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Indonesian Chamber of Commerce and Industry


Indonesian Chamber of Commerce and Industry

Strengthening Policy Affirmation to Encourage the Increase of Domestic Products and TKDN

One of the government's efforts to encourage the penetration of domestic industrial growth while building national economic independence is by implementing a Domestic Product purchasing policy using the Domestic Component Level (TKDN) as one of its calculation bases. Various regulations have been issued to realise the increased purchase of domestic products, including through Law Number 3 of 2014 concerning Industry; Government Regulation Number 29 of 2018 concerning Industrial Empowerment, Presidential Regulation Number 12 of 2021 concerning Government Procurement of Goods and Services, and Presidential Instruction Number 2 of 2022 concerning the Acceleration of P3DN and MSMEs in Government Procurement of Goods and Services.

Vice Chairman of Kadin Indonesia for Associations, Wisnu Pettalolo attended the coordination discussion "Strengthening Policy Affirmation to Encourage the Increase of Domestic Products and Domestic Component Level (TKDN) in Indonesia, from the Perspective of the Business World" with the Secretariat of the Presidential Advisory Council on 14 September 2023.

Previously, various regulations have been issued to increase the purchase of domestic products, especially those with high TKDN and produced by MSMEs. The Micro, Small and Medium Enterprises (MSMEs) sector contributes to the national Gross Domestic Product (GDP) by 60.5% and absorbs 96.9% of the total national workforce by 2022.

Meanwhile, the lack of TKDN absorption is suspected because from the side of users who need goods and services, it is indicated that their desire to buy domestic goods and services is still low, not only in terms of technical considerations of the quality of goods, but also considerations of the unpreparedness of domestic goods and service providers to provide maximum after-sales service.

Kadin's meeting with the Secretariat of the Presidential Advisory Council seeks to gather suggestions and recommendations on the implementation of the TKDN policy in Indonesia, and how it impacts the business world, as well as challenges and problems in the TKDN policy for the business world.

The importance of the Government's role for the success of increasing the TKDN of domestic components, including by reinforcing and socialising the amount of TKDN for each industry, increasing TKDN standards for strategic sectors to increase production in the sector.

The government can provide incentives for companies that can produce government needs that have only been through imports, provide easy access for industries to obtain raw / auxiliary materials and local production factors.

On the other hand, Kadin is expected to follow up on the President's directive on 23 August 2022 to accelerate the downstream programme of mining and mineral resources in order to create domestic industrial independence, which prompted Kadin Indonesia to form the Working Group for Acceleration of Industrial Downstream.

Another recommendation is to increase Kadin's participation in encouraging the TKDN verification process, especially those carried out by small and medium scale industries.

In addition, the TKDN determination mechanism should be made partial. Materials alone and services alone. If it is simulated between services and materials as the final value, it can create problems. Sometimes there are different visions between contractors and assessors regarding the determination of TKDN only for materials. The TKDN value of goods/materials is seen from the capacity of the existing manufacturing industry in Indonesia.

Kadin's view of the Indonesian Industrial Development System is how the government increases MSMEs to SMEs, SMEs to SMIs so that they become basic industries. The upstream must be held and this policy is in the Ministry of Cooperatives, so that the industry will continue to grow.

Some of the challenges encountered at this time include the relatively low interest of domestic industry players to participate in TKDN certification, domestic production costs that are still less competitive than imports, arrangements in the procurement of suppliers that are not in accordance with e-catalogue or the availability of goods in certain warehouse locations.

In the CEPA negotiations with the European Union, there is a view from the European Union to remove TKDN and e-catalogue. This can be conveyed to the Government, especially the Director General of Foreign Trade, to negotiate to maintain TKDN and E catalogue with all the shortcomings that still occur in Indonesia.

Input from Kadin and Apindo will be reported to members of the Presidential Advisory Council in the form of a police paper which will later be submitted to the President.

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Indonesian Chamber of Commerce and Industry