Jakarta, Indonesia Sentinel – The American Chamber of Commerce in Indonesia (AmCham Indonesia) and the U.S. Chamber of Commerce have expressed concerns over decision of Apple’s iPhone 16 band in Indonesia, citing failure to meet the country’s local content requirements (TKDN).
AmCham Indonesia, established in 1971, represents over 300 companies with ties to the U.S. and operates as a major business association in Indonesia. The U.S. Chamber of Commerce focuses on fostering American business interests globally. Both organizations view Indonesia’s TKDN regulations as a barrier for U.S. companies looking to invest in the country.
“The TKDN policy has raised concerns among U.S. businesses interested in investing in Indonesia. It increases production costs and stifles business growth rather than fostering local industry development,” stated AmCham Indonesia on its official website.
Challenges for Multinational Companies
A recent report funded by USAID and authored by EY Indonesia highlights the difficulties faced by multinational tech companies in Indonesia. The country’s relatively underdeveloped technology manufacturing sector struggles to align with the government’s high expectations for local production.
According to the report, the Indonesian Ministry of Industry’s Regulation No. 31 of 2022 sets standards for calculating local content in electronic goods. However, these standards often exceed the country’s current manufacturing capabilities, creating obstacles for foreign investors.
“There is a significant gap between government demands for local production and the actual infrastructure to support high-tech manufacturing,” the report states.
The challenges are further exacerbated by the lack of clear guidelines to help companies navigate compliance. In many cases, companies meet TKDN requirements by producing accessories such as chargers and earphones, which contribute minimally to local value.
Comparisons With Malaysia
The report contrasts Indonesia’s approach with Malaysia’s success in creating a thriving tech manufacturing ecosystem. Since the 1970s, Malaysia has invested heavily in developing modern industrial parks, such as those in Penang, attracting substantial foreign investment.
“Indonesia could benefit from a similar strategy to build a robust manufacturing base,” the report notes.
Apple’s Investment Proposal Rejected
Indonesia’s Ministry of Industry recently rejected Apple’s $100 million investment proposal, deeming it insufficient under the “fairness criteria.” Minister Agus Gumiwang Kartasasmita outlined four key aspects that Apple’s proposal failed to meet:
- Investment comparisons with other countries.
- Investment parity with other smartphone brands in Indonesia.
- Contribution to national revenue and value-added industries.
- Job creation and economic impact.
“Based on a technical assessment, the numbers simply don’t align with what we consider fair,” said Kartasasmita.
The Ministry is also pressing Apple to fulfill its remaining $10 million investment commitment from 2023, which will not be factored into future proposals.
The Role of Apple Developer Academies
Apple has historically opted to comply with TKDN requirements through innovation development. The company has established three Apple Developer Academies in Indonesia:
- Binus BSD, Serpong, Tangerang.
- Universitas Ciputra, Surabaya.
- Infinite Learning, Batam.
To secure the latest TKDN certification, Apple proposed building a fourth academy in Bali, valued at approximately $20 million. However, the plan has yet to materialize, leading to the Ministry’s decision to ban iPhone 16 sales.
Broader Implications for U.S. Investment
John Goyer, Executive Director of the U.S. Chamber of Commerce for Southeast Asia, highlighted the broader impact of Indonesia’s regulatory landscape on foreign investment.
“TKDN requirements, import license restrictions, and sudden, non-transparent policy shifts, combined with overlapping or contradictory regulations, have negatively influenced U.S. investment in Indonesia,” Goyer said.
He emphasized that addressing these challenges could improve perceptions of Indonesia’s investment climate among both American and global investors.
Indonesia Rejects Apple $100 Million Investment Proposal, iPhone 16 Ban Remains
Calls for Reform
Indonesia’s Ministry of Industry has announced plans to revise its local content regulations, including updating Regulation No. 29 of 2017, which governs TKDN compliance for smartphones and other electronic devices. The revisions aim to reflect changes in the industry landscape while maintaining fairness for all stakeholders.
For now, multinational companies like Apple must navigate a complex regulatory environment to tap into Indonesia’s lucrative market. As debates over local content policies continue, the path forward for U.S. businesses in Indonesia remains uncertain.
(Becky)
