Indonesia just walked back import restrictions on a swathe of products following backlash from companies and consumers, in a cautionary tale for countries resorting to protectionist policies to produce more goods onshore.
The rules, which were implemented just in March, had quickly choked supply chains in Southeast Asia’s largest economy, with more than 26,000 containers piling up in major ports because of the additional permits and lengthier inspections for importers. Apple MacBooks, Michelin tires and chemicals were just among some of the goods running low due to the curbs.
The rollback shows the limits of President Joko Widodo’s Made-in-Indonesia campaign, a policy gaining traction among other nations as the US ramps up its trade war with China yet again. Australia plans to invest A$1 billion ($667 million) in solar panel manufacturing, while India plans to subsidize some onshore electric vehicle production, both to reduce reliance on imports.
To be sure, resource-rich Indonesia has enjoyed relative success in wielding export bans on raw ores to get companies to refine more metals onshore. Hyundai Motor and LG Energy Solution are jointly building a battery plant, while a unit of Tsingshan Holding Group plans to follow suit. EV makers BYD and VinFast Auto are also planning investments in production facilities, bolstering the nation’s bid to climb up the supply chain.
But Southeast Asia’s largest economy doesn’t have the same comparative advantage in manufacturing consumer goods, electronics or chemicals. The import rules also inadvertently hit the nation’s export sector, such as wheat flour producers that source their fortifying pre-mixes abroad, and local factories in need of imported components to make washing machines and televisions.