of developing their own outlets, thereby helping to foster the franchise business.