Public procurement of goods and services has become more restrictive with the new Presidential Regulation 12/2021. The new regulation now includes a provision that in procuring goods/services, at least 40% (forty percent) of the products/services procured by the central government and regional governments must originate from domestic production by MSB and Cooperatives [segments closed to FDI due to minimum captial requirement]. No such percentage was required under the Previous Regulation [see below restrictions that applied previously]. The new regulation also increased the limit on the amount for the procurement of goods/construction works/other services from micro-level businesses and cooperatives from Rp2,500,000,000 to Rp15,000,000,000. An exemption from the maximum amount of Rp15,000,000,000 can be applied for if the project has highly technical requirements and the project cannot be conducted by a micro-level business or cooperative.
Previously, rules on public procurement of services, including construction of works, consultations and other services, gave preferential treatment to majority-owned Indonesian services firms, and the rules on public procurement of goods gave preferential treatment to companies partnering with Indonesian-owned SMEs [foreign-invested companies do not qualify as SMEs because of minimum capital requirements] in addition to meeting domestic content in terms of goods and services (which is considered domestic only when the service supplier is majority-owned by Indonesians). But no minimum statutory market reservation for SMEs/Cooperatives existed in terms of percentage of budget expenditure on public procurement.
"26. The provisions of Article 65 are amended so that it reads as follows:
Part One Participation of
Small Businesses and Cooperatives
Art 65
(1) Small business consists of Micro and Small Enterprises.
(2) Ministries / Institutions / Local Governments are required to use products of small businesses as well as cooperatives from domestic production.
(3) Ministries / Institutions / Regional Governments as referred to in paragraph (2) are required to allocate at least 40% (forty percent) of the budget value for goods / services expenditures of the Ministries / Institutions / Regional Governments.
(4) The package for procurement of goods / construction work / other services with a ceiling value of up to Rp. 15,000,000,000.00 (fifteen billion rupiah) is intended for small businesses and / or cooperatives.
(5) The ceiling value of the procurement budget as referred to in paragraph (4) is exempted for work packages that require technical capabilities that cannot be fulfilled by small businesses and cooperatives.
[...]
27. The provisions of paragraph (2), paragraph (3) and paragraph (4) of Article 66 are amended, and between paragraph (3) and paragraph (4) is inserted 1 (one) paragraph, namely paragraph (3a), so that Article 56 reads as follows :
Art 66
(1) Ministries / Institutions / Regional Apparatus are required to use domestic products, including national design and engineering.
(2) The obligation to use domestic products as referred to in paragraph (1) is carried out if there are domestic products that have the total value of the Domestic Component Level (TKDN) plus the Company Benefit Weight (BMP) value of at least 40% (forty percent).
(3) The value of TKDN and BMP as referred to in paragraph (2) refers to the inventory list of domestically produced goods / services issued by the ministry that administers government affairs in the industrial sector.
(3a) The obligation to use domestic products as referred to in paragraph (2) shall be carried out at the stage of Procurement Planning, Procurement Preparation, or Selection of Providers.
(4) The provisions as referred to in paragraph (3a) shall be stated in the RUP, technical specifications / KAK, and Bidding Documents.
(5) Procurement of imported goods can be carried out, in terms of:
a. the goods cannot be produced domestically; or
b. domestic production volume is not able to meet demand.
(6) LKPP and / or Ministries / Institutions / Local Governments increase the inclusion of domestic products in the electronic catalog.[...]" (PRESIDENTIAL REGULATION OF THE REPUBLIC OF INDONESIA NUMBER 12 YEAR 2021 ON GOVERNMENT PROCUREMENT OF GOODS / SERVICES [google translation])
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Previously: up to 2020 below
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"Chapter 1 - GENERAL REQUIREMENTS
Part One
Definition
article 1
In this Ministerial Regulation what is meant by: [...]
2. Domestic products are goods / services including design and engineering which are produced or carried out by industrial companies investing and producing in Indonesia. [...]
5. Services are work services that include construction services including integrated construction services, consultancy services, and other services, whose technical planning and specifications are determined by the Budget User and the implementation process is supervised by the Budget User.
6. Integrated Construction Services (Engineering, Procurement and Construction Services / EPC Services), hereinafter referred to as EPC Services, are planning services, procurement of materials and equipment, implementation services and supervision services carried out in an integrated manner.
7. Domestic Component Level, hereinafter referred to as TKDN, is the amount of domestic components in goods, combination of goods, services, combination of services, and combination of goods and services.
