WORLD TRADE  
ORGANIZATION  G/TRIMS/W/61 
8 May 2009 
 (09-2263) 
Committee on Trade-Related Investment Measures Original:   English 
  
 
COMMUNICATION FROM THE EUROPEAN COMMUNITIES  
AND THE UNITED STATES 
 
Certain New and Proposed Measures by Indonesia Addressing Local Content in 
 
Investment in the Telecommunications Sector  
 
  The following communication, dated 6 May 2009, is being circulated at the request of the 
Delegations of the European Communities and the United States.    
_______________ 
 
  The United States and the European Communiti es are concerned about existing and new and 
proposed measures applicable to investment in  Indonesia's telecommunications sector, and in 
particular whether these measures are in conformity  with the Agreement on Trade-Related Investment 
Measures (TRIMs Agreement) and the General Ag reement on Tariffs and Trade (GATT) 1994.  We 
understand that the Ministry of Communications  and Information Technology of Indonesia has 
recently issued a decree – 07/PER/M.KOMINFO/01/200 9 – which appears to set out local content 
requirements of 30 to 50 per cent in the wireless br oadband sector (the "wireless broadband decree").   
 
 Indonesia has in Article 18b of Ministry of Communication and Information Technology 
Decree 38/PER/M.KOMINFO/9/2007 (amending Decr ee 11/PER/M.KOMINFO/04/2007) regarding 
the provision of universal telecommunication service obligation, introduced a local content requirement (Capital Expenditure Requirement, CAPE X) of a minimum of 35 per cent (20 per cent in 
case the provider uses the 2,3 GHz radio frequency spectrum).  It seems that these local content 
obligations are enforced through the licenses gi ven to telecommunication service operators.   
 
 We further understand that a draft decree is being considered by the Ministry of 
Communications and Information Technology that appears to require all telecommunications 
operators to source locally a minimum of 30 per cent of their capital expenditures (the "draft 
telecommunications decree", attached to this submission).  We would appreciate clarification on the 
status of these decrees and their provisions, an y enforcement actions taken under these decrees or 
their provisions and, to the extent they may include provisions falling within the scope of the illustrative list of TRIMs inconsistent with article III and article XI of GATT 1994, steps Indonesia is 
taking to remove them.    
 We have been unable to locate an official tr anslation of the wireless broadband decree in an 
official WTO language.  However, we understa nd Article 17 of this decree to state:   
 
1. Telecommunication equipment used for wireless broadband service as mentioned in Chapter 16 occupying radi o frequency 2.3 GHz and 3.3 GHz must 
fulfil local requirement at least 30 per cent for subscriber station and 40 per cent for 
base station.   G/TRIMS/W/61 
Page 2  
 
  2. Gradually, telecommunication equipm ent used for wireless broadband 
service telecommunication equipment mentione d in clause 1 must fulfil local content 
requirement at least 50 per cent in the next 5 years.   
  Further, we have attached to this submission an unofficial translation of the draft 
telecommunications decree.  We draw Members atten tion to article 2, paragraph 1, which appears to 
require that telecommunications operators use do mestic components as a minimum of 30 per cent of 
their total capital expenditures.  Capital expenditur es are defined as "cost spent by telecommunication 
operators in order to acquire capital goods for telecommunication infrastructure development".  
Further, Article 3, paragraph 5 clarifies that domestic inputs are to be distinguished from foreign 
inputs on the following basis:  "Telecommunicati on material/device based on country of origin", 
"Manpower based on citizenship", and "Working e quipment based on ownership".  Companies are 
required to assess their compliance with these provisions  and report to the Government;  these reports 
are subject to verification by the Government or by private institutions appointed by the Government.   
 
