Overview

Overview Seven-years after the issuance of Government Regulation 28 of 2018 on Industry Empowerment, the Minister of Industry (MoI) finally issued Regulation No.35 of 2025¹ (New Regulation) on the Calculation of Local Component Levels and/or Company Benefit Weighting, which became effective on 11 December 2025, three months after its issuance on 11 September 2025.

In addition to setting out the calculation methodology for local component levels (TKDN) and company benefit weighting (BMP), the New Regulation introduces:

1. MoI Regulation 16/M-IND/PER/2/2011 of 2011 on Provisions and Procedures for Calculating TKDN.
2. MoI Regulation 2 of 2014 on Guidelines for Increasing the Use of Domestic Products in Government Procurement of Goods/Services.
3. MoI Regulation 3 of 2014 on Guidelines for Increasing the Use of Domestic Products in Government Procurement of Goods/Services Not Funded from the State Budget/Regional Budget.
4. MoI Regulation 46 of 2022 on Provisions and Procedures for Calculating the Value of TKDN for Small Industries.

What are TKDN and BMP?

TKDN reflects the portion of a product (whether it is goods, industrial services or combination of both) that originates from domestic sources. The new mechanism for calculating TKDN aims to provide transparency on the level of local content incorporated into a product, thereby supporting the broader objective of strengthening domestic manufacturing and integrating local products into Indonesia’s industrial supply chain. BPM, on the other hand, provides recognition for companies that invest in and carry out production in Indonesia. The BPM value is derived from a set of weighted criteria under the New Regulation, which collectively measure the extent of a company’s contribution to local industrial developments.

What are the new calculation methods for TKDN and BMP?

TKDN

The New Regulation provides a more granular and structured methodology for calculating TKDN components, by reference to following different product categories:

1. TKDN for goods is calculated using specific production components, weighted as follows:
2. 1. 75% for direct materials
   2. 10% for direct labour; and
   3. 15% for factory overhead.

These components are aggregated to determine the domestic content of a single unit of goods.

2. TKDN for industrial services is calculated by comparing total industrial service costs (excluding foreign service costs) with the total industrial service costs. The calculation covers labour, tools/facilities and general service costs.
3. TKDN for combined goods and services is calculated by adding the weighted results of TKDN for: (i) the goods, multiplied by the proportion of the goods procurement value, and (ii) services, multiplied by the proportion of the services procurement value.

BMP

The BMP framework has been significantly expanded and now incorporates more explicit criteria relating to a company’s capabilities, innovation, workforce development and overall impact on the domestic industrial ecosystem. Although the maximum BMP value remains 15% (fifteen per cent),² the New Regulation introduces the following 15 assessment indicators:³

1. labour absorption;
2. new investment;
3. supply-chain strengthening;
4. pioneer industry status;
5. use of domestic machinery;
6. production location;
7. industry 4.0 implementation;
8. human resource development;
9. domestic brand ownership;
10. green industry practices;
11. export performance;
12. certification;
13. ESG (Environmental, Social and Governance) adoption;
14. awards; and/or
15. compliance with SIINas reporting.

The issuance procedure for TKDN certificates

The New Regulation maintains the existing approach for small-scale industries, which may continue to submit TKDN application through a self-declaration process via the SIINas platform. Application submitted through this mechanism remain exempt from fees. The New Regulation also extends the validity period of TKDN certificates and BMP values to five years,⁴ an increase from the previous three-year validity period. This extension is expected to provide businesses with greater regulatory certainty and reduce the administrative burden of frequent renewal.

Administrative penalties

Under the New Regulation, TKDN certificate holders may be subject to administrative penalties in the form of:⁵

1. suspension of the TKDN certificate;
2. revocation of the TKDN certificate; and
3. blacklisting.

These penalties may be imposed in cases involving, false submission of information, failure to fulfil TKDN commitments, production of non-compliant goods or services or falsification of certificates. In addition to imposing administrative penalties on certificate holders, MoI may also impose penalties on the Independent Verification Institution (Lembaga Verifikasi Independen, LVI), which is an institution appointed by the minister (who oversees government affairs in the industrial sector) to carry out the calculation and verification of TKDN and/or BMP values. Penalties may be imposed where errors are found in the calculation or verification conducted by LVI, or where LV fails to submit quarterly recap reports on the implementation of TKDN/BMP calculations and verifications.⁶

Key takeaways

The New Regulation marks a significant update to Indonesia’s local content certification framework. It introduces a more robust and comprehensive system for calculating and certifying TKDN and BMP values that are intended to cover goods, industrial services and combined products or services. The submission, calculation and verification of TKDN and/or BMP values are conducted either by LVI or, in the case of small-scale industries, via a SIINas-based self-declaration.

The New Regulation’s expanded calculation criteria, clearer verification mechanisms and extended five-year certificate validity are designed to encourage broader business participation and offer greater predictability for businesses operating in sectors where TKDN plays a critical role, including government procurement.

Businesses should review the updated requirements carefully to ensure ongoing compliance to optimise opportunities arising from the new framework. Non-compliance may lead to administrative penalties under the New Regulation.

We will continue to monitor the implementation and enforcement of the New Regulation and will provide further updates as developments arise.

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