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Govt's decision to ease supply restriction hailed
Retailers and shopping center operators have welcomed the governmentâs decision to scrap the high local-supply requirement for foreign retailers, saying the change would lure more investment in the countryâs rapidly growing retail sector
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etailers and shopping center operators have welcomed the government's decision to scrap the high local-supply requirement for foreign retailers, saying the change would lure more investment in the country's rapidly growing retail sector.
Indonesian shopping center association (APPBI) chairman Handaka Santosa said in Jakarta on Wednesday that the exemption of some modern stores from the rigid sourcing requirement was necessary as it catered to the real situation on the ground.
He said it was hard for foreign retailers to meet the high local supply requirement because even though they produced their products in Indonesia, they could not sell them in Indonesia under the strict supply-chain policy. The retailers generally sourced from their foreign factories for the Indonesian market, he added.
In addition, Handaka said only a few foreign products could be produced in Indonesia. 'With the new trade ministerial regulation, we feel there's more certainty in doing business here,' he said.
The Trade Ministry has scrapped the requirement imposed on foreign retailers to source locally for at least 80 percent of their products sold in their Indonesian outlets.
- Previous ruling required all foreign retailers to locally source 80% of the products sold in RI outlets
- Restriction was lifted due to complaints that it caused business uncertainty
Under the revised ruling, modern stores that belong to global retail networks, selling premium products manufactured overseas or serving the needs of foreign communities living in Indonesia will not now be subjects to the prerequisite to supply 80 percent of their overall goods domestically. This will include stand-alone brands, outlets or specialty stores.
The tight supply rule, however, still applies to modern stores that do not fall into the three categories. The new trade ministerial regulation is set to come into effect on Sept. 17, 2016.
The deputy secretary-general of the Association of Indonesian Retailers (Aprindo), Satria Hamid, echoed Handaka's view, saying the rule was much more flexible to accommodate retailers' concerns.
'Our domestic consumers still need retailers under a global brand or international chains. It is important to address how they can penetrate this market and continue their business. They really demand certainty,' he said.
Satria added that it would be a challenge to all stakeholders to work with the branding issue to enable high-quality and competitive Indonesian products to gain a stronger foothold and stand equally with imported products.
Trade Minister Muhammad Lutfi said Wednesday that the previous rule was revised due to a lot of complaints from both local and foreign retailers who argued it created business uncertainty.
'We've improved this regulation to boost investors' confidence and provide certainty to carry out business in Indonesia,' he told reporters during a visit to Pacific Place mall.
Lutfi added that the presence of foreign retailers would create stiff competition, which would ultimately be positive in helping to foster creativity among Indonesian producers and generate more local products with world-class quality.
Indonesia, the world's fourth-most populous nation, has seen its economy expand robustly in the past few years despite a slowdown this year, lifting more than half its 240 million population into the middle class.
Indonesia's consumer class will likely triple in size to 135 million by 2030, spending US$1 trillion more each year than it does now, global consulting firm McKinsey & Co. has said.
