Understanding Indonesia’s TKDN Changes for Construction Services: A Practical Overview

Legal Brief
Understanding Indonesia’s TKDN Changes for
Construction Services: A Practical Overview

BACKGROUND
Definition & Scope
Domestic Products
Goods and services, including design and engineering, that are produced or performed by companies that invest and manufacture in Indonesia,
utilizing all or part of the Indonesian workforce, and whose processes involve the use of raw materials or components that are wholly or partially
sourced domestically.
Art. 1 (21) Government Regulation Number 29 of 2018 on Empowerment of Industry as partially revoked by Government Regulation Number 28 of 2021 (“GR 29/2018”)
TKDN
The level of domestic content in goods, services, and a combination of goods and services.
Art. 1 (24) GR 29/2018.
The scope of regulation on increasing the use of domestic products includes:
a. Obligation to use domestic products.
b. Efforts to enhance the utilization of domestic products by private enterprises
and the public.
c. Domestic Component Level/Tingkat Komponen Dalam Negeri (“TKDN”).
d. Domestic product utilization enhancement team.
e. Development and supervision.
f. Recognition for the utilization of domestic products.
a
b
c
e
d
f
Art. 56 GR 29/2018
TKDN on Goods
Goods are any tangible or intangible items,
whether movable or immovable, intended for
use or trade by the user of the goods.
Art. 1 (22) GR 29/2018
TKDN on Services
Services are the provision of work performed by
service providers, which include construction
services, including integrated construction
services, consulting services, and other services.
Art. 1 (23) GR 29/2018
Combined TKDN on
Goods and Services
A H R P L e g a l B r i e f
02
01 As regulated by Presidential Regulation Number 12 of 2021 on the Amendment of the Presidential Regulation Number 16
of 2018 regarding the Government Goods/Services Procurement, obligation of utilizing domestic products is conducted
within the procurement planning, procurement preparation, or selection of provider, which are encompassed within the
general plan of procurement, technical specification, working framework, and selection documents.
Based on Minister of Public Works and Housing Decree Number 4/IN/M/2022 on the Strategy for the Prevention of Risk of
Irregularities in the Goods/Services Procurement Process of the Ministry of Public Works and Public Housing in 2022-
2024, it is necessary to determine the minimum commitment threshold for the achievement of the domestic
component level for each type of infrastructure in the public works and public housing sector.
Recently, the Government has issued Minister of Public Works and Housing Decree Number 602/KPTS/M/2023 on the Domestic
Component Level Regulation for Construction Services (“MoPWH Decree 602/2023”), based on the following considerations:

OBLIGATION TO USE DOMESTIC PRODUCTS
Domestic Products are goods and services, including design and engineering, produced or
performed by companies which conduct investments and production in Indonesia, by employing
manpower of Indonesian citizens entirely or partly, and which process uses domestic raw materials
or components entirely or partly.
The obligation to use domestic products shall be conducted in the planning and
implementation stages of the procurement of goods/services.
Art. 1 (21) GR 29/2018 jo. Art. 58 (1) GR 29/2018
The domestic products must be utilized by:
state institutions, ministries, non-ministry government institutions, and regional working
units are required to comply with the procurement regulations when acquiring
goods/services. This obligation applies when their funding originates from state and
regional budgets, including domestic or offshore loans or grants; and
state-owned enterprises, regionally-owned enterprises, and private enterprises that
receive financing from state and regional budgets for the procurement of goods/services,
or engage in work activities through government-private enterprise cooperation, or utilize
state-controlled resources.
Art. 86 (1) of Law 3/2014
Parties who are Required to Use Domestic Products
Use of Domestic Products Component
02
01

