Tim Cook made a diplomatic comment about the possibility of Apple manufacturing in Indonesia, after the country’s president pressed him on the issue. The country is an important market for Apple, as the world’s 4th most populous country after China, India, and the US.
Indonesia is one of a growing number of countries to use the threat of import tariffs as a way to encourage foreign companies to invest in the local economy, and Apple has so far used an indirect method to escape these …
Threats of import tariffs
Threatening to impose import tariffs on expensive consumer products is an increasingly common tactic by countries to get some financial benefit from imports, which would otherwise see money flow out of the country to overseas companies like Apple.
The usual mechanism is known as a local content requirement (LCR), which says that a company must produce some of its products locally – or at least invest in the local economy.
India has been particularly successful in using this approach, through a program known as Made in India. Apple now uses the country as its second-largest manufacturing hub, after China. It was only last year that the company finally met the requirements to be allowed to open its first Apple Store in the country. Other countries, like Indonesia, have been encouraged by this success in developing their own schemes.
Apple uses developer academies to meet the terms
Indonesia has a 35% local requirement, but Apple has been allowed to meet this requirement by investing in developer academies. This is the reason that the company yesterday announced its fourth academy in the country, with places open to anyone in the world – to bring even more money into the local economy.
But president pressing for manufacturing
However, Indonesia’s president is pressing for Apple to establish manufacturing plants in the country too, as Reuters reports.
Apple chief executive Tim Cook arrived in Jakarta on Tuesday after visiting Vietnam. He met with Jokowi, as the president is popularly known, and will inaugurate its fourth developer academy on the island of Bali.
“We talked about the president’s desire to see manufacturing in the country, and it is something that we will look at,” Cook told reporters after the meeting.
Indonesia’s industry minister, Agus Gumiwang Kartasasmita, suggested the country would be content with component manufacturing, rather than assembling Apple devices.
“We will discuss how Apple’s facility in Indonesia could become a global supply chain,” he said, adding that the government said that even if Apple didn’t built a factory, it could partner with Indonesian companies to obtain components.
Its economy has also modernised dramatically in recent years, being reclassified from an agricultural to industrialised country, leading to growing demand for consumer electronics.
Photo by Dino Januarsa on Unsplash
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