Government Claims Relaxation of Local Content Requirement is Safe for Investment, CELIOS Warns of Industrial Risks

Jakarta, Aktual.com – The government, through the Ministry of Investment and Downstreaming/BKPM, has stated that the relaxation of the Local Content Requirement (TKDN) in the Indonesia-US trade agreement will not disrupt the national investment climate. The policy is described as part of a strategy to remove non-tariff barriers while still protecting domestic industries.

Deputy Minister of Investment and Downstreaming/Deputy Head of BKPM, Todotua Pasaribu, said the relaxation is being carried out in a limited manner and has undergone careful calculations regarding trade relations between the two countries.

“I don’t think it will have an impact on the investment climate. It is just part of a strategy, with some of the requirements being relaxed,” he said at the BKPM office in Jakarta, quoted on Wednesday (25/2/2026).

According to Todotua, the government continues to pay attention to the trade balance between Indonesia and the United States in every policy taken. He said that this step will not reduce Indonesia’s competitiveness as an investment destination.

Furthermore, the relaxation is said to not be a unilateral decision without reciprocal calculations in trade relations. “However, there are calculations involved. Our trade with them is not greatly affected by this,” he said.

On the other hand, Director of Digital Economy at the Center of Economic and Law Studies (CELIOS), Nailul Huda, believes that public concern lies in the possibility of relaxing the TKDN for the general market.

“Our concern is related to the TKDN being abolished for consumers in general, not just for government procurement,” he said in a forum held by CELIOS online on Monday (23/2/2026).

So far, the TKDN policy has been an important instrument to encourage manufacturing investment and technology transfer into the country. If this obligation is relaxed more broadly, companies are considered to be able to choose the import route rather than strengthening local production.

Huda also reminded of the impact of the policy on companies that have invested heavily in the manufacturing sector. “What I am worried about is that manufacturers who have built factories in Indonesia will switch to being just traders and reconsider the continuation of factory operations in Indonesia,” he said.

In this case, CELIOS believes that the electronics and automotive sectors are the most vulnerable to be affected because they are highly dependent on the certainty of local content policies. Without consistent implementation of the TKDN, Indonesia risks becoming more of a market than an industrial production base.

(Nur Aida Nasution)

This article was written by:

Eka Permadhi