Verification. Activity to calculate TKDN value of goods/services
and Company Benefit Weight Value based on data taken or
collected from business activities of a goods manufacturer,
services company, or provider of the combination of goods and
services.
Art. 1 (26) GR 29/2018
VERIFICATION AND CERTIFICATION OF
TKDN
Certification
The calculation and verification
on the amount of TKDN value
and Company Benefit Weight
Value shall be conducted through
TKDN certification by the Minister
of Industry.
Art. 70 (1) GR 29/2018
The Minister of Industry, in
calculating and verifying the
amount of TKDN value and
Company Benefit Weight value
may appoint a relevant
independent verification agency.
Art. 70 (2) GR 29/2018
Producers of goods, service
providers, or providers of both goods
and services holding industrial
business licenses, as prescribed by
laws and regulations, are required to
undergo verification.
Art. 70 (3) GR 29/2018
Calculation of TKDN value and
Company Benefit Weight value
must refer to provisions and
procedures for the calculation of
TKDN value and amount of
Company Benefit Weight value.
Art. 70 (4) GR 29/2018
Results from the calculation and
verification of the value of TKDN
for goods and Company Benefit
Weight value shall be validated
by an official appointed by the
Minister of Industry in the form of
a TKDN certificate.
Art. 70 (5) GR 29/2018
The amount of value of TKDN for goods
and/or Company Benefit Weight value
specified in the TKDN certificate shall
be specified in the inventory list of
domestically produced goods/services
issued by the Ministry of Industry.
Art. 70 (6) GR 29/2018
Industrial companies as
producers of goods shall
specify the amount of value
of TKDN for goods that
have been validated on the
label of the products.
Art. 71 GR 29/2018
02
01 03
04
05
06
07

CALCULATION ON TKDN (1/2)
%TKDN = Domestic Component Production Cost x 100%
Total Production Cost
TKDN of goods is calculated based on a comparison between
the price of finished goods, minus the price of foreign
components to the price of finished goods, namely production
costs incurred to produce goods ("TKDN for Goods").
Art. 2 (1) and (2) MoI Reg. 16/2011
The calculation of the TKDN for goods is based on accountable
data. If the data used cannot be accounted for, the TKDN value
for the respective component is considered to be zero.
Art. 7 (1) and (2) MoI Reg. 16/2011
TKDN on Goods
Direct
Material
Cost
Direct
Labor
Cost
Indirect Factory Cost
o Specifications;
o Unit of measurement
for materials;
o Country of origin;
o Supplier;
o Quantity used; and
o Purchase price of
materials.
o Position;
o Qualifications;
o Nationality;
o Quantity;
o Work allocation;
and
o Monthly salary.
Indirect Labor Cost Work Equipment/Facilities Cost Other Indirect Factory Costs
o Position;
o Qualifications;
o Nationality;
o Quantity;
o Work allocation; and
o Monthly salary.
o Proof of ownership;
o Machine name;
o Specifications;
o Number of machines;
o Allocation; and
o Depreciation value/rental cost.
o Supplier;
o Management cost; and
o Allocation of usage.
Based on Minister of Industry Regulation Number 16/M/-IND/PER/2/2011 of 2011 on Provisions and
Procedures for the Calculation of Domestic Component Level (“MoI Reg. 16/2011”)
TKDN on Goods

TKDN on Services is calculated for each service provision.
Art. 9 (1) MoI Reg. 16/2011
TKDN of Goods and Services is calculated based on the comparison
between the total price of the combined goods and services, subtracted
by the price of combined foreign goods and services, divided by the total
price of the combined goods and services (“Combined TKDN of Goods
and Services”).
Art. 11 (1) MoI Reg. 16/2011
CALCULATION ON TKDN (2/2)
%TKDN = Domestic Component Service Cost x 100%
Total Service Cost
TKDN on Services
Project Management and Engineering Cost
Construction / Fabrication Cost
General Service Fee
Work Equipment / Facilities Cost
o Position;
o Qualifications;
o Nationality;
o Quantity;
o Work duration; and
o Unit wage rate.
o Specifications/
qualifications;
o Supplier;
o Quantity; and
o Unit price.
o Position;
o Qualifications;
o Nationality;
o Quantity;
o Work duration; and
o Unit wage rate.
o Proof of ownership;
o Machine name;
o Specifications;
o Number of machines;
o Usage duration; and
o Depreciation value/rental cost.
TKDN on Services is calculated based on the comparison between the
total price of domestic services subtracted by the price of foreign
services, divided by the total price of services (“TKDN on Services”).
Art. 8 (1) MoI Reg. 16/2011
The calculation of TKDN on Services is based on accountable data. If
the data used cannot be accounted for, the TKDN value for the
respective component is considered to be zero.
Art. 10 (1) and (2) MoI Reg. 16/2011
%TKDN = Domestic Component Combined Cost x 100%
Total Combined Cost
Combined TKDN on Good and Services
Goods
Services
o Direct material cost; and
o Tool cost.
o Project management and engineering cost;
o Construction cost;
o Fabrication cost;
o General service fee; and
o Work equipment/facilities cost.
Combined TKDN of Goods and Services is calculated for each
combined goods and services provision.
Art. 11 (3) MoI Reg. 16/2011
The Combined TKDN of Goods and Services is used in the
calculation of TKDN for both construction projects and integrated
construction projects.
Art. 11 (6) MoI Reg. 16/2011
The calculation of the Combined TKDN of Goods and Services is
based on accountable data. If the data used cannot be accounted for,
the TKDN value for the respective component is considered to be
zero.
Art. 12 (1) and (2) MoI Reg. 16/2011
TKDN on Services Combined TKDN on Goods and Services

