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Industry minister gears up to defend local content requirement
Some experts argue the local content requirement (TKDN) prevents companies from purchasing cheaper material and advanced equipment from other countries, thus limiting their international competitiveness.
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Industry Minister Agus Gumiwang participates in a work meeting with House of Representatives Commission VI on June 2, 2021. (BeritaSatu Photo/Ruht Semiono)
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ndustry Minister Agus Gumiwang Kartasasmita has revealed dissent among cabinet members on whether to keep or abolish the local content requirement (TKDN) policy, which obliges businesses in some sectors to include a minimum portion of local input in products they sell in the country.
While proponents say the TKDN will add value to domestic industries in the long term, opponents argue the rule keeps local companies from purchasing cheaper imported materials and advanced tools, thereby limiting local manufacturers’ international competitiveness.
They want the policy reevaluated.
Agus said another minister during a recent limited cabinet meeting with President Joko “Jokowi” Widodo had floated the idea of eliminating the TKDN, calling it “outdated”, but the industry minister defended the policy, arguing it was driving investment in Indonesia, helped build industrial supply chains and added value to goods made by local manufacturers.
“That’s why I do not understand [why] there is a thought from a minister, [expressed] in a limited meeting, to request the abolition of the TKDN policy,” he said on May 30.
Agus explained that he agreed that the thresholds and procedures of the policy needed to be constantly evaluated. For example, the TKDN for products with sophisticated technology that could not be produced in the country, such as photovoltaic cells, could be reduced.
However, he rejected the idea of entirely abolishing a policy that has drawn the ire of domestic and foreign business groups in the country.
