Indonesia Plans to Revise TKDN Policy to Boost Foreign Investment

【Indonesia: Government plans to revise local component ratio policy to attract foreign investment】

On April 18, Indonesian President Prabowo Subianto proposed revising the domestic component ratio (TKDN) policy to lower localization thresholds and enhance policy flexibility, aiming to attract foreign investment, particularly in the electric vehicle and emerging technology sectors. The current policy mandates that government - procured goods meet a 25% localization rate and that enterprises’ welfare weight reaches 40%. However, these stringent rules have been blamed for curbing foreign investment enthusiasm in the new energy sector. In the automotive industry, the loosening of the TKDN policy will accelerate the layout of international automakers like Tesla and BYD in Indonesia and promote the localization of the electric vehicle supply chain. Previously, Indonesia extended the deadline for electric four - wheel vehicles to meet the 40% localization requirement from 2024 to 2026 to allow foreign investors more adaptation time. Nevertheless, local automakers worry that rapid opening - up may impact the traditional automotive ecosystem. GAIKINDO emphasized the need to protect the decades - long established fuel - vehicle industry chains of Toyota and Honda.