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.
“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.”
Bylaws banning and controlling liquor sales in shopping centers, hotels, restaurants and nightspots would not curb alcohol-related deaths because drinking was common practice, an activist said.
Rudhy Wedhasmara of the East Java Action (EJA) Drug Victim Network, a nonprofit organization that provides counseling for drug addicts in East Java, said the regulation that controls the distribution and sale of hard liquor in Surabaya was ineffective because drinking had become common practice among many communities in the country.
“Not everyone drinks liquor to get drunk, but some drink to show they are tough by intentionally mixing traditional liquor with substances easily found in the market, such as carbonated drinks, which they mix to make deadly brew, or methanol,” Rudhy told The Jakarta Post.
Rudhy said that with the presence of a local bylaw, social drinkers could be criminalized as the government would not be able to control the distribution of adulterated liquor.
Indonesia 2015 priority legislation (Prolegnas) includes to banning alcohol (RUU Larangan Minuman Beralkohol).
Cigarette vs Alcohol issue
Plain packaging’s impact upon smoking and the illicit cigarette trade remains the subject of vigorous debate. No longer debatable, however, is plain packaging’s negative affect upon the alcohol industry and other non-tobacco sectors of the Australian economy.
The unintended effects of plain packaging have the potential to vastly outweigh the legislation’s intended public health benefits, real or imagined. In fact, Australia’s imposition of plain packaging on tobacco opened a Pandora’s Box of potential trade costs with the nation’s alcohol sector set to become the first example of the policy’s collateral damage.
Indonesian farmers recently rallied in front of the Australian embassy in Jakarta in support of their government’s targeting of Australian alcohol. The Indonesian trade ministry is preparing to mandate the plain packaging of alcohol products, including Australian wine, with the respective labelling devoted to warnings of the adverse health consequences associated with alcohol consumption. April 16th, this regulation runs.
Providing political support for these plans are Indonesian business lobbyists seeking to protect their domestic market from foreign competition, as well as global and domestic public health NGOs who support plain packaging on all manner of ‘unhealthy’ consumer products, including alcohol and tobacco.
Such support would not have mattered to the Indonesian government if Australia had not opted for plain packaging in late 2011. BAustralia government could not resist the temptation to become the global ‘leader’ in tobacco control policy. Consequently, Australia is now embroiled in a messy trade dispute that may spill over into a costly trade war.
Indonesia and four other countries are challenging Australia’s plain packaging law at the World Trade Organization (WTO). This particular trade challenge is shaping up to be one of the most significant in recent years, given the sheer number of parties involved, as well as the substantive effect regarding the interpretation of WTO provisions. The latter will define how key global trade rules are interpreted and applied in the future, not just in relation to tobacco, but to other controversial products, including alcohol.