As part of its broader fiscal sector deregulation agenda, the Indonesian government has amended the regulatory framework governing Domestic Component Level (Tingkat Komponen Dalam Negeri or “TKDN”) through the issuance of Minister of Industry Regulation No. 35 of 2025 on Provisions and Procedures for Certification of TKDN and Company Benefit Weight (“MoI Reg 35/2025”). The subject was previously regulated under the Minister of Industry (“MoI”) Regulation No. 16 of 2011 on the Provisions and Procedures for Calculating TKDN, MoI Regulation Number 46 of 2022 on the Provisions and Procedures for Calculating TKDN for Small Industries, MoI Regulation Number 02 of 2014 on Guidelines for Increasing the Use of Domestic Products During Government Procurements of Goods/Services and Moi Regulation Number 03 of 2014 on Guidelines for the Increased Use of Domestic Products During Government Procurements of Goods/Services Not Funded Through State/Regional Budgets. MoI Reg 35/2025, which was issued on September 11,2025, will come into force three months from its issuance date.
TKDN refers to the proportion ofdomestic components contained within goods, services, or a combination of both. Its implementation is primarily applied in public procurement, where government institutions and state-owned enterprises are mandated to prioritize goods and/or services that meet the prescribed TKDN thresholds. In addition, compliance with TKDN requirements is also mandated in certain industrial sectors under sector-specific regulations.
MoI Reg 25/2025 introduces a simplified framework for TKDN calculation. Further, MoI Reg 25/2025 also provides incentives for foreign investors who undertake direct investment in Indonesia and conduct research and development in Indonesia.
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