G/TRIMS/W/148
26 March 2015
(15-1702)  Page: 1/2
Committee on Trade-Related Investment Measures  Original: English
 
INDONESIA – LOCAL CONTENT REQUIREMENTS FOR 4G LTE 
EQUIPMENT AND MOBILE DEVICES 
QUESTIONS FROM THE UNITED STATES 
The following communication, dated 25 March 2015, is being circulated at the request of the 
Delegation of the United States. 
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 In early January 2015, Indonesia's Ministry of Communication and Information Technology (KOMINFO) issued two draft regulations related to mandatory local content requirements for the 
4G LTE spectrum, affecting both the networks and the devices that use the networks. The two 
KOMINFO drafts were: Technical Requirements for Equipment and Facilities for Purpose of Long-
Term Evolution Time Division Duplexing (Lte T dd) and Long-Term Evolution Frequency Division 
Duplexing (Lte Fdd) Broadband Services  and Procedure for Calculation of Local Content in 
Telecommunication Devices . These regulations appear to buil d on Ministry of Industry (MOI) 
Regulation 69/2014 on the Conditions and Method of Calculating the Value of the Land Component 
Level Role in Electronic and Telematics Industry , adopted in September 2014.  
 These measures seem to be part of Indonesia's broader plans to move up the value-chain of manufactured products by requiring companies investing in Indonesia to develop domestic 
manufacturing. As we understand the draft regulations, products using the 4G LTE spectrum – 
including LTE smart phones – that are sold on the Indonesian market would have to meet certain specifications for local content. LTE time division duplexing (TDD) devices would have to meet a 
threshold of 30% local content upon issuance of the regulation, with the threshold increasing to 
50% 5 years thereafter. For LTE frequency division duplexing (FDD) devices, the initial local content threshold would be 20%, increasing to 30 % within two years. The draft regulations also 
seem to indicate that companies must meet th e local content requirement from 20% intangible 
value (IPR, R&D) and 80% tangible local content. Although this provision is not entirely clear, it appears that in order to fulfil the local content requirement an investor must use local goods in a manufacturing process.  
 
In addition, according to our understanding, not on ly do the draft regulations appear to impose 
local content requirements benefitting investors who use Indonesian inputs, they also appear to 
make it significantly easier for Indonesian-owned companies to meet those local content 
thresholds than foreign-owned companies. Accordin g to the draft regulations, local content values 
w i l l  b e  w e i g h t e d  b o t h  b y  w h o  p r o d u c e s  t h e  p r oduct (domestic versus foreign ownership) and 
where the product is produced (domestic versus manufacturing). For instance, an Indonesian 
company manufacturing in Indonesia gets 100% cr edit on the manufacturing value of Indonesian 
equipment and components that go into a 4G-e nabled device; however, a similarly-situated 
foreign-owned firm manufacturing in Indonesia would get credit for only 75% of the value.  
 
Further, a manufacturer using non-Indonesian inputs can nevertheless get credit for local content, 
but if it is 100% owned by Indonesians. Likewise, a joint venture between foreign and Indonesian 
partners can receive "local" manufacturing value credit even if using non-Indonesian inputs, on a sliding-scale based on the percentage Indonesian ownership in the JV. Thus, an Indonesian company using non-Indonesian inputs gets "local content" credit for 75% of the manufacturing 
value; a 50/50 JV with one Indonesian partner, using non-Indonesian inputs, gets "local content" 
credit for 50% of the manufacturing value; a fore ign firm using foreign inputs gets no credit.  
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  Finally, we also understand that, beyond the lo cal content requirement, the regulations may 
provide an additional tax incentive. This incentive seems to provide an additional financial benefit to companies that use domestic content, rather than foreign content, over and above the minimum local content requirement imposed by the regulations. 
 
MOI 69/2014 also outlines the process for companies to obtain a "certificate of production", which 
includes an assessment of the "production aspects" of a company, as well as the calculation of the 
value of local content. The assessment must be carried out by the MOI Directorate for Electronic 
and Telecommunication Industry or an independ ent surveyor appointed by the Minister of 
Industry.  
While the MOI regulation has been adopted, the KO MINFO regulations are still in draft form.  As 
we understand it, although the decision to require local content in 4G-enabled devices has been made, the way in which local content value is calculated and how quickly the requirements will be 
implemented are still up for discussion.  
 The United States is very concerned about th ese regulations, and seeks to understand their 
requirements and their current status. 
 Questions for Indonesia 
 
1. Is our understanding above of the two regulations correct? Are there aspects of the 
regulations we have misunderstood and/or omitted? 
 
2. How is credit towards local content calculated for a foreign company when it manufactures a 
4G enabled device in Indonesia using Indonesian equipment or inputs? How is credit towards local content calculated for a foreign company when it manufactures a 4G enabled device in 
Indonesia using foreign equipment or inputs?  
 3. What would be the consequences for a foreign company if it were to sell 4G enabled 
equipment in Indonesia that does not meet the local content threshold? 
 
4. Would Indonesia please describe the tax incentive that a foreign investor may receive if it 
exceeds the minimum local content thresholds? Under what conditions can manufacturers 
benefit from that incentive? Is the incentive the same for Indonesian-owed manufacturers as 
it is for foreign-owned manufacturers? 
 
5. When does Indonesia anticipate that KOMINFO will finalize the regulations? 
 
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