 In accordance with Article VI of the TRIM s Agreement, we request Indonesia to provide 
translations of the above-referenced decrees to th e Committee for review.  We also request Indonesia 
to address the following questions:    1. With regard to Decree 38/PER/M.KOMINFO/9/2007,  the application of local content is done 
through a self-assessment calculation in accordance with  the "applicable provisions ", Article 18 b (3).  
What are these applicable provisions?  How are othe rwise these local content requirements enforced?  
What will be the consequence for a company which fa ils to meet the local content requirement?  Can 
Indonesia please explain how these local content requi rements are consistent with Article II of the 
TRIMS and the annex?    
2. With respect to the wireless broadband decree,  please describe the manner in which the local 
content of the telecommunications equipment will be assessed.  What will be  the consequence for a 
company which fails to meet the local requireme nt?  Have there been instances of enforcement 
actions taken under this provision?    3. The wireless broadband decree seems to contem plate that the local requirement will increase 
from 30/40 per cent to 50 per cent over the next five y ears.  What is the schedule for this increase?  
Why does Indonesia consider this increase to be necessary?    4. Please explain the manner in which, in Indonesia' s view, the local requirement of the wireless 
broadband decree is consistent with Article II of the TRIMs Agreement, and the annex (illustrative 
list).   
 5. What is the current status of the draft tel ecommunications decree?  Is Indonesia of the view 
that this draft decree, as currently constituted, is  consistent with Article II of the TRIMs Agreement 
and the annex (illustrative list) as well as Article III of the GATT?  If so, what  is the basis for this 
conclusion?  If not, what steps are being taken to amend or withdraw this draft decree?   
 
6. Pursuant to article 5, paragraph 2 of th e draft telecommunications decree, the government 
may employ a private survey institution to verify wh ether the local content requirement has been met.  
Given the sensitive nature of the information bei ng evaluated, how does Indonesia propose to ensure 
that such information is protected from public release?   
  G/TRIMS/W/61 
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  DRAFT  
 
MINISTER OF COMMUNICATIONS AND INFORMATION TECHNOLOGY  
OF THE REPUBLIC OF INDONESIA 
 
REGULATION OF THE MINISTER OF COMMUNICATIONS AND INFORMATION 
TECHNOLOGY  
 
NUMBER:  ................................. 
 
REGARDING  
 
PROCEDURES FOR THE ASSESSMENT OF DOMESTIC COMPONENT CONTENT 
(TKDN) IN TELECOMMUNICATION OPERATION 
 
BY THE GRACE OF THE ONE ALMIGHTY GOD  
MINISTER OF COMMUNICATIONS AND INFORMATION TECHNOLOGY 
 
 Considering :  a. Whereas in the context of effective use of domestic production, it is 
necessary to arrange the utilization of domestic production in 
telecommunication operation activities;   
  b. Whereas the arrangement of domes tic production utilizati on is intended to 
empower and develop domestic teleco mmunication supporting industries;   
  c. Whereas the empowerment and development of domestic telecommunication 
supporting industries are intended to improve competitiveness of domestic 
goods/services and to provide economic bene fits for the interest of national 
economy;   
  d. Whereas to provide reference to the utilization of products of domestic 
telecommunication supporting industries, it is necessary to prepare technical 
guidelines for the utilization of dom estic products with regard to 
telecommunication operation activities;   
  e. Whereas based on consideration as intende d in sub-articles a, b, c, and d, it is 
necessary to issue a Ministerial Regulation.   
 In view of :  1. Law Number 36 Year 1999 regardi ng Telecommunication (State Gazette of 
the Republic of Indonesia Year 1999 Number 154, Supplement to the State 
Gazette of the Republic of Indonesia Number 3881);   
  2. Government Regulation Number 52 Year 2000 regarding Telecommunication 
Operation (State Gazette of the Republic of Indonesia Year 2000 Number: 107, Supplement to the State Gazette of the Republic of Indonesia Number:  3980);   
  3. Regulation of the President of the Republic of Indonesia Number:  
9 Year 2005 regarding the Position,  Duties, Functions, Organizational 
Structure and Working Procedures of State Ministries of the Republic of Indonesia as amended with Regulation of the President of the Republic of Indonesia Number:  94 Year 2006;   
  4. Regulation of the President of the Republic of Indonesia Number:  
10 Year 2005 regarding the Position,  Duties, Functions, Organizational 
Structure and Working Procedures of State Ministries of the Republic of Indonesia as amended by Regulation of the President of the Republic of Indonesia Number:  72 Year 2007;   G/TRIMS/W/61 
Page 4  
 
