Impact of TKDN Policy Relaxation on Market Access for US Industrial Products in Indonesia

Muhammad Ammar Haitsam Rusly () and Julius Jilbert
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Muhammad Ammar Haitsam Rusly: Hasanuddin University
Julius Jilbert: Hasanuddin University

A chapter in Proceedings of the 10th International Conference on Accounting, Management, and Economics (10th ICAME 2025), 2026, pp 2275-2289 from Springer

Abstract: Abstract The Reciprocal Trade Agreement between Indonesia and the United States marks a crucial turning point in Indonesia’s industrial and trade policy. This agreement fundamentally alters the competitive landscape by granting an exemption to US-origin companies and products from the obligation to comply with the Local Content Requirement, a protectionist policy that has long been a pillar of Indonesia’s industrialization strategy. This research analyzes the multifaceted impacts of this TKDN relaxation. Using a mixed-methods approach that combines regulatory analysis, economic impact assessment, and a political economy theoretical framework, this paper examines the consequences of this policy shift on market access for US industrial products, the competitiveness of Indonesia’s domestic industry, and the dynamics of the bilateral relationship between the two countries. The main findings indicate that while the TKDN exemption significantly enhances market and competitive advantage for US industrial products, particularly in the information and communication technology and medical device, it simultaneously creates substantial competitive challenges for Indonesia’s domestic component and manufacturing industries. The resulting impact is bifurcated: on one hand, there are potential macroeconomic benefits through increased investment and the availability of quality products for consusmers; on the other hand, there is a risk of de industrialization and the weakening of local supply chains. This paper concludes that this preferential TKDN relaxation not only reflects a strategic concession under geopolitical pressure but also forces Indonesia to undertake a fundamental recalibration of its industrial development model at the crossroads of economic sovereignty and integration into global value chains.

Keywords: Local Content Requirement; Reciprocal Trade Agreement; Industrial Policy; Indonesia; United States (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-709-5_159

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DOI: 10.2991/978-94-6239-709-5_159

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