Global Trade Alert

On 8 May 2009, the WTO communicationNo. G/TRIMS/W/61 was circulated at the request of the Delegation of the European Communities and the United States who are concerned about existing and new measures applicable to investment in Indonesia's telecommunications sector.

On 17 September 2009, the Indonesian Delegation at the WTO responded with the WTO communication No. G/TRIMS/W/63 and clarified the following points:

1)The concerned Degree No. 7 Year 2009 is still being formulated (it is not yet implemented!).

2)The Decree is not intended to regulate trade in goods.  Instead, this regulation is a legal instrument in supporting the Government programme to utilize certain part of radio spectrum for implementing Broadband Wireless Access (BWA) system.

3)The Government selects the operator(s) through bidding process and winner(s) of the bid shall fulfill certain requirements to use their capital expenditures (CAPEX) and their operational expenditures (OPEX) which is written in the regulation as local content.

4)Failing to meet the local requirement (CAPEX and OPEX) is liable to penalties.

5)The local content (CAPEX and OPEX) must be increased from 30-40% to 50% in five years.

6)Domestic and foreign providers operating in the Indonesian territory are treated equally.

The April 2010 report of the U.S. Trade Representative under section 1377 of U.S. trade law (Review of Telecommunications Trade Agreements) states (without mentioning the Decree Number) that the following Indonesian regulations have been implemented:

1)In January 2009, a regulation stating that telecommunications providers applying for spectrum to supply wireless broadband services must adhere to local content requirements of 30-50 percent.

2)In October 2009, the Ministry of Communications and Informatics issued a decree requiring all telecommunications operators to expend a minimum percentage of their total capital expenditures for network development on locally sourced components or services.

GTA has not found official evidence for the implementation of the above regulations.

If implemented, the new local requirements seriously disadvantage foreign telecommunications equipment and service suppliers.