    5. Ministerial Decree Number:  KM.20 Year 2001 regarding 
Telecommunication Network Operation as most recently amended with Regulation of the Minister of Comm unications and Information Technology 
Number:  06/P/M.Kominfo/O4/2008;   
  6. Ministerial Decree Number:  KM.21 Year 2001 regarding 
Telecommunication Service Operation as most recently amended with 
Regulation of the Minister of Comm unications and Information Technology 
Number:  07/P/M.Kominfo/O4/2008;   
  7. Regulation of the Minister of Communications and Information Technology 
Number:  01/P/M.KOMINFO/4/2005 regarding Organization and Working 
Procedures of the Ministry of Communications and Information Technology;   
  8. Regulation of the Minister of Communications and Information Technology 
Number:  03/P/M.KOMINFO/4/2005 regarding Adjustment of Terms in Several Decrees/Regulations of the Minister of Communications on Special Contents in the Post and Telecommunication Sector;   
  9. Ministerial Regulation No. 07/PER/M.KOMINFO/2/2006 regarding 
Provision on the use of 2.1 GHz radio frequency band for Cellular Mobile Network Operation;   
  10. Regulation of the Minister of I ndustry No:  11/M.Ind/PER/3/2006 regarding 
Technical Guidelines for the utilization of domestic production.   
 
HAS DECIDED: 
 To Stipulate : REGULATION OF TH E MINISTER OF COMMUNICATIONS AND 
INFORMATION TECHNOLOGY REGARDING PROCEDURES FOR THE ASSESSMENT OF DOMESTIC  COMPONENT CONTENT (TKDN) 
IN TELECOMMUNICATION OPERATION. 
 
CHAPTER I 
GENERAL PROVISIONS  
 
Article 1 
 
Referred to herein as:   
 1. Telecommunication Operation shall be activiti es with regard to telecommunication provision 
and services that enable the operation of communication;   
2. Telecommunication network operation shall be  activities with regard to telecommunication 
network provision and service that enable  the operation of telecommunication;   
3. Telecommunication service operation shall be  activities with regard to telecommunication 
service provision and service that enable the operation of telecommunication;   4. Telecommunication Operator shall be teleco mmunication network and or service operator;   
5. Capex  (capital expenditures) shall be the am ount of cost spent by telecommunication 
operators in order to acquire capital goods for te lecommunication infrastructure development;   
6. Telecommunication supporting industries shall be the industry producing goods and/services 
that support telecommunication activities;    G/TRIMS/W/61 
 Page 5 
 
 
  7. Industry shall be economic activities inte nded to produce goods, th rough raw material 
processing, goods manufacture/assembly process from raw material or components thereof causing 
changes in characteristics, forms, and or functions  of the goods so as to have higher utilization and 
economic values, including technical service indu stry activities closely related thereto, and 
information and technology industry;   
8. Domestic products shall be goods/services including design and engineering produced or 
made by the companies making investment and manufacturing in Indonesia, the production or 
manufacturing process of which enables the use of imported raw materials/components;   9. Domestic Component contents (TKDN) shall be the amount of domestic components contained in the goods, services, and combination of goods and services;   
10. Domestic components with regard to goods sh all be the use of raw materials, design and 
engineering containing elements of manufacture, fabrication, assembly, and finishing of work 
performed in Indonesia;   11. Domestic component with regard to services sh all be services provided in Indonesia by using 
domestic experts and software;   
12. Domestic component with regard to combina tion of goods and services shall be the use of raw 
materials, design and engineering containing elements of manufacture, fabrication, assembly, and finishing of work as well as services performed in In donesia by using domestic experts and software;   
13. Self assessment of TKDN  by telecommunication operators shall be the calculation of results of 
TKDN for capital expenditures (capex) assessed by the telecommunication operators themselves;   
14. Clarification shall be activities of reques ting further explanation from telecommunication 
operators regarding self-assessment of TKDN ;   
15. Verification shall be activities with regard to the verification of the results of self-assessment 
of TKDN conducted by Telecommunication Operators;    
CHAPTER II 
OBLIGATIONS OF LICENSE HOLDERS 
 
