In response to the external pressure brought by the 32% import tariff imposed by the United States on Indonesia, Indonesian President Prabowo recently instructed the Red and White Cabinet to cancel import quotas and gradually ease the TKDN (Domestic Content Regulation) requirements. The aim is to enhance market competitiveness, attract foreign investment, and boost domestic economic development.
I. Easing the TKDN Policy and Avoiding One-Size-Fits-All Enforcement
At an economic symposium in Jakarta, Prabowo stated that although the TKDN policy initially had a nationalist hue, it should be flexibly adjusted according to the actual situation in the current global economic context. He pointed out that overly strict TKDN requirements might weaken the market competitiveness of domestic products and therefore should not be enforced compulsorily. Prabowo emphasized that improving the level of domestic manufacturing requires a systematic project and cannot rely solely on the TKDN policy.
II. Canceling Import Quotas and Technical Reviews
To lower the barriers for businesses to enter the market, Prabowo has instructed the cancellation of the import quota system, allowing all enterprises to freely import goods. In addition, Prabowo has decided to simplify the technical review procedures, considering that some technical review requirements are too stringent and no longer suitable for the current economic development needs. This measure will help enhance trade efficiency and reduce unnecessary administrative obstacles.
III. Simplifying Quarantine Procedures to Avoid Redundant Reviews
Regarding quarantine, Prabowo proposed that if certain products have already undergone strict quarantine procedures in the exporting country, Indonesia will no longer conduct redundant quarantine. He said that negotiations should be held with the exporting countries, and if their quarantine standards are up to par, Indonesia can directly clear the goods. This measure will greatly improve logistics efficiency and reduce time and cost waste.
Indonesia’s Investment Environment: Multiple Advantages to Boost Business Development**
It is not just the aforementioned policies. In recent years, Indonesia has been continuously optimizing its investment environment to attract foreign enterprises:
Policy-Friendly: The government has gradually lowered investment thresholds, simplified approval processes, and introduced tax incentives, creating a relaxed environment for foreign investment.
Huge Market Potential: As the world’s fourth most populous country, Indonesia has a vast consumer market and a youthful population structure, with strong economic growth momentum. In 2022, Indonesia’s GDP reached $1.32 trillion, with an annual growth rate of 5.3%.
Resource and Geographical Advantages: Indonesia is not only rich in natural resources (such as minerals and rubber), but its geographical location also makes it an important transportation hub connecting Asia and Oceania, as well as the Pacific and Indian Oceans.
Deepening China-Indonesia Cooperation: China has become Indonesia’s second-largest source of foreign investment. It is projected that China’s investment in Indonesia will reach $7.43 billion in 2024. The Indonesian government has clearly stated that it will continue to deepen economic cooperation with China, providing businesses with stable policy expectations.
Sending Investment Signals and Accelerating the Creation of an Open Market
Through this series of reforms, the Indonesian government has sent a clear signal: it welcomes foreign investment into its market. President Prabowo emphasized that easing trade restrictions and simplifying regulations will enhance market confidence, elevate Indonesia’s position in the global supply chain, and drive sustained economic growth.
These policies bring new opportunities for Chinese investors entering the Indonesian market. As business owners venturing into Indonesia, seizing policy benefits and flexibly positioning themselves are key to standing out in the Indonesian market!
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Tariff Breakthrough
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Avoiding the U.S. 125% Additional Tariff List on China: By leveraging the Indonesia-ASEAN Free Trade Area (AFTA) and the Regional Comprehensive Economic Partnership (RCEP), manufacturers can enjoy zero-tariff export benefits for 90% of goods within the region.
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Cost-Locking Winning Strategy
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Tax Policy: Companies in the special zones enjoy a 15-year corporate income tax exemption (full exemption for the first 5 years and a 50% reduction for the next 10 years), and import duties on equipment are fully exempted.
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Labor Costs: The workforce under 25 years old accounts for 38%, with the average monthly wage in the manufacturing sector being only one-third of that in China.
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Energy Assurance: The electricity price is approximately 0.5 RMB per kilowatt-hour, with peak hours at 0.75 RMB.
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Employee Social Security: Health insurance is paid by both the employer and employee at 1% of the salary each, pension insurance is paid by the employer at 8.4% of the salary, and work injury insurance is paid by the employer at 0.24% of the salary. (Total less than 10%)
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Ready-Made Factory Space for a Head Start
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1 million square meters of high-standard factories in the Batang Economic Special Zone, Central Java, available for immediate rent and use:
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✓ Complete supporting facilities
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✓ Adjacent to highways
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✓ Bonded area
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✓ Green and energy-efficient factories
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✓ “One-stop” services
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