Indonesias Strategic Move to Bolster the Electronics Industry: Permenperin 6/2024

Jakarta, INTI - The Ministry of Industry continues its efforts to foster a conducive business environment for manufacturers investing in Indonesia. One of the strategic steps towards this goal is the development of the electronics industry in the country, aimed at enhancing its competitiveness. This vision is realized through the issuance of Minister of Industry Regulation Number 6 of 2024 concerning the Procedure for Issuing Technical Considerations for the Import of Electronic Products.

“This regulation represents a concrete effort by the government to create investment certainty for industry players in Indonesia, particularly in the production of electronic products domestically,” stated Priyadi Arie Nugroho, Director of Electronics and Telematics Industry (IET) at the Ministry of Industry, in Jakarta on Monday (4/8).

The regulation governing import flows is a follow-up to the President's directive regarding the trade balance of electronic products in 2023, which still showed a deficit. Therefore, based on proposals and the domestic industry's capabilities, Ministerial Regulation 6/2024 sets out regulations for 139 electronic tariff lines. Of these, 78 tariff lines require Import Approvals (PI) and Surveyor Reports (LS), while the remaining 61 tariff lines only necessitate LS.

Among the products covered by the 78 tariff lines are air conditioners, televisions, washing machines, refrigerators, fiber optic cables, laptops, and various other electronic products, according to Priyadi.

Priyadi further emphasized that the regulation does not signify government opposition to imports but rather aims to maintain a conducive business climate for domestically manufactured products. He highlighted the potential for domestic manufacturers to seize the demand for electronic products, thereby enhancing their production capacity and diversifying their product range. For Electronic Manufacturing Services (EMS) or Original Equipment Manufacturers (OEMs), the regulation presents an opportunity to collaborate with international brand holders who do not yet have production lines in Indonesia.

Moreover, Priyadi pointed out that the regulation provides importers with certainty regarding the distribution and sale of imported goods domestically.

Referring to Ministerial Regulation 6/2024, it is expected that the imposition of import regulations will increase the utilization of domestic AC production. Priyadi cited data from SIINas in 2023, which indicated a production capacity of 2.7 million units for AC products, with actual production realization standing at around 1.2 million units, resulting in a utilization rate of only 43 percent. However, despite this, AC imports in 2023 reached 3.8 million units according to Surveyor Reports.

Therefore, it is hoped that import regulations will boost the utilization of domestic AC production. "The regulation has been well received by domestic electronic manufacturers, as evidenced by several official letters received by the government from domestic manufacturer associations expressing their support," Priyadi concluded.

Daniel Suhardiman, Secretary General of the Electronic Entrepreneurs Association (Gabel), expressed that the issuance of Ministerial Regulation 6/2024 must be seen from the perspective of national interests. Therefore, Gabel, as an association of electronic manufacturers, welcomes the regulation and hopes that it will be implemented consistently.

"While import trade regulations may address some issues, challenges such as the weak downstream industry in terms of raw material and core component manufacturing still exist," Daniel explained.

However, Daniel emphasized that downstream activities would not occur without the growth of upstream industries to achieve economic scale for downstream industries. Hence, with the issuance of Ministerial Regulation 6/2024, Gabel hopes that upstream industries will grow rapidly, thereby triggering integrated downstream activities.

"Of course, the government faces significant challenges in implementing this regulation, and it requires the support and input of all stakeholders to ensure smooth execution. If there are operational issues, they should be addressed collectively, without questioning the essence of the regulation," Daniel added.

Chairman of the Indonesian Cable Factory Association (APKABEL), Noval Jamalullail, stated that the implementation of Ministerial Regulation 6/2024 is the best solution to support the domestic cable industry, especially fiber optic cable manufacturers.

"This will revive domestic fiber optic cable production to actively meet the national demand for building telecommunication infrastructure and internet networks across Indonesia," he explained.

Furthermore, according to Noval, Ministerial Regulation offers new hope for the development of the domestic fiber optic cable industry. Currently, Indonesia's capacity and capability in the fiber optic cable industry are substantial, capable of producing all types of fiber optic cables for various purposes, including indoor, aerial, underground, duct, and submarine cables. The total capacity reaches 15 million ScKm (Kmfiber).

Despite substantial capacity, the utilization rate remains below 50 percent of installed capacity. This is despite several global investors from China, Korea, and Japan establishing fiber optic cable manufacturing facilities in Indonesia over the past eight years. However, Noval emphasized that all fiber optic cable processes, including coloring, tubing, stranding, armoring, and sheathing or jacketing, are entirely performed domestically.

"The production of fiber optic cables involves a unified process, eliminating the need for assembling processes," Noval concluded.