Prisma Ardianto, Heru Andriyanto, Jakarta – The Industry Ministry is reviewing Indonesia's local content policy not in response to external pressures or retaliatory tariffs from the United States, but to support domestic industry needs, Industry Minister Agus Gumiwang Kartasasmita said on Sunday.
Under President Joko Widodo, the government established a minimum 40 percent local content requirement for goods and services procured by the government. President Prabowo Subianto later issued Presidential Regulation No. 46/2025, mandating that contractors obtain local content certification before participating in government procurement projects.
Since February 2025, the Industry Ministry has launched a reform initiative aimed at simplifying the calculation of local content, making the process easier, faster, and less costly.
"The ongoing reforms to the local content policy are not driven by President Trump's tariffs or the global trade environment," Agus said in a statement. "They are based solely on the needs of Indonesia's domestic industries."
On April 2, the United States imposed a baseline 10 percent tariff on Indonesian products, with an additional 32 percent import tax set to take effect within three months. However, Agus emphasized that policy reforms were already underway prior to these trade measures.
The minister said the reforms aim to boost investment and job creation, and to ensure fair business practices in the domestic market.
"The new policies are being finalized and will be subject to public consultation," he said. "We hope these reforms will attract more businesses and investment to Indonesia and increase the manufacturing sector's contribution to the national economy."
The United States Trade Representative (USTR) has cited Indonesia's local content regulations as a trade barrier that prompted the reciprocal tariffs.
In its recent report, the USTR highlighted the Indonesian government's 2021 suspension of 79 medical device imports from the national e-procurement platform (e-Katalog), without prior stakeholder consultation. This move was intended to promote local manufacturing but sparked concerns from US medical device suppliers about disrupted access to public hospital markets.
"US stakeholders have frequently raised concerns about their products being withheld from public hospital purchases under the e-Katalog and requested the Indonesian Government allow a sufficient grace period for the transition to local production, assuring patient access to safe and high-quality medical devices," the USTR report said.
The USTR also pointed to Indonesia's 2012 Defense Law and Presidential Regulation No. 76/2014, which require defense procurement to prioritize domestic components and materials. When foreign suppliers are used, trade-balancing offsets – such as domestic production, technology transfer, or other forms – are required.
"While this regulatory framework seeks to bolster opportunities for local industry, the framework also poses challenges for foreign defense companies, which must navigate complex offset obligations in order to participate in the Indonesian market," the USTR said.