Domestic content rules may deter FDI in Indonesia

Indonesia celebrated a win when Apple Inc. agreed to boost its $1 billion in order to persuade President Prabowo Subianto’s administration to lift the ban on selling iPhone 16s. However, the victory may not last long.

Southeast Asia’s largest economy risks being left behind as neighbouring countries attract investors moving from China to avoid potential tariffs under Donald Trump’s administration.

“Now is not the best time to play hardball,” said Krisna Gupta, senior fellow at the Centre for Indonesian Policy Studies. “It can be a dangerous game to play.”

Indonesia used domestic content requirements to pressure Apple into increasing its investment offer from $10 million to $1 billion within a month to sell its flagship device in the country.

According to Bloomberg News, Apple’s latest deal includes the establishment of a plant on Batam Island by one of its suppliers to manufacture AirTags, creating jobs for approximately 1,000 workers.

It is the government’s strategy to attract more foreign direct investment, especially targeting companies that have a strong interest in maintaining their presence in the Indonesian market, which has a population of 270 million, as stated by David Sumual, the chief economist at PT Bank Central Asia in Jakarta.

“The policy may also deter FDI by raising costs, introducing regulatory complexities, and mandating localisation in sectors where domestic suppliers often lack the capacity to meet global standards — especially in industries dependent on advanced technology,” Sumual said.

Attribution: Bloomberg

Subediting: M. S. Salama