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Indonesia: Plan to Issue Regulation Requiring Local Sourcing of Materials

(Aug. 29, 2017) Indonesia’s President Joko Widodo (also called Jokowi) has announced plans to issue a new regulation requiring the use of local materials in all products made in Indonesia. According to Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan, who spoke on August 1, 2017, the regulation has been drafted and will be issued “within weeks.”  (Jokowi to Issue Regulation on Local Content: Minister, JAKARTA POST (Aug. 2, 2017).)

The announcement follows a statement from Widodo that criticized some state-owned enterprises for using foreign-sourced materials instead of local ones. Pandjaitan added that manufacturers who do not comply with the planned new regulation “will be warned and face tough measures.”  (Id.)

Background

Local content was first promoted by Presidential Instruction No. 2 of 2009, Regarding the Utilization of Domestic Products for Government Procurement of Goods/Services. (Instruksi Presiden Republik Indonesia Nomor 2 Tahun 2009 Tentang Penggunaan Produk Dalam Negeri Dalam Pengadaan Barang/Jasa Pemerintah (Feb. 9, 2009), Agency for Financial Supervision and Development website (click on item 2 for full text).)

Previous local content rules applied to specific industries. Examples include the July 2016 regulation requiring such materials be used for laptop computers, smartphones, and tablets.  (Permenperin [Regulation of the Ministry of Industry] No. 65, 2016, on Conditions and Procedures for Calculating the Value of the Domestic Components in Cell Phones, Handheld Computers, and Tablets (July 27, 2016), Ministry of Industry website (click on link to see pdf of text) (in Indonesian); Constance Johnson, Indonesia: Local Content Rules for Electronic Products, GLOBAL LEGAL MONITOR (Sept. 15, 2016).)  In addition, a number of local content rules have been applied to marine vessels.  (Sugiman Layanto, Local Content & Regulatory Changes in Indonesia (Asian Offshore Support Journal Conference, Sept. 8-9, 2015), RIVIERA MARITIME MEDIA.)  Furthermore, in 2010, Indonesia issued a regulation on electric power infrastructure projects that required local sources for materials.  (Permenperin No. 48, 2010, on Guidelines for the Use of Domestic Products in the Construction of Electric Power Infrastructure (Apr. 14, 2010), Ministry of Industry website (click on “open” on the line for “permenperind no. 48/2010 … pdf”) (in Indonesian).)