Indonesia does not require every industrial product sold in the country to meet a minimum local content level. Local content requirements become mandatory when government procurement rules or sector-specific regulations require domestic products, meaning an imported product can be legal to sell in Indonesia but restricted from certain government contracts.
When Government Procurement Triggers Local Content Requirements
Under Indonesia’s current government procurement rules, government bodies covered by the rules must prioritize domestic products when making purchases.
The rules give different categories of domestic products different levels of priority. Products with a combined local content score, known as TKDN, and company benefit score, known as Bobot Manfaat Perusahaan (BMP), of at least 40% receive first priority. They are followed by domestic products with TKDN of at least 25%, domestic products with TKDN below 25%, and domestic products without TKDN certification that are registered in Indonesia’s National Industrial Information System (SIINas).
TKDN of at least 25% and a combined TKDN-BMP score of at least 40% remain important thresholds for determining when domestic products must be used. The rules also set a wider priority order that includes domestic products below these levels.
Does TKDN affect your target customers? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
An imported product can generally be considered only when available domestic products cannot meet the government’s procurement need, subject to the required approval for using imports. Where the rules require an available domestic product to be used, a lower price or stronger technical specification does not by itself give the buyer freedom to select an imported alternative.
TKDN Does Not Determine Whether a Product Can Be Imported
TKDN certification and import legality are separate issues.
An industrial product may be legally imported and sold to customers in Indonesia without meeting a procurement TKDN threshold, provided the importer and product comply with the applicable import and licensing requirements.
The position changes when the customer is making a government purchase where domestic-product rules apply. An imported product that can be sold in the private market may not be available for selection when suitable domestic products can meet the government’s requirements.
Sector Rules Can Create Separate Local Content Requirements
Government procurement is not the only source of local content requirements. Some industries have separate rules that set TKDN or other domestic-content requirements for particular products or activities.
These rules can differ from the general government procurement framework. A sector may have its own minimum TKDN level, certification requirement, or rules on when a product can be used.
A product can face a local content requirement under a sector rule even when it is not being sold through a standard government tender.
When TKDN Certification Becomes Necessary
TKDN certification provides evidence of how much qualifying Indonesian content a product contains. TKDN calculation and certification are currently governed by Ministry of Industry Regulation No. 35 of 2025.
For a foreign manufacturer, certification becomes commercially necessary when the company needs to prove that its locally produced product meets the local content requirements for a government purchase or another transaction where TKDN rules apply.
Certification by itself does not make an imported product domestic. The product must have qualifying Indonesian content under the applicable TKDN calculation rules.
When a Foreign Manufacturer Needs to Localize Production
A company selling imported industrial equipment to private factories, distributors, or other buyers outside a mandatory domestic-product regime may be able to continue using an import-based model.
The calculation changes when a significant share of the company’s target customers is subject to TKDN requirements. If imported products cannot access those contracts, the manufacturer must determine whether Indonesian production or other qualifying local activity can produce the required TKDN score.
Planning localization for TKDN purposes? Email MAP Resources Indonesia at info@mapresourcesindonesia.com
The decision can be made at product level. A manufacturer may need domestic content for products sold to customers subject to TKDN requirements while continuing to import other product lines for customers that are not.
Managing TKDN Requirements with MAP Resources Indonesia
MAP Resources Indonesia helps foreign investors assess whether TKDN requirements apply to their industrial products and whether localization is needed to access their target customers. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
