Quotation from my book titled: “Franchising and Licensing in Indonesia: Regulations and Practices”.

This book will be published in English on August 2015

 Greetings by the Chairwoman of the Indonesian Franchising and Licensing Society (WALI)

As the head of WALI, I extend my congratulations and appreciation to Mr. Amir Karamoy for the publishin of this book. To my knowledge, this is the first franchising and licensing book on Indonesia, written in English.

The author of this book, is a teacher, mentor, and colleague to me. We have often discussed on ways to advance the franchising & licensing industry in Indonesia. Many of the thoughts inspired franchising policies in Indonesia. Among others, there needs to be a limit on company owned outlets/stores in franchising. Not enforcing the provision on the “post-expiry non-competition clause” in franchising agreement. Except aspects related to IP. Introducing the term “pewaralaba” into franchisor and “terwaralaba” into franchisee, was a creation by Mr. Amir Karamoy. The terms above, have been adopted into the franchising Law and regulations in Indonesia.

With the release of this book, each foreign franchise planning to enter in the Indonesian market, in my suggestion, should read this book. Such is the case for franchise consultants and franchise/license legal consultants from abroad. By reading this book, the background and discussions that have been developing over the release of franchising regulations will be understood.

As a legal scholar, I understand the intricacies of regulations related to franchising in Indonesia. This complexity, does not apply only to the substance, but also due to the quantity. Due to this complexity, the Trade Minister (in the cabinet’s last era of President Susilo Bambang Yudoyono 2009 – 2014) that replaced the previous minister, carried out revisions on a few Trade Regulations on franchising. This is discussed further in the book.I myself do not understand why there are so many regulations in managing franchising in Indonesia. In most countries, there is only one rule on franchising, but it covers all aspects that needs to be managed.

Hopefully the publishing of this book will provide direction to improve the quality of franchise regulations in the coming future.

* * *

Franchising is a business method – in the endeavour of market expansion – based on IP, also related to agreement laws. The strength of franchising (& licensing) economically, is measured by the number of outlets/stores that have been built successfully. The more outlets/stores established, the stronger the business. Strength defined is the ability to survive in situations where there is slow-down in economic growth. Because of this, there are parties that say franchising is a business immune to economic recession.

In the effort of business expansion, the franchisor really needs to strengthen the content quality of franchise (& license) agreements. The agreement content does not have to be identical to another, but still adjusted to conditions or local needs.

Every businessman that will and have operated franchises (& licenses), should pay more attention to the content quality by managing rights and obligations of parties fairly and proportionally. Also forming professional communication divisions for issues internally or externally. As in my opinion, two-way communication between the franchisor and franchisee, or between franchisees should be held based on the principle of “win-win relationships”.

Hopefully this book will provide inputs for the glory of Indonesian franchising (& licensing), both domestically or globally

September, 2015

Levita Supit

Chairwoman of WALI

       

The following is a citation from my book titled: “Franchising and Licensing in Indonesia: Regulations and Practices”. This book is published in English.

Chapter  III

……………..Since AFI’s (The Indonesian Franchise Association) establishment in 1991 until today (2015), unfortunately, succession to the Chairman position (Anang Sukandar) has never taken place. This certainly violates the rules of the ART (The Article of Association). In which based on its provisions, AFI’s Chairman, who has served in the position for 3 consecutive terms (9 consecutive years), should resign from the position in 2000 and can no longer be reselected.

Limitation on the terms of service is regulated in Article 12 paragraph 4 of AFI ART, which states: “A Chairman can be re-elected, provided that he/she has not served the position for 3 successive terms of services.” Based on the provision of this article, if the position of AFI Chairman is held for 3 successive terms, has a maximum of 9 years.

Next, in Article 12 paragraph 6 of ART, it is stated that: “When the Board’s term of service is due and a new Board has been established, then from end of service date, the Board becomes a demisioner.”

Following in Article 12 paragraph 7 C of the ART: “A demisioner cannot represent AFI or act on behalf of it including representing new positions in national/international organizations.”

These terms clearly states that anyone who has served the position of AFI’s Chairperson in 3 consecutive terms, by law, is declared demisioner and can no longer represent or act on behalf of AFI.

