The Local Content Requirement (TKDN) regulation for telecommunications devices in Indonesia has been in effect for years. Despite this, the mandated minimum level for local components in products has remained around 30% from year to year.
The TKDN policy was introduced in 2015 under the Ministry of Communication and Information Technology Regulation No. 27/2015, supported by the Ministry of Industry’s regulations. Initially, the local component threshold started at 20% in 2016 and then increased to 30% in 2017. By 2021, the requirement was raised to a minimum of 35% for telecommunications devices such as 4G and 5G equipment, as defined in Ministerial Regulation No. 13 of 2021. This regulation is still in force as of 2026.
Challenges in Implementing TKDN
Experts argue that while the TKDN policy aims to boost domestic industry involvement, the practical implementation has not significantly improved the local content ratio. Aryo Meidianto, a gadget analyst, points out that many manufacturers fulfill TKDN requirements superficially. "Often, the only local elements counted are packaging boxes or Indonesian-made applications, which users do not necessarily value," he explained.
Aryo emphasized the need for a balanced and transparent TKDN process, stating that the procedures must be simpler to avoid long bureaucratic delays. He also highlighted that local content can stem from hardware components, software, or investments, and all aspects should be considered fairly across all smartphone vendors entering the Indonesian market.
Many brands have established assembly plants in Indonesia, providing employment opportunities and contributing to local economies. However, the content integrated into TKDN is often limited to easily assembled parts like chargers or trivial app preloads rather than high-value components such as memory chips or motherboards. "Indonesia should aim to develop the capacity to produce more complex and higher-value components, like chipsets and camera modules, to increase the real impact of TKDN," Aryo advised.
Economic Perspectives on TKDN’s Impact
According to Teuku Riefky, a macroeconomics and financial market researcher at LPEM FEB UI, the TKDN policy’s role in growing investment is debatable. Indonesia’s insistence on high local content contrasts with trends in other developing and emerging markets like India, Vietnam, and Malaysia, which are moving away from stringent local content rules.
Riefky explained, "TKDN is intended to increase local components in products sold domestically, but it distorts market mechanisms by forcing imported products to comply with specified local content quotas." He recalled how countries like Vietnam and Singapore have succeeded in raising component quality and local involvement due to competitive advantages rather than forced requirements.
This approach contrasts with Indonesia, where local content increases are policy-driven rather than market-driven. The consequence is reduced competitiveness and reluctance from global brands, such as Apple, to fully comply with TKDN requirements. Riefky stressed the importance of fostering competitive local industries organically instead of relying heavily on TKDN mandates.
Key Issues Highlighted
- The TKDN percentage target has stagnated at roughly 30%-35% over several years.
- Vendors often satisfy TKDN with low-value components like packaging and pre-installed apps.
- Bureaucratic complexity hampers efficient implementation of TKDN certification.
- Indonesia’s TKDN policy contrasts with other countries that focus on market-driven local content.
- TKDN could negatively impact Indonesia’s global product competitiveness.
Future Considerations for TKDN Policy
Experts encourage Indonesian policymakers to rethink the TKDN framework to balance investment attraction with domestic industrial growth. Simplifying bureaucratic procedures could accelerate compliance, improving both local participation and economic impact.
Furthermore, encouraging local production capabilities for high-value components will drive meaningful growth in Indonesia’s telecommunications manufacturing sector. Support for research and development, technology transfer, and capacity building are essential to move beyond superficial TKDN achievements.
Indonesia could also explore complementary strategies, such as investment incentives and innovation-friendly regulations, to stimulate the technology ecosystem more effectively. This comprehensive approach might enhance the country’s competitiveness in the global market while still prioritizing local economic benefits.
The TKDN policy remains a significant but evolving tool in Indonesia’s industrial strategy. Its future success depends on aligning regulatory goals with practical outcomes and fostering genuine domestic industry progress rather than merely meeting formal requirements.