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Firm halts expansion over controversial bill
Jakarta Post - March 26, 2016
In a statement circulated on Thursday, the maker of the world-renowned Bintang Beer said it would postpone the expansion of an alcoholic beverages plant worth around Rp 635 billion (US$47.63 million) until legislators had come to a final decision on the bill.
Multi Bintang had planned to expand its factory in Sampang Agung, Mojokerto regency, East Java. The Sampang Agung factory was opened last year with Rp 200 billion in investment and an annual production capacity of up to 50 million liters of carbonated drink. "Multi Bintang will hold on its brewery expansion investment plan, pending legal certainty," the statement read.
Last year, all 10 party factions at the House agreed to continue deliberations on the possible prohibition of alcohol. Legislators who support the bill have argued that Indonesia needs a stronger legal standing to control the production and consumption of alcohol.
The bill, sponsored by the United Development Party (PPP) and the Prosperous Justice Party (PKS), political organizations that are Islamist in their orientation, has become one of priority bills under this year's National Legislation Programs (Prolegnas).
Nationalist parties like the ruling Indonesian Democratic Party of Struggle (PDI-P), the Golkar Party and the Democratic Party, meanwhile, have not shown any particular resistance to the bill.
The bill, reminiscent of the US' prohibition efforts of the 1920s, would outlaw the production, distribution and sale of all beverages with more than a 1 percent alcohol content.
The Indonesian Malt Beverage Producers Association has expressed concern that once passed into law and put in place, the bill would effectively shut down manufacturers along with their supporting distribution chains.
Even without the proposed bill, Multi Bintang saw its business performance decline throughout last year mainly due to a ministerial regulation that prohibited the sale of beer in minimarts and convenience stores in addition to sluggish economic conditions.
"This [regulation] severely impacted the availability of beer for many consumers of legal drinking age," the company's statement read. "We continue to engage in dialogue with the government to provide more effective solutions to address concerns of underage consumption."
Multi Bintang, a subsidiary of Dutch brewery Heineken International, saw its sales drop by 9.7 percent year-on-year to Rp 2.7 trillion last year. Although its cost of goods sold declined by 4.24 percent to Rp 1.13 trillion, the firm still saw its net profit plummet by 37.5 percent to Rp 496.71 billion last year.
The deep drop in net profits was also caused by penalties from the Directorate General of Customs and Excise amounting to Rp 221 billion for administrative errors between November 2010 and May 2014.
In a bid to offset losses caused by unfavorable regulations, Multi Bintang has expanded its range of non-alcoholic beverages. It also plans to launch new flavor extensions for the Green Sands brand in this year's second quarter.
Despite having the world's largest Muslim population, alcoholic drinks have deep roots in Indonesian society. The alcohol prohibition bill, however, includes exemptions for certain provinces and locations that depend on tourism.
PPP lawmaker Arwani Thomafi, who chairs the House's special committee for deliberation on the bill, said last week that the committee hoped to complete its deliberations by the middle of the year. "We will discuss [public recommendations] more deeply and may invite medical experts to answer our questions [regarding the bill]," he said.
Source: http://www.thejakartapost.com/news/2016/03/26/firm-halts-expansion-over-controversial-bill.html.
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