MoPWH Decree 602/2023
MoPWH Decree 602/2023 determines the minimum threshold for the TKDN for
construction works, consultancy services and integrated construction works
used by a Commitment Making Official (Pejabat Pembuat Komitmen/PPK) as a
reference in determining the minimum threshold for TKDN value in selection
documents.
The Commitment Making Official is required to calculate the TKDN by based on
the Self-Estimated Price (Harga Perkiraan Sendiri/HPS). This calculation aims
to ensure compliance with the minimum TKDN threshold value as specified in
the Appendix of MoPWH Decree 602/2023.
The minimum threshold for TKDN value shall be applied to all types of
procurement of construction works, consultancy services, and integrated
construction works which are financed by the State Revenue and Expenditure
Budget (Anggaran Pendapatan and Belanja Negara/APBN).
The minimum TKDN value for construction works and consultancy services are
set out in the Appendix of MoPWH Decree 602/2023.
Team for Increasing Domestic Product Utilization (Peningkatan Penggunaan
Produk Dalam Negeri/P3DN) at the Ministry of Public Works and Public
Housing shall conduct periodic monitoring and evaluation at least once a year
on the implementation of minimum threshold for TKDN value in construction
works, consultancy services and integrated construction works at the Ministry of
Public Works and Public Housing.
The results of the monitoring and evaluation shall be used to make
adjustments to the minimum threshold for TKDN value in construction works,
consultancy services, and integrated construction works.
In the event that the minimum TKDN value for the construction work and the
integrated construction work that will be undertaken has not been contained
in the Appendix of MoPWH Decree 602/2023, the Commitment Making
Official shall determine the minimum TKDN value for the construction work of
at least 25% (twenty-five percent) including work financed by foreign
loans/grants.
The minimum threshold for TKDN value for construction works, consultancy
services and integrated construction works as set out in the Appendix of
MoPWH Decree 602/2023, may be used as a reference for stipulating the
minimum TKDN threshold for construction works and consultancy services
at ministries/agencies/regional apparatus.
02
01
03
04
05
06
07
08

Infrastructure Type Minimum TKDN Threshold Supporting Work Unit
Water Resources Sector
Construction of Dam 60% Directorate of Dams and Lakes, Directorate
General of Water Resources
Revitalization of Lake 70%
Revitalization of Reservoir 70%
Construction of Weir 70% Directorate of Irrigation and Swamps, Directorate
Rehabilitation of Weir 70%
Construction of Irrigation Network 75%
Rehabilitation of Irrigation Network 65%
Construction of Swamp Area 75%
Rehabilitation of Swamp Irrigation Area 65%
Construction of Raw Water Transmission 50% Directorate of Groundwater and Raw Water,
Directorate General of Water Resources
Increase in Raw Water Transmission 75%
Rehabilitation of Raw Water Transmission 75%
Construction of Groundwater Irrigation Network
(Jaringan Irigasi Air Tanah)/Groundwater Wells
60%
Increase in Groundwater Irrigation Network
75%
Rehabilitation of Groundwater Irrigation Network
75%
Construction of Retention Basin 75%
Increase in Retention Basin 80%
MINIMUM THRESHOLD OF TKDN FOR CONSTRUCTION SERVICES
Based on Appendix of MoPWH Decree 602/2023
Construction Works

