Beer Today, Gone Tomorrow: Indonesia Targets Sales of Ale i

Police in Yogyakarta have raided a restaurant and confiscated five bottles of beer in what the establishment's lawyer said was retaliation for refusing to serve a group of senior police officers' wives. (Investor Magazine Photo/Uthan Rachim)

By : Chris Brummitt | on 10:33 PM March 27, 2015
Category : Business, Economy, Featured

Alcohol can be a hard sell in Indonesia, which has more Muslims than any other country. It’s about to get a whole lot tougher.

A regulation supported by Islamic groups that is scheduled to come into effect next month will prohibit the sale of beer at convenience stores and other small shops in the world’s fourth-most populous country.

The ban adds to a growing list of measures by President Joko Widodo’s administration that run counter to the pro- business messages he presented while campaigning for office last year.

At stake are beer sales in Southeast Asia’s largest economy, where domestic consumption makes up more than half of gross domestic product and the government is trying to spur growth, foreign investment and tourism.

“Losing this channel will mean a big decline in sales for leading beer manufacturers,” said Yulia Fransisca, a senior analyst at Euromonitor International. “The government will continue to be pressurized to create more restrictions on alcoholic drinks by Islamic groups in the country.”

Beer sales climbed 11 percent last year, according to Euromonitor research. Beer producers in the country include Multi Bintang Indonesia and Diageo, which brews and distributes Guinness through a third-party arrangement with Multi Bintang.

“Our concerns with the current announced policies is that they will impact some of the smaller retail businesses and tourism,” Diageo chief executive Ivan Menezes said in an interview in Singapore on Thursday. “There is also the risk of illicit alcohol growing again, and that is in nobody’s interest.”

The regulation, a revision to an earlier bill tightening restriction on alcohol sales, states that beer can only be sold at supermarkets and hypermarkets, where wines and spirits are currently also available. Those who violate the law risk having their trading license revoked. Alcohol sales in restaurants and bars are unaffected.

Neneng Sri Mulyati, a spokeswoman for 7-Eleven mini marts, a franchise run locally by Modern Internasional, said it would comply with the law at its 190 shops in and around the capital when it comes into effect mid-April. Multi Bintang declined to comment.

The regulation was issued without consultation with producers or retailers, according to Charles Poluan, the executive director of Indonesia’s malt beverage producers association.

“Traditional shops are the backbone of the beer distribution channels across a vast area of Indonesia,” said Poluan, who says he’s been unable to meet with Trade Minister Rachmat Gobel to discuss the ban. “We can’t yet determine how badly it will affect us economically. The picture is too astounding.”

The president governs in a coalition including the Islamic National Awakening Party (PKB), in a country with a secular constitution.

Islamic practice and belief is less rigid than in most parts of the Middle East and South Asia, with Indonesia’s westernmost Aceh province the only one that adheres to a version of shariah law.

In recent years conservative voices have become louder, providing opportunities for populist politicians of Islamist leaning or from secular parties to boost legitimacy by pandering to them, said Muhamad Ali, an Indonesian professor of Islamic studies at the University of California.

‘Creeping shariah’

“This is creeping shariah, slow but steady, using legal and constitutional means,” said Ali. “Nationally, it was a success for the Islamists and secular politicians who are using Islam as a way of attracting votes.”

Since the late 1990s, several district governments have issued shariah-inspired bylaws targeting alcohol consumption and regulating dress and other Islamic morals and practices. Implementation of the beer regulation is likely to be patchy and skirtable by bribery, according to Michael Buehler, a lecturer in comparative politics at the School of Oriental and African Studies in London who has carried out research on local Shariah laws.

“This is purely the politics of symbols,” he said. “What you can see happening is vigilante groups using the law to take things into their own hands and smash up places. That’s what make them problematic.”

The regulation was signed by Minister Gobel after a social media campaign by an anti-alcohol group that was supported by Islamist activists. The regulation states its aim is to “protect the morals and culture of society”.

“We don’t want investments that damage our young people,” Gobel told Muslim activists at his office a few days after he signed the law, some of whom were asking him to ban the production of beer in the country.

“I don’t care if investors make an enemy of me. I just laugh. Tourism is not a problem. Do we want to protect Indonesian citizens or tourists?”

That stance contrasts with efforts by Jokowi to promote tourism, including plans to gain over $1 billion in revenue by waiving visas for visitors from 45 countries including the US, China and Japan. Bali, a mostly Hindu island with a thriving beach and party scene, is the country’s top tourist destination.

The island is protesting against the ban, said Bali tourism office head A.A. Gede Yuniartha Putra.

“Foreigners like to have a drink when they are here,”, he said.

“This is going to seriously affect tourism. We want to be exempted from this, otherwise we won’t obey it.”

Bloomberg

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