We believe that having competitive local industry is a critical driver for countries to emerge as winners post-crisis, enabling them to achieve economic growth targets, create millions of jobs, increase supply chain resilience, and improve the nation’s global competitiveness.

In order to catalyze these efforts, Indonesia recently increased its local procurement (TKDN) targets from 44 percent in 2021 to 50 percent by 2024, looking to unlock benefits to economic performance and employment.

It is equally important for the country to focus on achieving sustainable benefits through national industry, rather than short-term targets, which may trigger higher costs and reduce the quality of goods. In Brazil for example, strict local content delivered some success, but ultimately resulted in a cost premium of up to 30 percent.

Capturing the maximum value of this transition not only requires strong participation by local industries, but also focused efforts to ensure local vendors reach global competitiveness as a value driver in Indonesia’s business ecosystem.

One option is to accelerate capabilities through collaborating with strategic partners. In many categories, boosting local industry will be extremely costly without these partnership ventures. For example, a partnership venture to develop smart metering in Indonesia would reduce imports and create sizable cost saving opportunities.

Saudi Arabia, in partnership with its national oil company, developed a road map toward a low-carbon economy with local vendor-development programs as a core pillar. This approach allowed the oil company to achieve 80 percent locally supplied content, with US$ 2 billion spent, while supporting the training of over 350,000 professionals to boost employment and add value to the local labor market.

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