November 22, 2024
JAKARTA – The Industry Ministry is assessing an upgraded investment proposal from Apple Inc. seen as the company’s latest effort to win the green light to sell its latest iPhone models in Indonesia.
According to the ministry, Apple submitted a plan on Monday to pour US$100 million into Southeast Asia’s largest economy to build a development center and a development academy as well as to begin producing mesh components for AirPods Max headphones beginning in July 2025.
Apple declined to comment when contacted by The Jakarta Post on Thursday.
The investment would be in line with the government’s push to integrate local industries into global value chains and marks a massive increase over a $10 million investment proposal put forward earlier this month to build an accessories manufacturing plant in Bandung, West Java.
“We are currently assessing if the $100 million investment proposal is fair for Indonesia, not just compared to Apple’s investments in other countries but also for existing domestic smartphone manufacturers,” Industry Ministry spokesperson Febri Hendri Antoni Arif told reporters on Thursday.
The ministry would negotiate carefully, Febri emphasized, as it did not want to give the impression that it was “rolling out the red carpet” just to secure Apple’s investment.
The government currently prohibits sales of iPhone 16 devices in the country, having found the United States-based tech giant out of compliance with a regulation requiring its products to meet a 40 percent local content threshold.
It remains illegal to trade iPhone 16 handsets in the country, Febri emphasized, noting that 11,000 of the new phones had entered the country this year through carry-on luggage.
The government was also still holding the US tech giant to its commitment to realize the remaining Rp 271 billion of its commitment to invest Rp 1.71 trillion ($108 million) to meet the local content requirements under the 2020-2023 contract, Febri said, adding that Apple was trying to offset that with the new proposal.
To meet the minimum local content requirement, companies can comply by manufacturing their devices or developing firmware in the country or by investing in local innovation.
Apple has built three academies to date, one in South Tangerang, Banten, another in Surabaya, East Java, and the third in Batam, Riau Islands. It has announced plans to build a fourth in Bali.
Govt to revise local content regulation
The government was considering revisions to the local content rules under Industry Ministry Regulation No. 29/2017 to better align with current industry developments, Febri said, calling the prevailing regulation “outdated”.
“The structure of the domestic industry has changed,” Febri said. “We’re looking to update the rules to reflect these changes and to integrate local industries into global value chains more effectively.”
This includes encouraging foreign companies to collaborate in integrating domestic industries to participate in the bigger value chain, as seen with the government’s proposal to Apple.
Sales of iPhones in Indonesia led Southeast Asia last year, with 2.61 million units sold and an estimated revenue of Rp 30 trillion, according to the Industry Ministry. Vietnam recorded the sale of 1.43 million units.
The government aims to strike a balance between integrating local industries into global value chains and maintaining a competitive business environment, but experts warn that regulatory consistency is also critical to sustaining investor confidence.
Center of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira Adhinegara criticized the government’s approach, calling it “pseudo-protectionism” and warning that frequent regulatory changes can damage the country’s appeal to investors and undermine its trade openness.
“The government needs to ensure a level playing field through consistent policies. Flip-flopping on regulations reduces business certainty,” Bhima told the Post on Thursday, adding that such inconsistencies ran counter to President Prabowo Subianto’s agenda to promote and attract foreign investment.
Rather than “threatening to change the rules” in a bid to force Indonesia entry to global supply chains, Bhima emphasized, the government should focus on improving its competitiveness, particularly through skilled labor, clean energy and stronger intellectual property protection.
“Threatening protectionist policies is at odds with efforts to attract global investors. It’s not fair to target one company while not applying the same standards to all players.”
Hasran, trade researcher of the Center of Indonesian Policies Studies (CIPS), argued that the current policy had failed to create a positive investment climate, as seen in the standoff with Apple.
Companies like Apple, which are part of global value chains, find it “inefficient” to invest in Indonesia under the local content requirements, as these companies typically source components from cheaper countries, but the policy forces them to use more expensive, less competitive domestic materials, ultimately raising production costs.
“The finished products will be more expensive and harder to compete with globally,” he added.
Dendi Ramdani, head of Bank Mandiri’s industry and regional research department, said the government’s tough stance may be aimed at “strengthening its bargaining power,” but added that foreign investors needed certainty that Indonesia could offer a cheaper, more competitive manufacturing base than other countries.
“Southeast Asia’s largest economy is undoubtedly attractive, but the cost of doing business here remains a question mark,” he said. “The government must map out production potential better to attract larger-scale investments.”