Key Points
- Indonesia secured a $1 billion investment from Apple to lift the iPhone 16 sales ban.
- Protectionist policies aim to boost local jobs and economic growth but may deter foreign investors.
- Vietnam and India attract larger investments with liberalized policies and global supply chain access.
- Indonesia’s manufacturing sector faces challenges from regulatory hurdles and regional competition.
Indonesia has declared a significant win after persuading Apple Inc. to boost its investment in the country to $1 billion to lift a ban on selling iPhone 16s. However, analysts warn this aggressive approach may risk sidelining Southeast Asia’s largest economy as other nations adopt investor-friendly policies. Apple’s revised offer includes establishing an AirTag production facility on Batam Island, creating 1,000 jobs. This move aligns with Indonesia’s domestic content requirements to secure foreign investment and create local jobs.
Prime Minister Prabowo Subianto’s administration aims to achieve 8% annual economic growth and transform Indonesia into a high-income economy by 2045. However, protectionist policies, such as mandating local production of components, could deter investors due to higher costs, regulatory hurdles, and insufficient local infrastructure for advanced technology. Critics argue that the domestic supply chain lacks the capability to meet global standards, especially as technology grows more sophisticated.
The government is also raising the domestic content ratio for mobile phones and tablets to 35% and may eliminate alternative compliance paths, such as funding developer academies. This leaves manufacturers with limited options, such as building components or applications locally. In contrast, countries like Vietnam and India attract investments with tax incentives, streamlined processes, and unrestricted access to global supply chains. Despite its smaller market size, Apple’s $15 billion investment in Vietnam highlights this disparity.
Indonesia’s manufacturing sector, already grappling with closures and layoffs, could face further challenges. While officials emphasize fairness and demand investments that generate jobs and economic growth, the country’s rigid regulations and less competitive workforce may push investors toward more liberalized markets.
Neighboring nations like Vietnam offer tailored support, including transportation, land clearance, and labor mediation, to ensure smooth operations for foreign companies. Analysts caution that Indonesia’s protectionist stance, coupled with long-standing issues like red tape and high taxes, risks stalling its manufacturing growth and losing out to more welcoming competitors.
