Plans for a Foxconn factory in Indonesia have hit a snag after the AFP reported that parent company Hon Hai has failed to reach an agreement with the national government to start work as expected.

Hon Hai’s investment in Indonesia, speculated to be worth up to $10 billion, was expected kick off before 2013 with work commencing on a site this month. Now, Taiwan’s Central News Agency is reporting that difficulties with Indonesian regulations on imported mobile phones and assurances against counterfeit devices have clouded the plans with uncertainty.

In a bid to get discussions back on track, Indonesia’s trade minister, Gita Wirjawan, is reportedly set to visit Hon Hai chairman Terry Gou in Taiwan this month, as the government looks to secure the significant investment from the manufacturer, which works with Apple, Microsoft, Sony, Nokia and others.

Hon Hai previously confirmed that it is looking to plough around $1 billion dollars into the initiative to create mobile-phone producing factories in Indonesia, which has a population of more than 240 million. However, government officials have gone on record with claims that the total investment could reach $10 billion and see Hon Hai create a Silicon Valley-style startup hub in the country.

The claims were not substantiated by Hon Hai and, given that its focus is manufacturing, such a hub is not an obvious choice for the company. Officials in Indonesia remain keen to attract the investment and raise its profile as a location for large firms.

A commitment from Hon Hai is sure to yield big benefits for Indonesia and, indeed, Samsung is reportedly among the other companies that is considering plans for a production base in the Southeast Asian country.

Hon Hai has other pending projects and its proposed investment in Sharp, another key deal, remains on hold as it evaluates a deal to purchase around 10 percent of the Japanese tech struggler. Qualcomm’s recent $120 million investment in Sharp may have boosted the potential for a deal and, just yesterday, Gou claimed it is still on course for completion.

Hon Hai has existing production bases in China and Brazil and this week it announced plans to expand into North America.

Image via Flickr / Chris Bulle