The U.S Questioned Indonesia’s Proposed 40% of Local Components Regulation

The U.S is one of countries that questioned Indonesia’s 40% of local component-proposed regulation which will be effective per January 1, 2017. The underlying complaint that the superpower holds would be around the law’s implication towards its market base which has no plan on adding local components to their products.

According to Reuters, USTR has filed and sent the matter to Indonesian government’s authorities and multinational forums. One of USTR’s spokepersons said, “The U.S has worries and influential support to make sure that information and communication tech, which is instrumental for economic growth, can be widely available in Indonesia.”

AmCham mentioned in its letter:

“We are afraid that the approach this regulation draft has may limit the access to new technologies, raise the ICT cost for Indonesian companies, increase the potential of smartphone grey and black market, and bring along other unwanted consequences.”

One of responses by the U.S is pursuing four trade cases involving Indonesia, regarding the regulation on local content in telecommunication sector investment at WTO.

AmCham’s Head for Indonesia Lin Neumann added, “One thing that big companies think of, not only U.S companies, is the lack of supply chain to produce high quality smartphones in Indonesia.”

While the smartphone penetration only touches one third of the Indonesian total population, Indonesian market remains sexy to world’s smartphone vendors. In result, numerous local, Chinese, and Korean vendors are starting to build their assembling factories in the country.

Though some show no fear towards the proposed regulation, they still regard having sufficient local high quality spare parts to press their production cost as something unmanageable. “The regulation may reduce the cost of handsets, since all of components, including the chipset, are still imported. The regulation will force local industry to grow,” said Teguh Prasetya, a telematics observer.

They wish for incentives so that the production of local spare parts may be reserved, both in quality and quantity.