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View all search resultsRevamp of local content rules riles businesses
A plan to cut local content requirements for goods made by foreign suppliers rather than in-house could dent investment as the country aims to woo foreign capital, businesses say.
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Workers produce noodles on Jan. 14, 2023, at a factory in Surabaya, East Java. (AFP/Juni Kriswanto)
T
he government plans to cut local content requirement scores for goods made through contract manufacturers, a move business groups say will dent investment and competitiveness more than it will help the country to woo foreign capital.
The new policy would penalize firms that outsource production by slashing their scores on key local content metrics like labor and overhead costs, as companies using external producers could see those contributions lowered by up to 70 percent, according to a document seen by The Jakarta Post.
Businesses argue the changed rules would make it harder to meet the thresholds required to qualify for government tenders, which often require a certain minimum share of local content.
Read also: Businesses wary on easing import, local content rules to coax US
“Companies that rely on outsourcing or contract manufacturing will need to adapt fast, even restructure their supply chains,” Deni Irawan, chairman of the Electronic Commodity Entrepreneurs Association (Apkonik), told the Post on Friday.
Uneven infrastructure for in-house production would leave unprepared companies most exposed, Deni viewed, though the future policy could “spur strategic and forward-looking” business players to strengthen the local industrial base.
“For electronics players, the best step now is to map out your supply chain, identify opportunities to localize components and consider vertical integration,” he added.