8. Corporate Benefit Weight, hereinafter referred to as BMP, is the value of appreciation to companies investing in Indonesia for empowering micro and small businesses and cooperatives through partnerships, maintaining health, safety and environment (K3L), having a quality management system certificate, and provide maintenance facilities and after-sales services.
[...]
CHAPTER II - LOCAL PRODUCT
Part One - Use of Domestic Products
Article 3
(1) The use of domestic products in the procurement of government goods / services is an effort to drive growth and empower industries in Indonesia, through the provision of awards for domestic users and producers.
(2) The award as intended in paragraph (1) is in the form of mandatory use of domestic products and / or provision of price preferences in the process of procuring government goods / services.
[...]
Article 6
In the plan for the procurement of goods / services, Budget Users classify goods with the following conditions:
a. goods are required, namely domestically produced goods which must be used to meet the requirements of need and have the total TKDN achievements and BMP achievements of more than or equal to 40% (forty percent) and TKDN achievements of goods more than or equal to 25% (twenty five percent );
b. maximized goods, namely domestically produced goods that meet the requirements of need and have the total TKDN and BMP achievements of less than 40% (forty percent) and have TKDN achievements of goods more than or equal to 15% (fifteen percent); and
c. empowered goods, namely domestically produced goods that meet the requirements of need and have a TKDN achievement of goods less than 15% (fifteen percent) and more than or equal to 10% (ten percent).
[...]
CHAPTER III - UTILIZATION OF DOMESTIC SERVICE COMPANIES
Part One - Domestic Service Companies
Article 10
(1) The provision of services must involve Domestic Service Companies.
(2) The Domestic Service Company as referred to in paragraph (1) is a business entity that produces services which is established in accordance with the prevailing laws and regulations in Indonesia and works and is domiciled in the territory of the Unitary State of the Republic of Indonesia with more than 50% share ownership (fifty percent) by State-Owned Enterprises, Region-Owned Enterprises and / or Indonesian Citizen Individuals, who have voting rights, dividend rights, and the right to determine / appoint members of the board of directors and / or amend the company's articles of association, and at least 2 / 3 (two thirds) of the total number of directors are Indonesian citizens.
Article 11
(4) Domestic Service Companies as referred to in Article 10 paragraph (2) may form consortiums / joint operations with other Domestic Service Companies or with National Service Companies if the capacity of one of the Domestic Service Companies is insufficient.
(5) Domestic Service Companies or a consortium of Domestic Service Companies and National Service Companies as referred to in paragraph (1) may cooperate with foreign service companies in the form of a consortium / joint operation or subcontract part of the work to foreign service companies.
Article 12
(1) A Domestic Service Company must become a lead firm in a consortium / joint operation for on-shore construction services.
(2) Domestic Service Companies or consortium of Domestic Service Companies are required to carry out at least 50% (fifty percent) of the implementation of work based on the contract value in the event of conducting a consortium with National Service Companies and / or with foreign service companies.
(3) In off-shore construction service work, the Domestic Service Company is obliged to perform the work at least 30% (thirty percent) of the minimum limit as referred to in paragraph (2) in accordance with the size of the contract value.
(4) The physical implementation of construction service work must be done in the territory of the Republic of Indonesia at least 50% (fifty percent) in accordance with the size of the value of the service.[...]" (Ministry of Industry issued regulation 02/M-IND/PER/1/2014 CONCERNING GUIDELINES FOR IMPROVING THE USE OF DOMESTIC PRODUCTS IN THE PROCUREMENT OF GOVERNMENT GOODS / SERVICES [google translated])
Presidential Regulation No. 12 of 2021 on Government Procurement of Goods and Services [google translation]
Presidential Regulation No. 16 of 2018 concerning Government Procurement of Goods / Services
Ministry of Industry issued regulation 02/M-IND/PER/1/2014 CONCERNING GUIDELINES FOR IMPROVING THE USE OF DOMESTIC PRODUCTS IN THE PROCUREMENT OF GOVERNMENT GOODS / SERVICES [google translated]
[<a href="https://peraturan.go.id/files/2021/ps12-2021.pdf">Reg</a>],[<a href="https://jdih.lkpp.go.id/regulation/download/terjemahan-resmi-peraturan-presiden-nomor-16-tahun-2018/1">Reg</a>],[<a href="https://peraturan.go.id/files/2014/bn45-2014.pdf">Reg</a>]