Bloomberg has a piece criticizing the way the Indonesian government has forced Apple to invest a billion dollars and make a commitment to build a factory or two in the country.
Using a protectionist playbook to get companies to build factories could end up sidelining Southeast Asia’s largest economy when neighbors are rolling out the red carpet for investors who are relocating from China ahead of Donald Trump’s potential tariffs, analysts said.
What Indonesian policymakers, officials, and ultranationalists refuse to acknowledge isn’t just the shortsightedness of protectionist policies, but the recklessness of enforcing them without the infrastructure to support a modern tech manufacturing ecosystem.
They cling to the illusion that forcing tech giants to build products locally is enough, ignoring the fact that manufacturing doesn’t happen in isolation, it’s an interconnected ecosystem dependent on robust infrastructure, not just financial sticks and carrots.
The Indonesian government isn’t just using the wrong policy, they’re operating with the wrong mindset entirely. They also haven’t squared the collapsing textile industry and the falling demand in the auto industry with their tech ambitions. Apple manufacture devices for the global market regardless of their origin while Indonesia’s manufacturing industries tend to be dominated by domestic sales.
Local content requirements cover a range of industries, from cars to medical devices. Together with decades-old problems such as red tape, high taxes and a less productive workforce, Indonesia’s manufacturing growth has slowed to a crawl.
In contrast, neighbors like Vietnam and India are offering tax incentives, swift approvals and the freedom to source their components from across their global supply chains, Gupta of the Center for Indonesian Policy Studies said.
That makes them attractive for companies looking to produce for export and explains why Apple can invest a much larger $15 billion in Vietnam despite the nation having a smaller domestic market than Indonesia, he said.
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