Government Amends PR 10/2021—Certain Business Lines Relating to Alcoholic Beverages Now Closed for Investment

The issuance of Presidential No. 10 of 2021 dated February 2, 2021 on Capital Investment Activities (the “PR 10/2021”) sparked major backlash from the Indonesian public due to the regulation opening the alcoholic beverage industry for investment. After listening to the people’s concerns, the government promised to reconsider its stance on opening the alcoholic beverage industry—as conveyed by President Joko Widodo in a public address on March 2, 2021, which is then followed up with the issuance of Presidential Regulation No. 49 of 2021 dated May 24, 2021 (the “PR 49/2021”) on the Amendment of PR 10/2021.

While PR 10/2021 states that all business lines (save for those that are closed or reserved for the Central Government) are open for investment, PR 49/2021 further elaborates that the business lines that are open are those that are commercial in nature. Additionally, PR 49/2021 adds Alcoholic Beverage Industry (KBLI 11010), Wine Industry (KBLI 11020), and Beverages Containing Malt Industry (KBLI 11031) to the list of industries that are closed off for investment.

As stipulated under PR 10/2021, businesses that are open for investment are divided into four categories: (i) priority business lines; (ii) business lines that are allocated or required for partnership with cooperatives and Micro, Small and Medium Enterprises (“UMKM”); (iii) business lines open with certain requirements; and (iv) other business lines not included in the foregoing, which shall be open for all investors. Previously, the “certain requirements” as mentioned in number (iii) are as follows:

  • closed for foreign investors (only open for Indonesian Investors);
  • has a cap on its foreign investment; or
  • requires special license.

Under PR 49/2021 a new requirement is added: “Business lines that are monitored and stringently regulated and are also subject to other regulations in the field of the management and monitoring of alcoholic beverages.” Business lines that fall under this category are Wholesale Trade of Alcoholic Beverage (KBLI 46333), Retail Trade of Alcoholic Beverages (472221), and Small-scale (Kaki Lima) Retail Trade of Alcoholic Beverages (KBLI 47826).

Besides the addition of provisions relating to the alcohol industry, PR 49/2021 also contains some amendments to its Annexes, which list out all business lines and KBLI that falls under 4 categories of businesses opened for investment as mentioned above. These amendments include the additions of some provisions for certain business lines to qualify for government incentives, the re-allocation of certain business lines that were previously placed in Annex 3 (open for investment with certain requirement) to Annex 2 (allocation for or partnership with UMKM), such as the batik industry, traditional medicine industry, etc., along with the addition and/or removal of some business lines from the Annexes.

We believe that the amendments of PR 10/2021 introduced in PR 49/2021 will still achieve its goal of attracting potential investors, despite the fact that some business fields relating to the alcohol industry are now closed for investment.

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June 14, 2021

Please contact Inka Kirana (ikirana@aksetlaw.com), N. Sekar Lestari (nlestari@aksetlaw.com), or Caleb K. N. Sitorus (csitorus@aksetlaw.com) for further information.

 

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