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Government bars new investment in alcoholic beverage industry
With a recently issued regulation, the government seeks to close the alcoholic beverage industry for new investment, bowing to pressure from Muslim organizations and Papuan political leaders.
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he government has issued a presidential regulation to close the alcoholic beverage industry for new investment following pressure from Muslim organizations and Papuan political figures.
President Joko “Jokowi” Widodo abruptly revoked in March Presidential Regulation No. 10/2021, which allowed investment in the alcoholic beverage industry in Bali, East Nusa Tenggara (NTT), North Sulawesi and Papua, and possibly in other provinces depending on proposals from governors.
Presidential Regulation No. 49/2021, which was issued on May 25, revises the previous regulation on investment and adds the alcoholic beverages industry to the list of closed industries under Article 2.
“Industries closed for investment as stated in Paragraph 1 (a) are: liquor industry (KBLI 11010), alcoholic beverage industry: wine (KBLI 11020) and malted beverage industry (KBLI 11031),” the regulation reads, referring to each industry by its Indonesian Standard of Industrial Classification (KBLI) designation.
The government issued the investment regulation as a derivative to the Job Creation Law, an omnibus law that revises 79 laws with the aim to improve the ease of doing business to the country and thereby increase investment.
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Investment Minister Bahlil Lahadalia said in March that the government, through the regulation, sought to promote the development of local alcoholic beverages, such as sopi in NTT and arak in Bali. As of March, the government has issued 109 permits for alcoholic beverage businesses in 13 provinces, according to the minister.
In 2020, alcohol consumption among people aged 15 or older was recorded at 0.39 liters per person, slightly lower than a year earlier, according to Statistics Indonesia (BPS). Consumption was notably higher in rural areas at 0.61 liters per person than in urban areas at 0.22 liters per person.
But large demand for alcoholic beverages also coming from foreign tourists, the regulation might limit domestic production and thus lead the country to fill the supply gap through imports, said Shinta Kamdani, deputy chairwoman of the Indonesian Chamber of Commerce and Industry (Kadin).
Read also: Indonesia’s rich and complex independent alcohol industry
The new presidential regulation still allows for investment in the retail of alcoholic beverages, albeit subject to scrutiny, which allows for the import and distribution of such beverages, including by street vendors.
“Clearly, with this policy, we will not have investment coming into or jobs created by the alcoholic beverage industry,” Shinta told The Jakarta Post in a text message on Tuesday. “We can only hope for an expansion of existing [businesses], which are very limited, and not new investment.
