JAKARTA: New import restrictions are roiling supply chains and causing concern among companies including foreign investors in the automotive and electronic industries, who are warning of stock shortages and temporary production stoppages.
The curbs affecting finished goods, as well as intermediate goods and raw materials categorised under 2,400 harmonised system codes across 18 sectors, have set off alarm bells among businesses and prompted business chambers to request a reassessment.
“We completely support the regulation’s objective to block illegal imports, but we need to find a much more workable system,” American Chamber of Commerce in Indonesia (AmCham) managing director Lydia Ruddy told The Jakarta Post last Thursday.
While the policy applied to many sectors, “it has become a huge problem for many foreign companies especially in textiles and footwear, electronics, health supplements, cosmetics and tyres,” she added.
Companies reliant on imported products with no suitable domestic alternatives would be hurt, she said, noting that some AmCham member firms were unable to conduct necessary imports and were having permits denied.
If the issue persists, “this will dampen investment appetite”, Ruddy warned .
The government argues that the new rules, based on Trade Ministry regulations No. 36/2023 and No. 3/2024 as well as Industry Ministry Regulation No. 6/2024, are aimed at curtailing illegal imports and promoting domestic production, but businesses said they disrupt operations of many companies connected to global supply chains.
Members of the foreign business community who requested anonymity told the Post that multinational companies have expressed concern over the new rules, citing significant cuts to import quotas, delays in permit issuance and a cumbersome import-licencing system.
They estimate potential losses from the import restrictions due to production stoppages and halted exports to be in the tens of millions of US dollars. Other companies have also raised the urgency of the matter.
Supplies of Apple MacBook laptops in Indonesia could dry up by the end of April, while other goods, including Michelin tyres and chemicals shipped from Europe will face similar depletion risks in the coming months, Bloomberg reported last Friday, citing unnamed sources.
When contacted by the Post, a representative from Apple declined to comment, while Michelin representatives did not immediately respond.
Lee Kang Hyun, chairman of the South Korean Chamber of Commerce in Indonesia, said last Wednesday that, while businesses understand the government’s motivation for responding to the negative impacts of imports amid the growth of local industries, only a few companies had received import approval.
Most South Korean companies had refrained from requesting import approvals since February, due to concerns about rejections and shipping-related issues arising from the new regulations, he pointed out.
Despite urgently filing for approval in March, these companies had yet to get the green light for imports.
“A few of our companies reported they are on the verge of production stoppages due to running out of stock this month,” Lee pointed out, without naming names.
“Financial losses and supply chain disruption are inevitable with the delays in the import licence application system.”
Donna Priadi, executive board member of the European Business Chamber of Commerce in Indonesia said the regulations were enforced “indiscriminately”, regardless of “industrial-sector readiness”.
A lack of readiness, she added, caused problems for downstream industries reliant on imported raw materials and the upstream sector that was underdeveloped and unable to provide viable domestic alternatives, and as such they were “forced” to source materials at higher costs.
Similarly, British Chamber of Commerce in Indonesia chairman Chris Wren raised concern about the “hurry” to implement the policy without adequate evaluation and time to receive input on shortcomings, leading to “serious supply chain shortages and commercial implications”.
This situation added to the growing risk of perceptions regarding the “ease of doing business” in Indonesia, he said. Government officials denied allegations of holding back import permits.
Trade Ministry foreign trade director-general Budi Santoso told the Post last Friday: “We’re not holding back import permits, including those for electronics.”
Separately, Industry Ministry spokesperson Ronggolawe Sahuri said technical rules on raw materials for industrial purposes had been stipulated, without specifying further details on other sectors.
“We have processed permits for some, while other applications were returned to businesses for not meeting the required criteria and needing additional information,” ” Ronggolawe said last Friday. — The Jakarta Post/ANN
