Sure, the local content requirement (TKDN) policy that the government uses to justify the measure is a form of protectionism, but the impact on investment is unclear for now.

Apple’s reported intention to invest US$10 million in a factory in Bandung, West Java, appears to be a gesture by the company to get on the right side of the government and, coming just days after the iPhone 16 ban, it suggests the ban may have encouraged rather than deterred investment.

Under the TKDN policy, at least 40 percent of the parts in phones and tablets must be sourced in Indonesia. Given that this may be difficult in practice, alternative commitments can be agreed upon instead, and the one from Apple was for investment in so-called developer academies.

Apple has neither admitted to nor refuted the government’s claim that it failed to meet the investment target for those academies. Apple CEO Tim Cook’s visit to the country earlier this year had many hoping for a pledge by the company to build a large factory in the country.

The plan for a small plant to make accessories or parts in Bandung, reported by Bloomberg, would show that the tech firm looks at Indonesia as more than just a consumer market.

A Google spokesperson, meanwhile, told The Jakarta Post that the company would not distribute the Pixel in Indonesia.

Be that as it may, a large, growing and relatively young population makes this country a market that device makers cannot ignore. At the same time, the government will not want to deny its people access to such technology indefinitely.

The situation boils down to a power struggle to see who yields first, and compromises are likely to be worked out eventually, but for now, Indonesia’s stern message to the two United States tech giants is this: Invest or go home!

The TKDN policy is one of the biggest gripes foreign businesses have with Indonesia, as representatives of their chambers of commerce have noted repeatedly.

No two ways about it, strong-arming foreign companies into investing in the local market under the threat of losing access to that same market means taking a sledgehammer to the free trade principle championed by Adam Smith and David Ricardo.

Yet Jakarta is under no external pressure to change tack because protectionism is in vogue around the globe.

There is little threat of WTO action against Indonesia, because the two companies would need to lobby the US government for such a move, and Washington itself has hamstrung the WTO’s dispute settlement mechanism for years by blocking appointments to its Appellate Body.

Furthermore, the US Inflation Reduction Act is nothing but protectionism in disguise, and many of its stipulations would likely not stand up to WTO scrutiny, so there will be little interest in the US to resuscitate the moribund trade organization.

Other countries and regions have their own excuses for hampering the global flow of goods and services with trade tariffs, non-tariff barriers and sanctions.

Collectively, the world is squandering trillions of dollars’ worth of comparative advantage it could enjoy through more open trade; an efficiency loss we can ill afford while trying to address climate change and other environmental crises.

In such a dog-eat-dog world, it is entirely understandable for Indonesia to play hardball. The TKDN policy is only one expression of this; others are mineral export bans or demands for electric vehicle makers to build factories in the country in return for being allowed to import cars.

President Prabowo Subianto looks set to follow in the footsteps of the Joko “Jokowo” Widodo administration when it comes to using the large and growing domestic market for leverage with foreign firms, but the question remains: Are we prepared for the response?