ANNOUNCEMENT 12 Dec 2013

In December 2013, the government of Indonesia announced a change in the required local inputs to serve domestic customers.

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising
Inception date: 12 Jun 2014 | Removal date: open ended
Still in force

Local sourcing

On 12 December 2013, the Indonesian Ministry of Trade issued regulation 70/M-DAG/PER/12/2013 concerning traditional markets, shopping centers and modern stores.
According to the new regulation, shopping centers will be forced to offer a "counter image" in designated floors strictly reserved for domestic products (art. 20 of regulation 70/M-DAG/PER/12/2013).
Furthermore, based on article 22 of the regulation, traditional markets, shopping centers and modern stores will be forced to supply 80% of their products with domestic ones. Exemptions may be granted but were not specified in the original regulation (cf. below). A similar local content requirement was already issued in 2012 for franchise businesses in the retail industry (cf. Related Measures).
On 17 September 2014, the Indonesian Trade Ministry issued exemptions from the obligation for retail stores to supply 80% of their stock with Indonesian products. The amendment regulation 56/M-DAG/PER/9/2014 to the initial regulation 70/M-DAG/PER/12/2013 creates three categories, which will not be initially required to comply with the rule from 2013.
According to a press release from the Ministry of Trade, the retailer needs to fulfil one of the following criteria in order to be eligible for the exemption:

  • '(1) Requiring uniformity of production and sourcing from a global supply chain;
  • (2) Having a brand that is world famous (premium products) and have yet to have a production base in Indonesia; or
  • (3) Products from certain countries being sold to meet the needs of their citizens living in Indonesia.' (15.10.2014, Indonesian Ministry of Trade)

As cited in the press release, the Director General of Domestic Trade Srie Augustina underlined 'however, 'that' these modern stores that are exempt must gradually increase the sales of similar goods that are domestically produced and report its implementation to the Minister through the Director General of Domestic Trade'.
The new rules concerning the 80%-LCR-rule come into effect on 17 September 2016, as opposed to the initial 12 June 2016.
 The restriction concerning the "counter image" in shopping malls came into effect 6 months after the issuance of the regulation 70/M-DAG/PER/12/2013, i.e. on 12 June 2014. However, according to art. 41(2) of the 2013 regulation, entities that have signed cooperation agreements with suppliers before the issuance of this regulation have to comply to the new rules only after the end of their existing contracts.

AFFECTED SECTORS

 

AFFECTED PRODUCTS

 
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