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Shopping Domestically Has Proven To Boost Investment And Productivity In The Industry
Friday, 17 Jan 2025
The implementation of the Domestic Component Level (TKDN) policy protects local industries. This protection comes in the form of guaranteed demand for industries through spending by the Central/Regional government and state-owned enterprises. It also ensures a market for domestic products in the mobile phone, handheld computer, and tablet (HKT) sectors. Additionally, the TKDN policy supports investment for manufacturing investors and helps create domestic jobs.
The application of TKDN has led to increased new investments, higher industrial productivity, and the creation of new jobs, particularly in the health equipment, pharmaceutical, and electronics sectors, including HKT. Government spending on TKDN-compliant manufactured products has risen each year, from IDR 989.97 trillion in 2022 to IDR 1,499.75 trillion in 2023, as stated by the Ministry of Industry spokesperson, Febri Hendri Antoni Arif, during a press conference in Jakarta.
TKDN has also successfully reduced imports of HKT and its components. Despite the decrease in imports, the demand for HKT products remains high. This indicates that the growing need for HKT in Indonesia can be met by local production, showcasing the success of the TKDN policy in the HKT industry.
During the event, Febri responded to an opinion from a researcher at the Centre for Strategic and International Studies (CSIS) published in a national daily on the same day. The opinion claimed that the TKDN policy contradicts the interests of businesses and national industrial development, citing empirical evidence from studies by Thee (1997) and Aswicahyono, Basri, and Hill (2000), as well as research from CSIS (2022) regarding the economic impact of the TKDN policy.
According to him, the first two studies presented by the author as empirical evidence are no longer relevant to the current state of Indonesia's manufacturing sector. For instance, the local purchase percentage set in line with the Domestic Component Level (TKDN) in the 2021 DTP vehicle tax program has proven to be a game changer for Indonesia's automotive industry. "This policy has boosted four-wheeled vehicle sales that were struggling due to Covid-19. Additionally, the rise in automotive product sales during this period has also increased productivity in the domestic tier 1 and tier 2 automotive component industries that supply the needs of the automotive sector," he explained.
The current TKDN policy is based on Law No. 3 of 2014 concerning Industry. This means that the policy emerged more than a decade after the first two studies referenced by the author. There are fundamental differences between the current TKDN policy and the policy during the time of the studies, such as size and parameters, products that must be certified, thresholds, government obligations, and industry compliance in implementing the policy. "Therefore, the first and second empirical evidence cannot accurately support the author's argument," Febri stated.
Similarly, the findings from the CSIS study (2022) are also difficult for Febri to accept as a basis for claiming the failure of the TKDN policy, as stated by the author. The CSIS study is based on an analysis of raw data from the Large and Medium Industry Survey (SI) by BPS for the years 2018-2019. Although the TKDN policy was in effect during this data period, only 3,207 manufacturing products had been certified.
"In comparison, by 2022, there were already 8,040 products certified under TKDN, and the realization of government domestic spending reached Rp989.97 trillion."
