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Govt bends local content rule to lowest level to spur domestic buys
Under the new rule introduced late last month, state institutions are permitted to buy domestic products with at least 25 percent local content instead of 40 percent previously.
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Industry Minister Agus Gumiwang Kartasasmita gestures on Jan. 7, 2025, while speaking to reporters in front of his offices in Setiabudi, South Jakarta.
(JP/Ruth Dea Juwita)
T
he government has loosened its local content requirement for state procurement in a bid to encourage spending on locally made products under Presidential Regulation No. 46/2025, introduced on April 30 as the second amendment to the 2018 regulation on state procurement.
The new rule allows state agencies and institutions to buy homegrown products that have local content of at least 25 percent, the lowest level possible.
Ministries, agencies and regional administrations were previously required to prioritize goods composed of at least 40 percent local content. This requirement could also be met by making certain economic “contributions”, such as supporting an empowerment program for small and medium enterprises (SMEs) or investing a large sum of domestic capital.
“This regulation is a more affirmative, aggressive and proactive step […] to safeguard domestic industries and expand the market for locally made goods,” Industry Minister Agus Gumiwang Kartasasmita said on Tuesday.
Read also: Industry minister admits legal loopholes enable transshipment through RI
Agus highlighted Article 66 in the new rule, which emphasizes an obligation for government institutions to utilize domestic products, including goods that involved local designs and engineering services.
The revised rule allows for the purchase of goods with a minimum local content of 25 percent, on the condition that no domestic manufacturers can produce a similar product with 40 percent local content or at a sufficient volume to offer a lower price.
