Indonesia Alcohol industry terrified as political process for prohibition advances

Multi Bintang Indonesia, the country’s largest brewery, has put on hold its US$42 million plant expansion projects in East Java after the ban on alcohol sales slapped on minimarts by the Trade Ministry in April slashed its sales by 40 percent and its profits by 47 percent in the first half.Yet the worst may be yet to befall the alcohol industry as a draft bill initiated by the House of Representatives will completely ban the production, distribution, sale and consumption of alcohol in the Muslim-majority country.

Under the draft bill, anyone found to be distributing or producing alcoholic drinks containing more than 1 percent alcohol could face between two and 10 years in prison, or a fine of up to Rp 1 billion ($77,000). Those caught consuming alcohol could face jail time of between three months and two years or fines of up to Rp 500 million.

The political process for ushering in prohibition in the world’s largest archipelagic country started in April after the House’s Legislation Body approved the bill as a House initiative and put it among the 37 priority bills for deliberation during its current sitting period.

President Joko “Jokowi” Widodo, who received the draft bill in July, instead of turning it down entirely, decided to continue the legislation process by assigning the Trade Ministry as the coordinator in charge of preparing the government’s stance on the bill.

Informed sources at the Trade Ministry said the President may submit to the House the government’s views on the bill sometime next month to make it a fully fledged draft law for further deliberation at the House. The alcohol industry is horrified by the extremely radical bill, not only because of its economic and social impacts but, more worrisome, by the acutely inadequate institutional capacity of the government to fully and fairly enforce such a draconian law.

The alcoholic drinks association grouped under APMBI has said it fully supports the initiative of the government and the House to make a comprehensive law to control the production, importation, distribution and consumption of alcohol in the country.

But such a comprehensive law should also be designed to protect the right of consumers, including tourists, to consume alcohol in a responsible manner based on a set minimum age, APMBI secretary-general Kwendy Alexander noted.“But totally banning the production, distribution and consumption of alcohol drinks, which even now are already controlled by 36 government regulations and 147 regional bylaws, could cause a set of new, even more damaging impacts,” Alexander pointed out.

Many analysts share Alexander’s view, arguing that prohibition would only force the industry to go underground. If this happens the government would lose excise duty revenues and, yet more alarming, there would be a proliferation of bootleg liquor production without any health and safety standards. “We compiled newspaper reports showing that between last December and May alone, almost 160 people died after drinking bootleg alcohol and hundreds of others were made totally or almost blind,” he added.According to the association’s estimate, total prohibition would cause the government to lose Rp 6 trillion in excise duties and result in the laying off of 180,000 workers. Thousands of other workers along the supply chain of the industry would become jobless.

A preliminary study by the Centre for Strategic and International Studies concluded that a total ban would cause revenue losses of Rp 22 trillion in the whole sector or 0.11 percent of gross domestic product, in addition to Rp 6 trillion losses in excise duty receipts (based on the government target as set in the 2015 state budget).Yet more damaging is the devastating impact that prohibition would inflict on the tourist industry at a time when the government is stepping up its efforts to woo more tourists by granting visa-free facilities to visitors from 30 more countries in a concerted bid to improve the current account balance.

Put simply, a total ban would boil down to the government shooting itself in the foot. Given the potentially extensive damage, the association and many political analysts are confident that the final bill that will be deliberated at the House will be centered on a more effective framework of controlling the production, distribution and consumption of alcoholic drinks.

The ASEAN economic ministers meeting in Kuala Lumpur last week also decided to maintain alcohol on the General Exception (GE) List. The GE list includes products that are permanently excluded from the free trade area for reasons of protection of national security, public morality, animal and plant life, health and items of artistic, historic and archaeological value. Some political analysts estimate that the initial sponsors of the draft bill — the Islamic-based United Development Party (PPP) and Prosperous Justice Party (PKS) — may not be strong enough to push through a total ban as the basic philosophy of the final bill. Moreover, six of the 10 political factions at the House are secular parties.

However the controlling framework is eventually strengthened under a new law, one of the most important points is to ensure that liquor remains subject to punitively high excise. Hence, the trade and finance ministries should design an importation and distribution system that is easy to oversee, yet effective in controlling liquor sales to the targeted market niche — foreign visitors and residents. Liquor drinking has now increasingly become part of a modern way of life. And as our economy has become intensively globalized and our country more popular as a tourist destination, we will inevitably be host to an increasingly large number of foreigners.

The writer Vincent Lingga is senior editor at The Jakarta Post.