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Understand TKDN, Its Benefits, and Calculation Types

What is TKDN?

Domestic Component Level (Tingkat Komponen Dalam Negeri or TKDN) is a crucial aspect in the domestic supply chain. The ministry responsible for this aspect is the Ministry of Industry. TKDN significantly influences the marketing and procurement of goods in society. This article will explain the definition of TKDN, various calculation components, benefits, and priority sectors in its determination. Additionally, it will discuss why TKDN values in the procurement of goods and services are considered essential.

3 Types of TKDN Calculations

Regarding the definition of TKDN, in broad terms, it is the percentage value of various domestically produced components. This production value includes the transportation cost of a bid item for goods and services.

There are three types of TKDN calculation components or assessments for companies required to have TKDN for their goods and services. To better understand, let’s look at the discussion of the calculations below:

  1. Domestic Component Calculation for Goods: The definition of goods includes any tangible or intangible, movable or immovable objects that can be traded, used, or utilized by the Goods User. TKDN calculation for goods measures the percentage of domestic components, including the materials used, the nationality of the workforce, and the ownership and origin of the equipment used. It’s essential to note that this calculations for goods are conducted for each type of product. The type of goods refers to products produced based on the same production process and raw materials. So, if a company produces various types of goods using different production processes and raw materials, separate TKDN calculations must be performed for each type.
  2. Domestic Component Calculation for Services: TKDN calculation for services considers the nationality of the workforce, tools and workplace facilities, and common services used in the traded services. The costs considered include all expenses incurred in providing services, calculated until the on-site work location.
  3. Domestic Component Calculation for Goods and Services: The last type involves calculating the TKDN components for both goods and services, combining the two previous points. The calculation combines the local components of the raw materials used and work equipment with labor, common services, construction/fabrication, and workplace facilities. The more components sourced domestically, the higher the value for the product.

Priority Sectors in TKDN Determination

Certainly, the implementation of the TKDN program has specific goals. The requirement for TKDN values in every tender process for the procurement of goods or services aims to support the government’s program in enhancing the domestic industry.

Therefore, it’s not surprising that some sectors of goods and services are prioritized in maximizing the implementation of TKDN. Here are the priority sectors for the government in TKDN determination:

  • Health equipment industry, with a priority value of >60%
  • Agricultural machinery or equipment industry, with a priority value of >43%
  • Oil and gas equipment industry, with a priority value of >24-40%
  • National electricity industry, with a priority value of >40%
  • Power plant industry, with a priority value of >30-70%
  • Substation industry, with a priority value of >17-65%

5 Benefits of Implementing TKDN

TKDN offers various benefits for both the government and Indonesian society. In short, the implementation of TKDN can minimize imports and enhance the competitiveness of domestic products.

  1. Creation of New Job Opportunities: The first expected benefit of implementing TKDN in Indonesia is the creation of new job opportunities. This is a primary concern of the government when considering TKDN. If new job opportunities are created, the unemployment rate and poverty levels in Indonesia will decrease. New job opportunities arise because TKDN focuses on the use of domestic goods and services. Additionally, TKDN aims to increase the use of domestic production. This is related to the increasing demand for domestic labor.
  2. Foreign Exchange Savings: TKDN is beneficial for saving foreign exchange, which is related to minimizing dependence on imported or foreign products. Imagine if Indonesian society is consumptive with imported products; it would hinder the increase of foreign exchange. If the government implements TKDN, government spending will be more optimal and focused on the domestic sector. This will be beneficial for foreign exchange reserves, providing an opportunity to avoid excessive spending on imported products.
  3. Increased Income Tax Revenue: If TKDN is optimized, it can be ensured that income tax revenue will increase. This is because domestically produced products will increase significantly, making it essential to optimize and promote various sectors of TKDN.
  4. Support for the Domestic Economy: The fourth benefit is the formation of support for the domestic economy. As mentioned earlier, if TKDN is optimal in terms of implementation, various aspects of the economy and society will improve in quality. For example, the domestic economy will improve, and Indonesia’s GDP will increase as the quality of the population’s economic aspects improves. This makes TKDN a “breath of fresh air” for the domestic economy.
  5. Enhanced Pride in Domestic Products: Lastly, it can be said that the benefit of TKDN is to enhance pride and trust in domestic products. Inspection and Consultation on TKDN make Indonesian society trust the quality of domestically produced products.

This will also affect healthy competition between domestic and international products. In short, TKDN will be a benchmark for improving domestic products to be on par with international products in terms of quality.

TKDN in Procurement of Goods and Services

The implementation of TKDN in the procurement of goods and services in empowering the domestic industry is the government’s effort to increase the use of domestic products (P3DN). Therefore, in its regulations, the government mandates the use of domestic products in the following components:

  • Funding sources from the state budget (APBN) for ministries/institutions/agencies (K/L/PD), including regional budgets (APBD), loans, or grants from domestic or foreign sources.
  • Funding sources from the state budget are also intended for State-Owned Enterprises (BUMN) and Regional-Owned Enterprises (BUMD) through collaboration between the government and the private sector.

In conclusion, it is crucial for the public to understand the definition of TKDN, its components, sectors of implementation, and various benefits. This is to ensure the continuous development of the quality of domestic products and the existence of a supportive community aspect. As a TKDN verification institution appointed by the Ministry of Industry, SUCOFINDO provides consultation and verification services for TKDN values in various industrial sectors.

For more information on inspection and audit services and the Wholesale and Retail Trade Sector, you can read our articles here. If you and your company need more information about our services, feel free to contact and consult with us here.

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