The Domestic Component Level (Tingkat Komponen Dalam Negeri or TKDN) certification has become a crucial factor in the development of industries in Indonesia. Government support for obtaining TKDN certification is a vital step that business actors need to take. Before delving further, it is essential to understand the concept of TKDN and why it plays a strategic role in the development of the domestic industry.

What Is TKDN Certification?
TKDN stands for Tingkat Komponen Dalam Negeri, which refers to the percentage of the value of components produced domestically. This concept encompasses various products, both goods and services, as well as the associated transportation costs. TKDN serves as a means for the government to encourage the use of domestic products and support the national industry.

The Application of TKDN in Procurement of Goods and Services
The government has set a policy for the use of domestic products in the procurement of goods and services as an effort to promote the domestic industry and encourage the use of Domestic Products (Penggunaan Produk Dalam Negeri or P3DN). This principle applies to procurement funded by the State Budget (Anggaran Pendapatan dan Belanja Negara or APBN), which includes Regional Budgets (Anggaran Pendapatan dan Belanja Daerah or APBD) and collaborations between the government and the private sector.
It's important to note that TKDN can be one of the determining factors in deciding who is more competitive and competent. It becomes a determining factor in the selection of the winning bid for the procurement of goods and services in certain institutions.

Strategic Benefits of TKDN Certification
TKDN certification offers several significant strategic benefits:

• Promoting the Use of Local Products: TKDN encourages companies to use local components in their production. This stimulates the use of domestic production and reduces dependence on imports.
• Conserving Foreign Exchange: By increasing the use of domestic products, companies reduce their spending on imports, ultimately conserving the nation's foreign exchange.
• Creating Equality with Foreign Brands: TKDN helps domestic products compete on an equal footing with foreign brands, fostering equality in the market.
• Creating a Robust Supply Chain: Another benefit of TKDN certification is the potential to create a strong supply chain. Vendors are encouraged to establish factories in the country and provide large-scale supplies to assembly plants.

Price Preference
In addition to TKDN, the government also provides incentives in the form of Price Preference given to domestic products in government procurement processes. Price Preference offers an incentive for products with a minimum TKDN of 25%. In procurements with a minimum value of one billion rupiahs, Price Preference incentives can reach up to 25% of the bid price.
How are price preferences granted? In Presidential Regulation Number 12 of 2021 Amendment to Presidential Regulation Number 16 of 2018 on Government Procurement of Goods/Services, Article 67 states that in paragraph (3) it is regulated that price preferences are given in the procurement of Goods according to the following conditions:

• Given to goods with the lowest TKDN of 25%.
• The highest price preference coefficient is 25%.
• Taken into account in the evaluation of bid prices that have met administrative and technical requirements.
• Determination of the winner is based on the lowest price order of the Final Evaluation Result (HEA).
• In the event of two or more bids with the same lowest HEA, the bidder with the higher TKDN is declared the winner.

Price Preference is also given in construction work in the international tender selection method, where a national business entity can receive incentives of up to 7.5% of the lowest bid price by a foreign business entity.
TKDN certification and Price Preference are essential instruments in supporting the use of domestic products and the development of the domestic industry. Implementing TKDN and utilizing Price Preference is a strategic step in building a robust domestic industry capable of competing globally. In an era of global competition, these initiatives play a strategic role in Indonesia's economic growth.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled a lot of similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author: Suryani Lim