The provisions may be revised, however it can only be carried out through a Special Board Meeting attended by two-third of its members, as set out in Article 18 of the AFI ART.

Any attempt that is aimed at establishing AFI to be “owned a small number of people (non-members)” by means of changing its legal entity from a non-profit organization into an organization with profit-motive is classified as clear betrayal against AFI’s aspirations and goals. Parties that have used AFI only to satisfy personal interest and bring material benefits to him/herself alongside with the interests of his/her families or cronies, shall be shunned by the international franchise community and not be recognized by the Government.

Founder of AFI,

Amir Karamoy

The following is the Preface of my book (the fifth book) titled: Franchising and Licensing in Indonesia: Regulations and Practices. This book will be published in English on August 2015

A FEW WORDS FROM THE AUTHOR

Although this book criticizes franchising regulations in Indonesia, but Indonesia is a very interesting market for franchise & license investments, both for locals and foreigners. The growth of the middle class is rapid, as the main consumers of the franchise & license business, giving added value to the bright and profitable market prospect.

With the Indonesian market being more open, especially in the Asean Economic Community era, it is important to utilize foreign franchise markets for the people’s welfare as much as possible. Upon the base of this thought, every foreign franchise investment must be protected by ensuring its legal certainty.

Aside from this, Indonesia has to drive its national franchises to enter the world market. This requires the government’s active role in carrying out promotions and marketing. For this, as proposed by this book, the author hopes for the budget allocation of the Indonesian trade attaché to be increased.

Then, trade attaché officials do not have to come from bureaucrats, but also from the private sector, for instance positions to be held by former reliable former businessmen in performing trade negotiations and performing as professional trade relations officer, as well as conducting market intelligence (that do not violate international laws) in a country. President Joko Widodo’s idea to make KBRI (the Indonesian Embassy) as the marketing agent of made-in-Indonesia products in the global market needs to be materialized   immediately. Not simply a political discourse.

* * *

The franchising practice in Indonesia in its conception was in the effort to create partnerships between large and medium businesses with small businesses. The idea of this partnership was conceptualized in the age of the new order government.

In the reformation era (year 2007) franchising was defined as a product/service distribution system. The author does not reject the notion that names franchise as part of product/service distribution. However, it should be added as product/service distribution based on intellectual property.

Franchising in essence is a two sided coin. The first side is a solid and proven system of business. Business system in this regard can be defined as distribution system (as part of product/service marketing methods). On the other side, it is IP.

The basic concept above seems to not be understood well by bureaucrats when formulating the franchise regulation. For instance, the definition or understanding regarding franchising, as stated in Government Law no. 42 year 2007 regarding “Franchising”, according to the author is the base of the misguided practice of franchising in Indonesia – because it sets aside the IP, by stating franchising is “special rights” (different from Government Regulation no. 16 year 1997). The author thinks that the Trade Law (Law no. 7 year 2014), which defines franchise with Government Regulation no. 42 year 2007 as the source is not quite accurate.

This is although, when the Trade Law was still in the form of a draft, the author has expressed the though bases in a written format about this, through KADIN (Indonesia Chamber of Commerce and Industry) and DPR (the House of Representatives of the Republic of Indonesia).

The author’s recommendation, among others, is to not use the franchising definition based on Government Regulation no. 42 year 2007. The Trade Law should make a new and solid definition and understanding of franchising related to IP. To become a regulation reference source on franchising. The author’s suggestions were ignored, because the way of thinking still emphasizes the sectoral ego.

With the enforcement of Law no. 7 year 2014 on "Tade" that, it is stated that Bedrijfs Reglementerings Ordonantie 1934, Staatblads 1938 number 86 - the trade law created by the Ducth Colonial Government, is revoke or no longer active. The Government Regulation no. 42 year 2007, whereby its provisions are made by the Colonial Government, should also be revoked. As such opportunities are open to revise Government Regulation no. 42 year 2007.

This book would also like to remind franchise regulations to not be utilized for the interests of momentary political authority. In the author’s opinion, each regulation, especially those related to business and economy. Has to treat each stakeholder and parties related proportionally, based on the principles of equality and fairness. So, if a regulation is developed to drive the development of micro, small and medium enterprises, it should not be through means that hinder large business; vice versa.

