Indonesia: Perpres 46/2025 lowers TKDN threshold and raises price-preference margin in government procurement

Mechanism

Perpres 46/2025 is the second amendment to Perpres 16/2018, Indonesia's master government-procurement regulation, administered by LKPP (the national public-procurement policy agency). The amendment recalibrates the domestic-content (Tingkat Komponen Dalam Negeri, TKDN) preference regime that governs how foreign and domestic bidders compete for central- and regional-government contracts:

• The TKDN threshold a "Produk Dalam Negeri" (domestic product) must

clear to receive preferential evaluation treatment is set at a minimum of 25%.

• Qualifying domestic suppliers receive a price preference of up to

25% applied during bid evaluation — i.e. a foreign or lower-TKDN bid can be priced up to 25% cheaper and still lose to a qualifying domestic bid on evaluated price.

• A minimum of 40% of procurement budgets must be allocated to

domestic goods/services, with a separate 40% carve-out earmarked for MSME (UMKM) and cooperative suppliers.

• The regulation also extends procurement rules to village-level

(desa) government spending for the first time, and is billed officially as making procurement "faster, more accountable, and data-based" (Kemenkeu treasury-office commentary).

GTA's own classification splits this into two components: it scores the TKDN-threshold reduction (down from a higher prior bar) as a liberalising change (easier for products to qualify as domestic), while flagging the price-preference increase as a harmful, trade-restrictive tightening for foreign suppliers. Net effect is more protectionist: more bids now qualify for a larger price-evaluation advantage, disadvantaging non-Indonesian suppliers economy-wide, not just in construction (construction and site-preparation are simply the first sectors GTA observed affected tenders in).

Downstream implications

• Foreign suppliers bidding into Indonesian public-sector construction,

infrastructure and equipment tenders face a larger effective price handicap versus qualifying domestic bidders than under the prior Perpres 16/2018 preference schedule.

• The lowered TKDN qualification bar (25% vs. a stricter prior

threshold) widens the pool of nominally "domestic" products eligible for the preference, likely accelerating onshoring/joint-venture structuring by foreign OEMs seeking to qualify.

• Structurally parallel to India's Public Procurement (Preference to

Make in India) Order, 2017 — see the localisation-preference cluster in em-trade-facilitation-logistics — and to Indonesia's own Permenperin 35/2025 TKDN-certification overhaul (2025-09-11), which post-dates and operationalises the certification side of this same domestic-content push.

Open questions

• Exact prior TKDN threshold and price-preference cap under the

original Perpres 16/2018 schedule (to quantify the delta) — not confirmed via primary text, only via secondary characterisation.

• Sector-by-sector rollout: which tenders beyond construction have

since applied the revised preference schedule.