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Industrial Business Licensing for Alcoholic-Beverage Production

Industrial Business Licensing for Alcoholic-Beverage Production

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In parts of Indonesia, drinking is an inseparable part of the indigineous culture, playing a large role in cultural festivals and social gatherings. Traditional alcoholic beverages are often brewed in backyards, made by fermenting rice, sugar cane, and palm sugar, then flavoring with herbs. Some of the more notable drinks are Arak Bali (Balinese rice wine), Ciu (Javanese vodka), Tuak (Sumatran rice wine), and Saguer (Minahasan palm sugar fermented drink).

Alcoholic beverages from outside Indonesia - such as beer, wine, sake, rum, and whisky - have also become popular in the country. While it is the largest Muslim nation in the world, the majority of Muslims are moderates. Across Indonesia, you can find Irish pubs, German bars, and night clubs, especially in economic centers and tourist destinations like Jakarta, Bali, and Lombok.

However, issues surrounding alcohol has always been controversial: while conservative Islamist groups are calling for a blanket ban on sale, distribution, and consumption, outright prohibition seems unlikely to happen.

Instead, tighter regulations have been instated. In 2015, the government enacted the Ministry of Trade Regulation No. 06/M-DAG/PER/1/2015 on the Control and Supervision of Procurement, Distribution, and Sale of Alcoholic Beverages, banning the sale of alcoholic beverages in all Indonesian minimarkets and kiosks. Moreover, the government has raised the import tax for alcoholic beverages, resulting in an increase in the overall price of drinking and turning people toward the black market or the consumption of methanol-laced drinks, many of which contain non-food grade materials and are therefore hazardous to health. Such beverages are produced in unlicensed breweries, known as oplosan and are linked to the majority of alcohol-related deaths in Indonesia.

To strengthen the control and supervision of alcoholic-beverage industries, the Minister of Industry (“MoI”) has issued MoI Regulation No. 17 of 2019 on the Control and Supervision of Alcoholic-Beverage Industries (“MOIR 17/2019”)1 . For those in the business of production of alcoholic beverages, or distribution of home breweries, please be aware of this regulation; it sets out a number of provisions addressing the following key matters:

  1. Alcoholic beverage classes.
    • Class A: beverages containing ≤ 5% ethyl-alcohol/ethanol;
    • Class B: beverages containing 5% - 20% ethyl-alcohol/ethanol; and
    • Class C: beverages containing 20% - 55% ethyl-alcohol/ethanol.
  2. Business requirements

    Two principal requirements must be met in order to engage in the operation of alcoholic-beverages industry, specifically:

    (1) Possession of Industrial Business License (“IUI”), with the exception of traditional alcoholic-beverage businesses; and
    (2) Quality standards for alcoholic beverages.

  3. Prohibitons

    Business actors are prohibited from:
    (1) Combining alcoholic-beverages with non-food grade alcohol and/or other hazardous chemical substances;
    (2) Producing alcoholic-beverages with > 55% ethyl-alcohol or ethanol content;
    (3) Storing and using non-food grade alcohol;
    (4) Producing alcoholic-beverages with packaging volumes over 180 ml; and/or
    (5) Repackaging products.

The issuance of the MOIR 17/2019 provides a legal basis for home breweries to produce alcoholic beverages while protecting the consumers from health hazards. Hopefully, the regulation will force home breweries to maintain a certain quality and health standards for their products, and ultimately mitigate illegal alcoholic beverage production and consumption, as well as preserve the traditional local drinking cultures.

As with drinking, we believe that doing business should also be done responsibly. Schinder Law Firm can assist you in any legal issues related to alcoholic beverages industry. Our team of expert lawyers can advise you on business licensing, contracts with third parties and/or contentious matters such as criminal investigation.

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1 Hukumonline, “Industrial Business Licensing Process for Alcoholic-Beverage Companies Integrated into OSS System”, 3rd June 2019.
About the author:

BUDHI Budhi Satya Makmur

A qualified Indonesian advocate. Budhi specialises in litigation, arbitration and other contentious matters. Budhi has extensive experience in representing numerous domestic and multi-national companies before the Indonesian National Board of Arbitration (BANI) and the Indonesian courts.




Industrial Business Licensing for Alcoholic-Beverage Production