Franchise regulations made by the government, has clear goals, to ensure legal certainty and increase the welfare of parties that become subject of regulations and the society as a whole. However, if this good goal is made by bureaucrats that have a narrow points of view and are not humble enough to accept criticisms and inputs from other parties (especially from parties more capable), then the good intention of the regulation will not be achieved.

Because of this, the most important in the development of each regulation (franchising) is an open attitude and common sense in evaluating each input. In this ditical technology era, the neo-feudalistic attitude that is still followed by bureaucrats (and politicians) in Indonesia, has to be cast aside as far as possible. The notion that a ”bureaucrat (& politician) can do no wrong”, is obsolete. The work motto that we should uphold now and in the future is realizing “the power of cooperation and sharing”.

Hopefully the constructive criticism of franchise regulation in Indonesia, can serve as input for the better improvement in the future.

* * *

Entering the Asean Economic Community (AEC), the business competition that will happen is not only among foreign businessmen entering the country, but also competition among Indonesian businessmen from an area and other areas. Each local government, will have tendencies to be more protective of its natural resources, including against businessmen who come from their administration.

In the future coordination and synchronization issues among regional governments and the central government needs to be strengthened. In the meantime, collaboration with WALI (The Indonesian Franchising & Licensing Society) needs to be empowered more based on the principle of “public and private partnership”.

To the businessmen that carries out the franchise and license pattern (including partnership) in the global free market era, needs to increase the quality of human resources professionalism, including utilizing technology (including information technology). Additionally, in operating the business, business ethics need to be held. For instance; the ethics of “fair business practices” have to be held high. Such is the case internally, with the principles of “good corporate governance”.  These two principles are part of the WALI code of conduct.

Collaboration with franchise and license associations at the global level, needs to be done. In the global trade era that is becoming increasingly open, bilateral or multilateral collaboration with franchise and license communities need to be continuously heightened. However, as written in this book, there cannot be the interests or ambitions of any groups or individuals, to make it an exclusive world vessel. There should also be no attitude to dominate the global franchise and license organization, controlled by and for the economic interests of developed countries.

WALI will continue to criticize the activities of this world association. Because Indonesia is one of the largest markets in the world and has been dubbed as “the hottest market for franchising and licensing”. WALI will continue to strengthen its bargaining position, to fight for the Indonesian franchise and license industry’s interests, by utilizing “the power of cooperation and sharing” principle.

Supposedly, the government (& DPR) should realize that franchising (including licensing and partnership) is an effective method to (1) Grow entrepreneur development’ (2) create job opportunities; (3) Develop Micro, Small and Medium enterprises; (4) Promote a nation’s local/national brand; (5) A tool to market creative products and products based on the local/national culture, both to markets in the country, or internationally.

Hopefully with the explanation of the 5 points above, franchising (licensing & partnerships) will become one of the priority programs of the related government.        

 * * *

The author wishes to express many thanks to the parties involved in sponsoring the publishing of this book. The sponsors are those that places ad campaigns, as seen in this book.

This proves that if we utilize the power of cooperation and sharing”, it will ease our efforts and works. Aside from it, it will be mutually beneficial for all parties involved.

Steven Kurniawan and friends are the ones that translated the part of this book from Indonesian to English, as well as editing of the English language. Then Taufik Darusman, performs checking for alignment of the definitions and terms from Indonesian to English. With their help, this book exists in a language that can be read by a majority of the world. The author would like to express his appreciation to both of them.

Gratitude is expressed to James Boey, Steven Chwee and Igor Alfarabi from Reed Panorama, this also extends to Danny Anthonius and Albert Sugiharto from Foresight Asia, for the motivation and professional collaboration provided. Without them, this book will not exist for the readers.

Last but not least, the author wishes to extend his gratefulness and hugs and kisses to Muly, Pronky & Riri, Vincent &  Fifi, Fadiyya, Legolas, Emir, Shasha, Gahan and Gio. With their companion, this book can be completed by the author in accordance to the deadline requested by the publisher.

The author hopes for criticisms and input to enrich the material of this book. Critiques and inputs are welcome by the author and can be sent through email: amirkaramoy@gmail.com

Thank you.

Jakarta, September 2015

Amir Karamoy