Indonesia continues to implement a strategic policy framework on local content requirements to strengthen national industry, accelerate technology transfer, and foster inclusive growth. This national policy has become particularly significant in sectors considered vital to public interest—such as energy, electricity, infrastructure, and telecommunications—where foreign and local investments are required to contribute meaningfully to the domestic economy. Through the enforcement of TKDN, the Indonesian government seeks to reduce import dependency, empower local supply chains, and enhance the competitiveness of Indonesian-made products and services.

This framework centers around TKDN (Tingkat Komponen Dalam Negeri), now expanded with a complementary compliance metric known as Company Benefit Weighting (CBW) (Bobot Manfaat Perusahaan – BMP). CBW (BMP) introduces a more holistic approach by not only measuring the percentage of local content but also evaluating the broader socio-economic impact that a company brings to Indonesia. This includes contributions such as local job creation, technology transfer, partnership with local vendors, community development programs, and tax reinvestment. By mandating CBW alongside TKDN, the government promotes a more inclusive, value-based regulatory model, encouraging both foreign and local companies to build sustainable operations rooted in local benefits.

TKDN (Tingkat Komponen Dalam Negeri)

TKDN (Tingkat Komponen Dalam Negeri) refers to the mandatory percentage of goods, services, and labor of domestic origin used in the production of goods or the implementation of services within Indonesia. It is a legal requirement imposed on certain sectors to ensure that domestic industry participation is prioritized and measurable within each project or procurement.

TKDN applies to both goods and services, and is expressed as a percentage value determined through a formal assessment conducted by an accredited verification institution, registered with the Ministry of Industry. 

Read More: Understanding Mandatory & Voluntary SNI Certification

Components of TKDN

The value of TKDN (Domestic Component Level) is calculated by aggregating the weighted contributions of three primary elements: material content, service content (manpower), and overhead/local supporting expenditures. These components reflect how much of the project or product is domestically sourced and executed.

1. Material Content (Goods)
   This component refers to the proportion of physical goods, raw materials, and semi-finished or finished products that originate from within Indonesia and are used in the development, construction, or production process.Materials that are imported or only repackaged domestically do not qualify as local content. The assessment includes the percentage of local material cost versus total material cost.
2. Service Content (Manpower)
   This covers the utilization of Indonesian nationals in project execution, engineering, supervision, testing, operation, and maintenance. The deeper and more complex the role of Indonesian professionals, the higher the TKDN value.This also includes local project management personnel, administrative staff, and contract-based experts involved throughout the lifecycle of the project.
3. Overhead and Supporting Costs
   This component refers to supporting expenditures made within Indonesia, including taxes, local insurances, permits, office operations, and logistics. It demonstrates the economic footprint of the project beyond physical and human resources.These costs must be traceable, properly documented, and paid to Indonesian entities with a registered NPWP (Tax Identification Number).By accurately calculating and reporting each of these TKDN components, companies can enhance their project eligibility in public procurement, licensing processes, and SOE partnerships.

Format of Company Benefit Weighting (BMP) Calculation

In line with Indonesia’s commitment to strengthening domestic industrial participation, the Ministry of Industry has introduced the Company Benefit Weighting (BMP) under No. 02/M-IND/PER/1/2014 – Article 28(2) scoring model as a supplemental metric to the Domestic Component Level (TKDN). The BMP model evaluates qualitative and quantitative contributions made by companies beyond local content, as part of a broader strategy to stimulate national economic empowerment and sustainability.

The BMP framework is used to calculate a percentage-based score derived from key corporate contribution factors. The result directly influences a company’s eligibility and scoring within public procurement, incentive programs, and TKDN compliance audits.

Read More: General Overview of the SNI Certification Process & Workflow

Structure of BMP Assessment

The assessment criteria are divided into five (5) main factors, each assigned with a specific weight (bobot) and a maximum scoring threshold:

1. Empowerment of Micro and Small Enterprises (MSEs) “Memberdayakan Usaha Mikro dan Kecil termasuk Koperasi melalui Kemitraan”
   1. Weight: 5% per IDR 500 million of partnership value
   2. Maximum Weight: 30%
   3. Example Output: 4.5% BMP score for MSE partnerships totaling ~IDR 4.5 billion
      
2. Occupational Health & Safety and Environmental Certification “Kepemilikan Sertifikat SMK3/OHSAS 18000 (30%) dan ISO 14000 (70%)”
   1. SMK3/OHSAS Certification: 6%
   2. ISO 14000 Environmental Management: 14%
   3. Maximum Combined Weight: 20%
   4. Example Output: 3% BMP score for partial certification
      
3. Community Development (CSR Initiatives) “Pemberdayaan Lingkungan (Community Development)”
   1. 3% per IDR 250 million invested in CSR initiatives
   2. Maximum Weight: 30%
   3. Example Output: 4.5% BMP score for ~IDR 375 million in qualified CSR projects
      
4. After-Sales Service Facility Development “Fasilitas Pelayanan Purna Jual”
   1. 5% per IDR 1 billion invested in after-sales infrastructure
   2. Maximum Weight: 20%
   3. Example Output: 3% BMP score for ~IDR 600 million in investment

Key Principles in BMP Evaluation

1. The BMP scoring is cumulative and shall not exceed 100%.
2. Only verified financial commitments and certified standards are accepted.
3. All activities must be implemented within the Republic of Indonesia.
4. Documentation such as contracts, certifications, tax filings, and MoUs are required to validate the BMP claim.
5. The resulting BMP score is valid for three (3) years from the issuance date, pursuant to Article 28(2) of Ministerial Regulation No. 02/M-IND/PER/1/2014.

Read More: Understanding Mandatory & Voluntary SNI Certification

Conclusion

The integration of TKDN (Domestic Component Level) and Company Benefit Weighting (CBW/BMP) within Indonesia’s regulatory framework reflects the government’s strategic commitment to driving sustainable industrial development, empowering domestic stakeholders, and ensuring long-term economic inclusivity.

While TKDN serves as a quantitative benchmark of local content fulfillment, CBW/BMP introduces a broader qualitative dimension, requiring businesses to demonstrate real contributions through job creation, partnerships, compliance, and community impact. Together, these compliance instruments are now essential for companies engaged in public procurement, strategic projects, or sectoral licensing processes in Indonesia.

Both foreign investors and local enterprises must anticipate and internalize these obligations at the earliest stages of project planning to secure eligibility, maintain competitiveness, and avoid regulatory delays or penalties.

At ET Consultant, we offer end-to-end regulatory and legal support to ensure your business meets the full scope of TKDN and CBW (BMP) requirements. Our team provides TKDN certification coordination with licensed verification bodies, BMP scoring advisory and documentation support, Legal structuring for foreign and local compliance, Community development and local partnership strategies, Government liaison and representation for licensing, tendering, and audit readiness

Whether you are a foreign investor, private contractor, or a state-linked entity, we ensure your operations align with the evolving legal standards of Indonesia, strategically and sustainably.

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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.

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