Government regulates franchise operation

JAKARTA (JP): The government has ruled that franchises in the country will be limited to provincial capitals unless they meet a new set of operating conditions.

Government Regulation No. 16/1997, effective June 18, states that franchises in towns outside provincial capitals must consider the towns' social and economic development.

The 11 article regulation also says that franchisees must use as many local products as they can, as long as they comply with franchisers' standards.

But franchisees worry that the newly established rules will discriminate against foreign franchises.

Chairman of the Indonesian Franchise association, Bambang N. Rachmadi, called on the government to ensure that the new rule treats foreign franchises the same as it does local franchises or companies distributing imported products.

"But these local companies (which distributes imported items) are allowed to enter regencies," Bambang, who is also the president of McDonald's Indonesia, was quoted by Bisnis Indonesia daily as saying.

He said he was worried that the new regulation would take away McDonalds' chance to cooperate with small businesses.

In a similar bid to protect local small and medium businesses, the Ministry of Industry and Trade recently issued a joint ministerial decree with the Ministry of Home Affairs forbidding new big retail centers in towns outside of provincial capital cities to open.

The decree also requires existing big retail chains in towns outside provincial capitals to cooperate with local small and medium retailers. (das)