INDONESIA’S CHALLENGES IN MAINTAINING THE IMPLEMENTATION OF THE 4G LTE TKDN POLICY FROM POTENTIAL TRADE DISPUTES WITH WTO MEMBERS

Abstract

The Indonesian government's policy regarding 30% local content requirements on 4G LTE-based smartphones has received sharp attention from the WTO (World Trade Organization). Some WTO members represented by the United States said that the TKDN requirements listed in the Minister of Communications regulation No. 27 of 2015 is not in accordance with the contents of the agreement with TRIMs and violates the principles of free and fair international trade. The objectives of this study is find out the reason of Indonesia Government in implementing TKDN 4G LTE Policy because WTO with TRIMs Agreements also concerning this policy and claimed violating the TRIMs Agreements that causing a potential dispute with WTO. This requirement to meet local content is considered to force 4G LTE-based smartphone manufacturers to relocate their investment to Indonesia and will harm their neighbors. However, the Government of Indonesia is optimistic to implement the TKDN policy to reduce smartphone imports that are increasing and protect the emerging local industry. Implementation of local content policies can reduce smartphone imports according to Ministry of Industry data, in 2013 imports of mobile phones reached 62 million units and dropped to 60 million units in 2014. In 2015 imports fell by around 40% from the previous year, which was about 37 million units. In 2016 cellphone imports decreased by around 36% from the previous year, which indicates that every year Indonesian cellphone imports are declining due to government policies related to local content driven by the process of industrialization and strengthening the national industry and opening up more jobs in the country.