House of Representatives Approves the Horticulture Bill

After year of deliberations, the House of Representatives (Dewan Perwakilan Rakyat or ‘DPR’) finally approved the Horticulture Bill on 26 October 2010. Considering that horticulture is one of Indonesia’s natural resource assets that is essential to the food supply, medicinal source materials, and natural aesthetics. The government intends the Horticulture Bill to provide certainty to the regulatory framework for the continuous and sustainable horticulture development in Indonesia, including protection of horticulture farmers and increasing foreign exchange reserves through foreign trade. The Horticulture Bill covers, among others: planning, development, distribution, trade, marketing and consumption, investment, and citizen participation.

Horticulture is defined as anything related to fruits, vegetables, medicine derived from plants, and floriculture; as well as fungus, lichen and aquatic plants that have a nutritious, medicinal, and/or aesthetic function. The Horticulture Bill also regulates the protection, utilization and development of genetic resources. The Minister of Agriculture will set out a list of endangered horticultural genetic resources, the utilization of which will be subject to approval from the Minister of Agriculture. Moreover, Article 28 (2) prohibits the export of endangered horticultural genetic resources. Further implementation of the regulations on the export of horticultural genetic resources will be governed by a separate ministerial regulation.

Article 50 divides horticulture business into: seeding; cultivation; harvest; processing; distribution, trade and marketing; research; and agro tourism. The aforementioned horticulture businesses are further classified into: micro, small-scale, medium-scale, and large-scale businesses. Except for large-scale businesses, which can have a domestic and/or foreign investors (with a maximum foreign participation of 30%), horticulture businesses can only be owned by local entities. Foreign investors who are allowed to participate must provide apprenticeship opportunities and technology transfer to domestic businesses.

Furthermore, the Horticulture Bill states that businesses have to prioritize the utilization of domestic horticulture facilities, such as: high quality seed of a diverse variety, fertilizers, equipment, and machinery. Pursuant to Article 34, the central and/or regional government will grant incentives to businesses to produce horticulture facilities that are not currently being domestically produced. Such incentives will consist of licensing facilities, access to funding and/or tax facilities.

To avoid excess imports, Article 88 provides that importers of horticulture products must consider certain aspects, for instance: food security, the domestic supply of horticulture products, packaging and labeling requirements, quality control, and safety and protection of human health, animals, plants and the environment. Imports can only be carried out after being recommended by the Minister of Agriculture and approved by the Minister of Trade.

It should be noted that the Horticulture Bill also provides for citizen participation in: planning, area development, research, funding, development, monitoring, establishment of business associations, information system development, institution development, and guidelines for horticulture businesses. Citizen participation can take the form of giving suggestions, responses, objections, improvement proposals and/or aid. The Minister of Agriculture will issue a separate implementing regulation on this matter.

Sanctions are set out in Chapter 16, with the violation of certain provisions being subject to administrative sanction in the form of written notices, penalties, temporary cessation orders, withdrawal of products, revocation of business licenses and/or business closure. Criminal sanctions are also available, and provide for monetary penalties as well as imprisonment.

It should be noted that, under Article 131, within 4 years after the enactment of the Horticulture Bill, foreign partnerships that have already obtained a business license will have to adjust their shareholder composition to be in conformity with the provisions in the Horticulture Bill.

The Horticulture Bill has been approved by the DPR on 26 October 2010, and now awaits the formality of receiving presidential approval.