Relying solely on protectionist policies may bring quick wins but at the expense of long-term sustainability.
ast week, officials from the Industry Ministry and Apple executives sat down to negotiate terms for lifting the iPhone 16 sales ban, focusing on the tech company’s compliance with Indonesia’s local content requirement (LCR) regulation. This high-stakes negotiation reflects a broader economic balancing act—one that may well become the subject of future economic papers and seminars.
When news broke of the government accepting Apple’s US$1 billion offer to establish an AirTag manufacturing facility in Batam, Riau Islands, it seemed like a breakthrough—a flicker of resolution. But that hope was short-lived. After Apple executives, in their distinctive suit-and-tie attire, exited the Trade Ministry office while dodging journalists, Industry Minister Agus Gumiwang Kartasasmita reaffirmed the government’s firm stance on maintaining the sales ban.
This tug-of-war exposes deeper tensions in Indonesia’s economic approach, prompting crucial questions: What long-term costs are we accepting for short-term gains, and are we overlooking a more sustainable vision for the future?
This negotiation highlights a broader issue: Indonesia’s protectionist policies prioritize immediate wins over sustainable, long-term planning—a classic case of missing the forest for the trees. While such policies may quickly attract capital and create jobs, their overuse risks branding the country as a place where companies are forced to invest, hindering future investments.
Relying on protectionism exclusively also stifles business competition, which, at first, may seem like a safeguard for struggling domestic firms. However, competition is vital: it pushes firms to create added value and build unique differentiators, which drive innovation—a key ingredient for sustaining economic growth.
Brazil’s experience with its semiconductor industry in the 1980s and 1990s offers a cautionary tale. Despite over a decade of protectionist policies, the industry failed to achieve global competitiveness. Instead, it remained confined to the lower tiers of the semiconductor value chain, capturing only a marginal share of the global market.
By contrast, Taiwan embraced a more balanced approach, combining targeted protectionism with promotional policies like tax incentives and research and development (R&D) funding. These measures cultivated a robust ecosystem that attracted global players while encouraging local innovation. Today, Taiwan produces nearly 92 percent of the world’s most advanced semiconductors, cementing its position as a worldwide leader.
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