The Indonesian Economists Alliance, consisting of 400 economists, issued demands to state administrators in a statement titled “Seven Urgent Economic Demands” on Tuesday, 10 September 2025. The statement urged the government to carry out a comprehensive evaluation and relaxation of the Domestic Component Level (TKDN) policy in sectors that do not yet have quality local suppliers, and to develop local industry by strengthening investment in human resources, technology transfer and infrastructure development.
The alliance also said that a rigid TKDN policy raises production costs and has not yet produced quality products, eroding the competitiveness of Indonesian products in global markets. A rigid TKDN policy also creates loopholes for corruption in licensing and procurement. The alliance further described the negative impact of the TKDN policy on the investment climate, consumer prices, industrial competitiveness, resource allocation, potential violations of WTO rules, Indonesia's international trade and Indonesia's access to global markets.
The economists' alliance also referred to research by ERIA (2023) and CSIS (2023) describing how applying TKDN worsens the investment climate, lowers industrial productivity, burdens consumers with higher prices, reduces industrial competitiveness and causes distortions.
Responding to the demands of the 400 economists in the Indonesian Economists Alliance, Kemenperin said it has already done what the economists demand through the TKDN policy reform. The TKDN reform is mainly aimed at a procedure for calculating TKDN scores that is easier, cheaper and faster, and of course not rigid, as the economists' alliance demands.
“The Minister of Industry, Agus Gumiwang Kartasasmita, and his team at Kemenperin have evaluated and reformed the TKDN policy. The evaluation and reform were based on the voices of the public, industry, investors, economists and everyone involved in the industrial ecosystem, especially industries producing TKDN-certified products. The result is a draft Ministerial Regulation on TKDN Calculation Procedures that pays close attention to the needs and interests of local industry, especially small and medium industries, in obtaining TKDN certificates, so that it can increase the competitiveness of industrial companies and their products, employ more workers, attract domestic and foreign investment and, most importantly, strengthen the domestic industrial ecosystem and supply chains,” Febri said in Jakarta on Wednesday (10/9).
Febri further explained that Kemenperin undertook the TKDN reform because the old regulation, which had been in force for more than a decade, needed to be evaluated and adjusted to the current needs of domestic industry, especially in responding to domestic demand from government or household needs for certain manufactured products. The TKDN reform emphasizes the principles of being cheap, easy, fast and incentive-based.
“Whereas the certification process used to take more than 20 working days at relatively high cost, under the new scheme certification can be completed in just 10 working days. For small industries, it even takes just three days through the self-declare mechanism,” he said. The reform also introduces additional incentives, such as a minimum TKDN value of 25% for companies that invest and employ local workers, and an extra 20% for those that carry out research and development.
“In this way, TKDN calculation is no longer just an administrative obligation, but becomes a reward system that encourages innovation and investment,” he added.
Through the TKDN reform, Febri continued, Kemenperin is actually paying special attention to small and medium industry (SMI) players. SMIs now have easier access to TKDN certification, including through the self-declare scheme valid for five years.
“With the self-declare method, SMIs can obtain TKDN certificates faster at very low cost, and can even achieve a TKDN value of more than 40% without the administrative complexity of before. This is a form of affirmative action so that SMIs can stand on an equal footing with medium and large industries,” he said.
In addition, information on TKDN values is now more transparent because it can be seen on product labels and packaging. This makes it easier for consumers and government institutions to ensure SMI products are competitive and meet procurement requirements. “We hope more and more SMIs will use this facility, so that their products are not only competitive in local markets, but also able to penetrate large-scale industrial supply chains,” Febri added.
Regarding sectoral TKDN, such as TKDN for HKT, which is considered rigid and an obstacle to investment, we can say that Kemenperin only sets the policy on procedures for calculating and meeting TKDN for products in sectors whose TKDN threshold has been set by other Ministries/Agencies. The regulation on TKDN calculation procedures is also adjusted to the needs and interests of industry and investors in those sectors.
“In fact, foreign investors, especially investors or businesspeople who have not yet been able to build production facilities in Indonesia, hope the sectoral TKDN policy will remain in force. Their reason is that the sectoral TKDN policy helps them compete in the domestic market. So they also hope the sectoral TKDN policy will be maintained, especially for domestic industrial products targeting or meeting household and private-sector needs. And we have also evaluated and improved the quality of these regulations in the TKDN policy reform,” Febri said.
According to Febri, the TKDN reform also arose from evaluating various obstacles businesses have faced, from the high cost of obtaining certificates and validity periods that were too short to the phenomenon of TKDN washing by irresponsible parties. In addition, the certification process is carried out digitally, minimizing contact between verifiers and TKDN certificate applicants.
“Under the new regulation, TKDN certificates are now valid for up to five years with stricter supervision mechanisms. We have also formed a Supervisory Team under the Inspectorate General to ensure there is no more manipulation of certification or fraud that creates loopholes for corruption, whether by businesses or verification bodies,” he explained.
Febri stressed that this reform is in line with the direction of Minister of Industry Agus Gumiwang Kartasasmita, who places TKDN as an important pillar in realizing President Prabowo Subianto's Asta Cita. “The TKDN reform is part of an economic deregulation package to strengthen the foundations of domestic industry, create quality jobs and support national economic self-reliance,” he said.
He added that Kemenperin will continue to promote the benefits of TKDN, especially to small and medium industries, so that more and more local products become competitive and able to meet the needs of domestic and global markets.
“In the end, every rupiah of state spending directed to TKDN-certified products will come back many times over to the Indonesian people, including in the form of employment, industrial growth and a stronger national economy,” Febri concluded.
Source: Press Release of the Ministry of Industry of the Republic of Indonesia