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FDI: Treatment and operations, nes
On 24 August 2012, the Ministry of Trade issued regulation 53/M-DAG/PER/8/2012 introducing restrictions for franchise contracts. With the new provisions, article 19 of the regulation introduces a local content requirement of 80% on business equipment, merchandise and raw materials used by the franchisee.
Also, based on article 20, the franchisors have to appoint Indonesian SMEs as suppliers or franchisees, as long as they fit the requirements set by the franchisor.
The regulation came into force on the day of its issuance.
The hotel and restaurant services were selected as the affected sector. This selection is based on the commentary to the regulation by the law firm Hadiputranto, Hadinoto & Partners (cf. Sources): "In our discussions with the MOT, the MOT has indicated that for goods such as luxury branded products exemptions will be granted and that the Local Content Requirement is directed more at the food & beverage sector. (...) Further, according to our discussions with the MOT, an assessment will be made based on a wide range of criteria including the availability of local content, Indonesian employment, corporate social responsibility commitments and other issues."
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