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 The movie market is one of dozens of industries Indonesia
liberalized last week in a "Big Bang" shake-up that one minister
called the largest opening of Southeast Asia's biggest economy
to foreign investors in 10 years.
Under the new rules, foreign firms can hold 100 percent stakes
in the film industry, including production, distribution and
exhibition. Previously, the so-called "negative investment list"
shut foreigners out of much of the industry.
Tight regulation and censorship under autocratic former
President Suharto left Indonesia's cinema industry stunted - but
ripe with potential.
"Indonesia has long been a sleeping giant in cinema terms," said
David Hancock, head of film and cinema at research provider IHS
Technology. "For such a populous country, it has a low number of
cinema screens and therefore a low number of visits."
The sprawling archipelago is home to 250 million people - many
young and tech-savvy with a median age of 29. They are served by
slightly more than 1,100 movie screens and go to the cinema less
than once a year on average, according to IHS data.
South Korea, by comparison, with a population one-fifth of
Indonesia's, has 2,400 screens and saw movie goers reaching
almost 220 million last year, according to the Korean Film
Council.
"We welcome the decision since it will become much easier for
foreign firms to invest in Indonesia. We will continue to
actively do our business there," said CJ CGV spokesman Cho Sung-jin.
CJ CGV, which operates Indonesia's second-largest movie chain
CGV Blitz, plans to more than quadruple its number of screens in
the country to 600 by 2020, Cho said.
"TOO RUSHED"
Young movie-goers, who complain that some blockbusters are slow
to get a release in Indonesia, welcomed more competition.
"Sometimes the movies at Indonesian cinemas are not up-to-date
enough," said student Marsya Karzinar. "If there are foreign
cinemas that come in, and they can give good facilities, that
would be good."
But, in a pointer to the problems that liberalization faces in a
country where foreign investors have often complained of
economic protectionism and nationalism, some in Indonesia's
cinema industry are fuming over the decision.
Johny Syafrudin, chairman of the All-Indonesia Cinema Owners'
Association, said it was "too rushed" and would bring a flood of
foreign movies that could erode the country's culture.
"They think that opening the foreign tap will bring in a good
opportunity, but other cultures will ride behind these
investors," he told Reuters.
Indonesia has a burgeoning domestic movie scene - with films
such as martial arts action flick "The Raid 2" that played at
the Sundance Film Festival in 2014 - and some filmmakers, at
least, say they welcome foreign investment.
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"We've been lobbying for the opening of the negative list," said
Mike Wiluan, CEO of Infinite Studios.
"Because as a studio, we've been heavily involved in financing the
production infrastructure from ground up...That requires a lot of
capital and know-how."
LUCRATIVE NEAR-MONOPOLY
The stiffest competition foreign firms will face is likely to come
from the Cinema 21 Group, founded by a cousin of Suharto and his
business partners, which has enjoyed a near-monopoly of the
lucrative movie import business for decades.
The group accounts for around 74 percent of the total movie screens
in Indonesia, according to company data and industry estimates. It
competes against two smaller rivals - CGV Blitz, which has about 12
percent, and Indonesian retail-to-media conglomerate Lippo Group's
Cinemaxx.
Cinema 21 is ready to compete "healthily" in response to the
liberalization, Corporate Secretary Catherine Keng told Reuters. But
it also hopes the government will direct foreign companies to open
cinemas in underserved areas to "avoid cannibalization", Keng added.
Cinemaxx CEO Brian Riady said it planned to triple its movie screens
to around 250 this year.
"When you compare that demand with the supply of cinemas across the
market, there is a pretty significant mismatch between demand and
supply," he told Reuters.
On top of having to break the local stranglehold, foreign newcomers
will have to jump other regulatory hurdles, such as restrictions on
how close a foreign-owned cinema can be to a domestic operator.
The government is reviewing a rule requiring cinema operators to
allocate 60 percent of their total screentime to local content, said
Triawan Munaf, head of Indonesia's creative economy agency.
Tom Lembong, a former investment banker who is now President Joko
Widodo's trade minister, told Reuters that ending the Hollywood
movie import monopoly would lead to a huge increase in supply.
"We have a $10 billion trade surplus with the U.S.," he said. "One
of the U.S. exports to Indonesia with the best prospects, in my
view, is Hollywood movies and American entertainment content."
(Reporting by Eveline Danubrata in JAKARTA and Hooyeon Kim in SEOUL;
Additional reporting by Cindy Silviana, John Chalmers and Yuddy
Cahya in JAKARTA; Editing by Alex Richardson)
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