ABSTRACT
Local content requirements (LCRs) are one of the policy measures used by many countries around the globe, including Indonesia, to protect and support their strategic sectors and to create local jobs. However, the use of LCRs is often found to be inconsistent with a country’s international trade and investment commitments - disguised as unjustifiable discrimination of trade or investment. Our chapter explores whether Indonesian regulations in certain sectors breach its international commitments in the World Trade Organization Agreements, its Free Trade Agreements, and its International Investment Agreements. Based on our assessment, it is important to ensure consistency of domestic laws and regulations with Indonesia’s international commitments. We suggest that the government of Indonesia should carefully consider the potential economic impacts of LCRs and explore alternative policy schemes in pursuing improvement in its domestic value added.
