Foreigners' entry in retail industry still prohibited

JAKARTA (JP): The government will continue to ban foreign companies from operating wholesale and retail businesses in the country to protect local traders, says a senior official of the Ministry of Trade.

Paian Nainggolan, the head of the ministry's Research and Development Agency, said here yesterday that the wholesale and retail businesses remain closed to foreign investors, even though most industries previously closed to foreigners had been taken out from the negative investment list.

Speaking at a three-day coordination meeting of the Investment Coordinating Board (BKPM), Paian said that the measure would be further maintained not only to protect domestic traders but also to prevent foreigners from controlling the country's huge retail and wholesale markets.

The national meeting, which will end on Wednesday, is being participated in by 150 officials of BKPM's provincial offices. Speakers of the seminar included Coordinating Minister for Industry and Trade Hartarto and Coordinating Minister for Economy and Finance Saleh Afiff.

The ministry of trade has issued a number of rulings concerning restrictions imposed on foreign investors in the retail and wholesale industries. The restrictions are, however, not very effective as many of the world's major retail and wholesale chains are still able to break the barriers through a number of business arrangements with local companies. Sogo, Yaohan, both of Japan, and Makro of the Netherlands, for example, have operated here for more than two years through technical agreements with local firms.

Franchising

Paian said foreign companies are allowed only to operate in the country's retail and wholesale industries through franchising agreements with local firms or in cooperation with appointed distributors.

The government recently opened a number of previously closed business sectors such as seaports, telecommunications, power, railways, civil aviation and nuclear plants to foreign ownership to attract foreign investors. The move is also part of the adjustment to the General Agreement on Tariffs and Trade (GATT).

In his address in yesterday's meeting, Paian said the government has no plan to ease the restrictions imposed on foreign investors in the retail and wholesale sectors even though the country, within the next five years, has to adjust its investment rulings to the trade-related investment measures (TRIMs) under the GATT.

Abolishment

State Minister of Investment Sanyoto Sastrowardoyo, who is also chairman of BKPM, told the meeting that developed nations are required to abolish their trade-related investment rulings, which are contrary to the GATT principles, within two years since its ratification early this year, while developing countries, including Indonesia, are required to abandon such rulings within five years and least developed nations within seven years.

The BKPM chairman said that most of Indonesia's investment rulings have been in accordance with the GATT principles except those in the automotive industry, where foreign automobile makers are required to use a certain percentage of local contents to be able to establish production units in the country.

Sanyoto said that the restriction in the form of local contents in the automobile industry should be adjusted to TRIMs in the next five years. (hen)