Rehabilitation of Retention Basin 80% Directorate of Groundwater and Raw Water,
Directorate General of Water Resources.
Procurement of Characteristic Goods/Services 80%
Operation 80% Directorate of Operational Development and
Maintenance, Directorate General of Water
Resources
Routine Maintenance 80%
Periodic Maintenance 80%
Operation 50% Sidoarjo Mud Control Center, Directorate General
of Water Resources
Routine Maintenance 75%
Periodic Maintenance 25%
Increase 60%
Construction of Flood Control 60% Directorate of Rivers and Coasts, Directorate
Increase in Flood Control 60%
Rehabilitation of Flood Control 60%
Construction of Coastal Guard 70%
Increase in Coastal Guard 70%
Rehabilitation of Coastal Guard 70%
Construction of Chekdam/Sabo Dam 70%
Increase in Chekdam/Sabo Dam 70%
Rehabilitation of Chekdam/Sabo Dam 70%
Construction Works

Human Settlements Sector
Development, Increase and Expansion of
Drinking-Water Supply System (Sistem
Penyediaan Air Minum/SPAM)
30% Directorate of Drinking-Water, Directorate General
of Human Settlements (Cipta Karya)
Construction of Community-Based Settlements
(Cipta Karya) Drinking-Water Supply System
(Sistem Penyediaan Air Minum/SPAM)
50%
Wastewater Management System 50% Directorate of Sanitation, Directorate General of
Human Settlements
Community-Based Wastewater Management
System
50%
Waste Management System 30%
Community-Based Waste Management System 50%
Construction, Development, Restoration and
Rejuvenation of Residential Areas
45% Directorate of Regional Development Settlements,
Directorate-General of Human Settlements
Construction of Community-Based Settlement
Infrastructure
85%
National Tourism Strategic Area (Kawasan
Strategis Pariwisata Nasional/KSPN) and
National Strategic Projects
65%
Arrangement, Construction and Rehabilitation of
Buildings and Areas
45% Directorate of Building Arrangement, Directorate
General of Human Settlements
Border Posts (Pos Lintas Batas Negara/PLBN) 40%
Rehabilitation and Arrangement of Cultural
Heritage Buildings, Palaces, Traditional
Settlements and Tourism Destinations
45%
Construction, Rehabilitation and Renovation of
Higher Education Facilities
35% Directorate of Strategic Facilities, Directorate
General of Human Settlements
Elementary, Secondary, Madrasah and Religious
Schools
45%
Sports Facilities
60%
Market Facilities
50%
Construction Works

Construction Works
Highways Sector
Construction of Road 70% Directorate of Road Development and
Directorate of Freeways, Directorate General
of Highways (Bina Marga)
Opening and Establishment of New Roads 65%
Preservation 65% Directorate of Road and Bridge Preservation
Region I and II, Directorate General of
Highways
Mitigation of Landslide 65%
Bridge Construction 70% Directorate of Bridge Construction,
Directorate General of Highways
Bridge Replacement 70%
Flyover Development 60%
Bridge Duplication 65%
Housing Sector
Construction of Multistory Housing 45% Directorate of Multistory Housing, Directorate
General of Housing
Construction of Special Housing 55% Directorate of Special Housings, Directorate
General of Housing
Consultancy Services 60% All Work Units of the MoPWH
Consultancy Works

We will continue to follow the developments on this topic and provide additional information as it becomes
available. If you have any questions on this topic, please contact:
Yohanes Partogi Napitupulu
partogi@ahrplaw.com
Zaneta Axel Winata
zaneta@ahrplaw.com
Thea Mutiara
thea@ahrplaw.com
This publication has been prepared by AHRP for educational and informational purposes only. The information contained in this publication is not
intended and should not be construed as legal advice. Due to the rapidly changing nature of law, AHRP makes no warranty or guarantee concerning
the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your
circumstances before deciding to take any action.
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Jl. Mega Kuningan Barat No.3, Kuningan
Jakarta 12950 Indonesia
P: +6221 50917915
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Understanding Indonesia’s TKDN Changes for Construction Services: A Practical Overview​

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