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Jakarta Post

New smartphone regulation may boost smuggling

  • Khoirul Amin

    The Jakarta Post

Jakarta   /   Sat, January 31, 2015   /  11:41 am

The government'€™s plan to require smartphone manufacturers to use local components may help the local cellphone industry, but trade observers warn that the restriction will also encourage smuggling.

Beginning 2017, all 4G smartphone manufacturers will have to use a minimum of 40 percent local content, as part of the government'€™s efforts to promote the country'€™s growing cell phone manufacturing sector.

Ali Cendrawa, the chairman of the Indonesian Cell Phone Dealers and Importers Association (Aspiteg), said on Friday that his association fully supported the government'€™s move as it would help the local component industry grow.

'€œFor us, 40 percent is actually quite low. We are already able to produce plastics, batteries and keyboards '€” among other things. So, we believe that we can aim for more as there are still two more years to go before the planned regulation comes into force,'€ he told The Jakarta Post.

Ali said the move '€” which will require thorough assessments of imported phones '€” would help the country reduce the number of illegal phones entering the market.

In 2013, the Trade Ministry found that no fewer than 50 million phones circulating in the country were illegal.

Taking a different view, Indonesia Cell Phone Association (APSI) secretary-general Ina Hutasoit said previously that while cell phone importers were ready to comply with the regulation, they urged the government to set the quota at less than the planned 40 percent.

Indonesia, which exports tin commonly used for various electronic components, already produces a number of components for handsets. Some components, such as integrated circuits, however, still depend on imports.

Communications and Information Minister Rudiantara said on Friday that his ministry, the Trade Ministry and the Industry Ministry had agreed to join forces in making sure that no 4G-ready handsets were able to enter into the country'€™s market without meeting the quota for local content.

'€œAll brands, any brands [including iPhones] will not be allowed to enter if they don'€™t meet the requirement,'€ he told reporters.

iPhones are currently assembled by China-based Foxconn, which reportedly manufactures 40 percent of the entire world'€™s consumer electronics, including products from Amazon, Dell, HP Motorola, Nintendo, Nokia, Samsung and Sony.

The ministry'€™s director general for post and informatics resources, Muhammad Budi Setiawan, said the ministry'€™s planned regulation, which was expected to come into effect in early 2017, was designed to boost local industry.

This will be the second measure taken by the government to boost the local cellphone industry since early last year. In the middle of last year, the government imposed a 20 percent luxury-goods tax on the sale of high-spec imported smartphones.

Observers said they were worried the requirement to use local components would cause an increase in smuggling, which has grown following the introduction of the luxury tax.

Budi said that a number of local companies were already able to manufacture a number of cell-phone components, he said. PT Hartono Istana Teknologi manufactures its own smartphone under the Polytron brand.

'€œPT INTI is also able to manufacture smartphones itself but it'€™s still waiting for orders,'€ he said, referring to state-owned PT Industri Telekomunikasi Indonesia.

Besides local manufacturers, a number of handset makers have reiterated their commitments to building factories in the country.

South Korean giant Samsung and Chinese device maker Oppo are reportedly set to build facilities here.

Aspiteg'€™s Ali said that while he was optimistic that the government'€™s move would be fruitful for the local industry, he argued that the government should provide certain incentives for foreign companies building facilities in Indonesia.

'€œThe government should provide a tax holiday of three to five years for those [foreign] companies building factories or assembling facilities here,'€ he said.