Prabowo Pushes for Flexible Domestic Content Rules to Boost Global Competitiveness

JAKARTA, investortrust.id – President Prabowo Subianto has called for a major revision of Indonesia’s local content requirements, urging government officials to make the rules more flexible and aligned with global industrial dynamics. The directive, aimed at strengthening the country's industrial competitiveness, was delivered at a high-level economic forum in Jakarta on Tuesday, April 8, 2025.

Speaking at the National Economic Colloquium held by the Coordinating Ministry for Economic Affairs, Prabowo said the current structure of domestic content requirements, or TKDN, while driven by nationalism, must be adjusted to reflect economic realities and industrial capabilities.

The Local Content Requirement (TKDN) is a regulation requiring a specific percentage of local materials or services in certain products to stimulate domestic industry.

"TKDN has good intentions, it's about nationalism. If you know me, you’d know I’m among the most nationalistic. But we have to be realistic. Enforcing TKDN too strictly could make us less competitive. I support making TKDN more flexible, even considering incentive-based alternatives,” said Prabowo.

Regulations Alone Won’t Build Capability

President Prabowo emphasized that the issue is not just regulatory, but structural—connected to education, research and development, and scientific progress.

“Reform the TKDN regulations to be realistic. Local content is a broad issue—it involves science, technology, and education. Simply raising the TKDN target by regulation alone won’t solve the problem,” he added.

He instructed ministers and policy-makers to ensure that local content policies support, rather than burden, domestic industries as they seek to compete in global markets.

Trade Talks With the US Highlight Policy Dilemma

The push for reform comes amid trade negotiations with the United States, where Indonesia is reportedly offering to ease TKDN regulations in the electronics sector in exchange for lower import tariffs.

Currently, many US products face import tariffs as high as 32% in Indonesia.

Heru Sutadi, Executive Director of the Indonesia ICT Institute, noted that the policy shift could help reduce production costs and make Indonesian products more competitive.

“Easing TKDN shows Indonesia’s commitment to trade openness, and might soften Washington’s stance. It could also allow electronics firms to import cheaper components, especially from the US and China,” he told investortrust.id.

Threats to Domestic Industry

Despite potential gains, Heru cautioned that a rapid rollback of TKDN could be detrimental to Indonesia’s growing local component industry.

“Reducing TKDN could be economic suicide. Our domestic component manufacturers are still developing and heavily reliant on large phone makers. Without protection, they might collapse,” he said.

Data from the Ministry of Industry shows that Indonesia’s electronics manufacturing already relies on imported components for 80% of its inputs.

Heru argued that instead of reducing TKDN, the government should strengthen it through smarter policies—prioritizing high-value innovation over simple assembly work.

“Let’s take Vietnam as an example. They succeeded by focusing on chip development and high-tech components,” he said, adding that Indonesia should diversify exports toward BRICS nations, the Middle East, and Europe rather than over-relying on the US market.

“Easing TKDN is a step backward. Long term, we must enhance it intelligently, not reduce it,” he concluded.

Apple Adapts to TKDN Rules With Major R&D Investment

Earlier, US tech giant Apple has adjusted its strategy to comply with Indonesian TKDN rules. Last month, the Ministry of Industry confirmed that 20 Apple products—11 iPhones and nine tablets—have received TKDN certification.

The approval came after Apple faced sanctions for non-compliance between 2020 and 2023. To regain access to the market, the company committed to building a Rp 2.5 trillion ($160 million) research and innovation facility in Indonesia—its first in Asia and second outside the US.

This investment forms part of Apple’s compliance plan for the 2025–2028 period. The certified devices, including the iPhone 16 series, must now secure telecommunications and import licenses to be officially sold in Indonesia.