Indonesia’s move to get more goods produced onshore is already starting to backfire, with companies warning that supplies of products including Apple Inc.’s MacBook Pro could start to run out as soon as the end of April.
Other goods including Michelin tires and chemicals shipped from Europe may run out over the next few months because of the rule enforced from March 10 that’s seen as an attempt to curb imports of thousands of products, according to people familiar with the matter.
President Joko Widodo has presented himself as business-friendly to foreign investors, but he has also railed against imports that compete against local products. That tension is coming to the fore as the import hurdles have ignited furor among top executives at companies from Apple to Michelin and spurred business chambers from the US to South Korea to write letters to his government to review the matter, said the people who asked not to be named discussing sensitive issues.
Representatives from Apple as well as Indonesia’s ministries of trade and industry didn’t immediately respond to requests for comment.
Michelin said it has been working with associations and other companies facing a similar issue, and it’s optimistic the government will act soon to fix the problem. “Michelin aims at integrating Indonesia fully into its global value chain, and that is why openness to trade is key to us,” it said in an emailed response to Bloomberg.
The complex rule effectively restricts imports of about 4,000 products, including finished goods such as laptops and raw materials like hazardous chemicals. To get import permits, companies must get a letter of recommendation from the Ministry of Industry, but the process is onerous — requiring firms to submit tenancy agreements and annual forecasts of items they intend to bring into the country, said the people.
The forecasts may be used by the government to set import quotas for certain products, which the companies view as being meant to spur them to set up production facilities onshore to get an upper hand or lose out to rivals because of the quota mechanism, they said.
Despite multiple queries from the companies, the government didn’t give any clarity on the implementation since the rule was signed into law in December, the people said. Firms only understood the complexity and ramifications once the regulation was enforced, which is throwing companies into turmoil as they need to plan budgets, logistics and transport for the goods, they said.
Firms are now turning to Coordinating Investment and Maritime Affairs Minister Luhut Panjaitan, who’s seen as someone who has Jokowi’s ear, to persuade the president to ease the rule. In private conversations, Panjaitan described the rule as potentially injuring Indonesia’s business reputation and economic interests, the people said.
A representative for Panjaitan didn’t immediately respond to a request for comment.
--With assistance from Eddie Spence and Eko Listiyorini.
