Indonesia Attempts to Cut Service for ‘Illegal’ Cell Phones

A security guard at the Surakarta Palace in the Central Java town of Solo talks over his cell phone in this June 5, 2013 file photo. (JG Photo/Ali Lutfi)

A security guard at the Surakarta Palace in the Central Java town of Solo talks over his cell phone in this June 5, 2013 file photo. (JG Photo/Ali Lutfi)

A controversial plan to curb cell phone smuggling could cut service for millions of Indonesians using “illegal” unregistered phones.

Trade Minister Gita Wirjawan floated the plan in a meeting with telecommunications firms on Wednesday, stating that nearly one-third of the cell phones currently operating in Indonesia were unregistered. The ministry has taken an aggressive stance on technology smuggling in recent months, targeting stalls throughout Jakarta selling unlicensed Apple and BlackBerry products.

All tech products sold in Indonesia need to receive a permit from the Trade Ministry and are subject to a 10-percent value-added tax. Customers purchasing cell phones face additional costs, including an often-ignored Rp 500,000 ($50) registration fee instituted by a 2005 Ministry of Trade decree.

Nearly 70 million unregistered cell phones are currently in use in Indonesia, Gita said. Many of the phones were smuggled into the country through Batam, Riau, circumventing the ministry’s registration fees.

It’s a problem that cost the state trillions of rupiah in losses to date, Gita said. And it’s one the ministry is keen to tackle.

“If 70 million cell phones are illegal and the registration fee is Rp 500,000-per-unit, then the state should have earned Rp 35 trillion,” he said. “[And that] figure doesn’t include the value-added tax.”

Gita has a simple solution to the problem: turn the illegal phones off.

Under a draft regulation currently in discussion, all cell phones with unregistered International Mobile Station Equipment Identity (IMEI) codes would stop operating after a specified date.

Customers can check their IMEI code by typing *#06# into their phone.

What they can’t do is check to see whether the number was registered with the ministry or attempt to register the phone themselves.

Ministry of Communication and Information spokesman Gatot S. Dewa Broto said the regulation was still in the planning stages.

“We’re still discussing this IMEI registration [plan] with operators,” Gatot said. “We don’t want this to burden customers and cause them to panic.”

All customers using prepaid telecommunication services were required to show their ID at the time of purchase, Gatot said. The vender was then supposed to enter the information and apply the registration fee.

But in many cases these steps were either ignored or improperly completed.

Gatot said that his own phone lacked the proper information. Instead of listing “Gatot Dewa Broto” as the registered user, his cell phone listed a random combination of letters, he said.

The Ministry of Communication and Information will phase the regulation in over a one-year transitional period if it is approved, he said.

“At the moment there is not yet a clear policy,” he said. “It is only conceptual.”

The Cell Phone Importer and Business Association (Aspiteg) has pushed for regulation that only affects new cell phones.

But the plan could still prove to be a tough sell in a nation with more cell phones than people.

Cell phone ownership in Indonesia has rapidly grown since 2005 when only 30 percent of the nation owned a mobile phone. By 2012, ownership had more than doubled with 62.7 percent of the population owning at least one cell phone, making the nation the fourth-largest mobile market in the world.

The proliferation of cheap plastic cell phones made much of this growth possible. While smartphones made by Samsung and BlackBerry may seem ubiquitous in Jakarta, less than half of the nation’s users have internet access on their phone despite data plans that cost less than Rp 49,000-a-month.

Mid-market malls like ITC Kuningan, in Central Jakarta, devote entire floors to stalls selling cell phones and tablets, including low-cost options that retail for less than Rp 250,000. The Ministry of Trade has warned that the malls are rife with smuggled and counterfeit goods, but lax enforcement has allowed the issue to persist.

There are few ways for a customer to determine whether a phone has been smuggled into the country and it is unclear who, the customer or the vender, is responsible for registering the phone.

It also remains to be seen whether mobile phone users will agree to pay nearly double the price of their phone in fees to the Ministry of Trade.

But mobile phone importers assured one thing: no one is going to be happy if their phone stops working.

“If the cell phones consumers use suddenly go off because they haven’t registered their IMEI, surely they’ll panic and get angry with the government,” said Ali Cendrawa, the head of Aspiteg.

Investor Daily


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