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Hollywood And Indonesia May Be Reuniting Again

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JAKARTA, Indonesia — Western companies have flocked to Indonesia to sell everything from Louis Vuitton bags to Pizza Hut but one big business has held out against the foreign invasion. Cinema screens are currently off limits to most Hollywood blockbusters – thanks to a virtual monopoly on film imports by a single company.

And moviegoers in the nation of 240 million have just about had enough.

With a booming national economy, a growing middle class and a relatively young population – 36 percent are between the ages of 15 and 40 – Indonesia provides a near bottomless market for consumer industries.

Yet the film world has managed to escape many of the reforms that resulted in the dismantling of monopolies following the collapse in 1998 of the 32-year dictatorship of Suharto, who placed control of entire sectors in the hands of family and trusted friends.

As long as Group 21 maintains a firm grip on all film imports and most screens in theaters nationwide, cinema lovers will have little to cheer about, said Raam Punjabi, a prominent producer and outspoken critic of the movie industry.

Last year, there wasn't a single American blockbuster you couldn't find in Indonesia's glizty shopping malls, numbering in the thousands. But Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox Film, Universal Pictures and others kicked off a boycott in February after the government said it would start enforcing a long-ignored import duty on all foreign flicks.

When that dispute was finally resolved in June, a few Hollywood hits starting trickling back to the predominantly Muslim nation. But a related legal stoush between Group 21 and the government means the releases are sporadic and long behind other countries.

Why the movie industry has held out for so long against competition might be answered when the government wraps up its eight-month investigation into how Group 21, which gained control over the movie industry in the 1980s, has maintained its grip over the three largest importers with exclusive rights to distribute all Hollywood films. They also own 570 out of 676 of the screens in theaters nationwide.

It's not a monopoly exactly, said Nawir Messi, chairman of the country's fair competition commission, but with that kind of dominance there are reasons to be suspicious.

Even after June revisions to the tax law, Hollywood was largely shut out because their longtime distributors, hit with more than $30 million in unpaid levies and related penalties, were challenging the case in court.

It wasn't until Omega Film – started by Ajay Fulwani, a nephew of Harris Lesmana, one of Group 21's primary owners – got the go-ahead to start importing and distributing blockbuster films that "Harry Potter and the Deathly Hallows: Part 2" finally hit theaters in late July.

"Transformers 3," "Kung Fu Panda 2" and "Fast Five" followed last month.

But competitors – and moviegoers like Adinda Rizka Margrethe – say the changes are minute.

"In Singapore, some movies like 'Captain America' have already come out, but here not yet," said the 15-year-old school girl as she showed up with three friends at a half-empty theater in downtown Jakarta.

"I love watching Hollywood movies more than Indonesian movies, so I'm a bit frustrated."

Some distributors say Omega is nothing but a proxy of Group 21 – something both groups deny – and has been given the right to show movies on Group 21's screens.

"If anybody says there is no link between them, they're either fooling themselves or trying to fool us," said Punjabi, who applied for a film import permit with two other industry leaders earlier this month.

If there is no monopoly, Punjabi argues, then Hollywood studios should welcome the formation of a new distributor.

"The big question will come, 'How many cinemas do you have?'" he said, and here, because of the alleged Omega-Group 21 partnership, competitors will lose out.

Where the government stands on Omega remains unclear.

But there were enough questions that the customs office decided to temporarily halt Omega's import license several weeks ago until the allegations were cleared up.

Others eager to get in on the game say what's been most frustrating has been Hollywood's perceived complacency in doing business with Group 21.

Ananda Siegar, owner and CEO of Blitzmegaplex, the second-largest theater chain in Indonesia, had hoped Hollywood would challenge the government's anticompetitive policies with bargaining power they got during their five-month boycott.

In addition to a simplified import duty and dropped royalties tax they could have demanded the right to open their own distributors – in effect circumventing domestic companies such as Omega – as they have done in most other parts of the world.

Right now they are barred from doing so because the film industry is on Indonesia's negative investment list – a list of businesses largely closed to foreign investors.

Hollywood executives were invited last month to discuss investment restrictions with Indonesian government officials, though both sides have remained mum about the outcome of those talks.

U.S. Ambassador Scot Marciel, however, told the English-language newspaper, the Jakarta Globe, last week that it looked like the government might be willing to open the doors a bit.

"We think more competition is good," he said." We wouldn't support a monopoly."

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