Article 2 
 
1. Every telecommunication operator shall be ob ligated to use domestic component (KDN) at 
the minimum of 30 per cent of total capital expe nditures (capex) in telecommunication network 
development.   
2. Capital expenditures (capex) as intended in pa ragraph (1) shall be the amount of expenditures 
on the cost spent by telecommunication opera tors in order to acquire capital goods for 
telecommunication infrastructure development.   3. Capital goods acquisition cost as intended in  the aforementioned paragraph (2) shall not 
include cost for land procurement, building de velopment, building lease, building/structure 
maintenance and employees' salary.   4. Building construction and land procurement as in tended in paragraph (3) shall be intended for 
the purpose of office building.   G/TRIMS/W/61 
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  CHAPTER III 
DOMESTIC COMPONENT CONTENTS  
 
Article 3 
 1. Percentage of Domestic Component contents  (TKDN) with regard to capital expenditure 
(capex) as intended in article (2) shall be calculate d based on the ratio of total capex subtracted by 
foreign capex to total capex .   
 2. Formulation of TKDN on capex as intended in paragraph (1) shall be based in the following 
ratio:   
 
%  TKDN ( capex )  =  Total capex  – Foreign capex
 x 100% 
Total capex  
 
or 
 
%  TKDN ( capex )  =  Domestic capex  x 100% 
Total capex 
 
3. Capital expenditure (capex) as intended in pa ragraph (1) shall include expense cost with 
regard to:   
 
a. Engineering.    Cost spent for engineering activities with regard to telecommunication infrastructure 
development.   
b. Telecommunication Material /Device.   
 Telecommunication material/device acqui sition cost used in telecommunication 
infrastructure development.   
c. Manpower.    Cost for manpower directly involved in telecommunication infrastructure 
development.   
d. Working Equipment.   
 Work equipment procurement cost used in telecommunication infrastructure 
development.   
e. Supporting Service Cost.    Cost for the provision of supporting services in telecommunication infrastructure 
development (among other things such as t opography survey cost, transportation cost, 
installation fee, etc.).   
 4. Format and element of calculation of TKDN as intended in the aforemen tioned paragraphs (2) 
and (3) shall be as follows:    G/TRIMS/W/61 
 Page 7 
 
 
   
Components of 
Capex Value of 
Capex 
(IDR) KDN Capex 
(IDR) KLN Capex  
(IDR) % of TKDN 
N° 
(a) (b) (c) (d) (e) = (c)/( ∑b) or 
(b-d)/(∑b) 
1. Engineering b1 c1 d1 e1 = c1/∑b or  
(b1-d1)/ ∑b 
2. Telecommunication 
Material/Device  b2 c2 d2 e2 = c2/∑b or  
(b2-d2)/∑b 
3. Manpower b3 c3 d3 e3 = c3/∑b or  
(b3-d3)/∑b 
4. Working Equipment  b4 c4 d4 e4 = c4/∑b or  
(b4-d4)/∑b 
5. Supporting Services  b5 c5 d5 e5 = c5/∑b or  
(b5-d5)/∑b 
 Total ∑b= b1+...+b5 ∑c= c1+...+c5 ∑d= d1+...+d5 ∑e = ∑c/∑b or 
(∑b-∑d)/∑b 
 
% of TKDN (capex)  =  Total capex – Foreign capex  x 100%   =  (∑b-∑d) x 100% 
Total capex     ∑b 
 
or 
 
% of TKDN (capex)  =  Domestic Capex  x 100% = ∑c x 100% 
Total capex  ∑b 
 
5. Basis for the categorization of Domestic Component (KDN) and Fo reign Component (KLN) 
as intended in paragraph (4) shall be calculate d by considering the following components:   
 
a. Telecommunication material/device based on country of origin;   
b. Manpower based on citizenship;   
c. Working equipment based on ownership;   
 
6. The value of domestic component (KDN) ca pex as intended in paragraph (4) shall be 
calculated based on the following formula:    
Value of KDN Capex = (acquisition valu e for capex component) x % of TKDN capex 
 
7. Telecommunication operators may use percentage of TKDN – telecommunication 
material/device as intended in paragraph (6) of domestic goods and services s upplier being the vendor 
of telecommunication operator in telecommunica tion infrastructure development and or show 
domestic expenditures receipts;   
8. Percentage of TKDN of telecommunication ma terial/device provided by domestic goods and 
services supplier as intended in paragraph (7) must have been ratified by the relevant agency or 
independent survey institution appointed by the government;   G/TRIMS/W/61 
Page 8  
 
  9. In the event that local content found in the procurement of telecommunication 
material/goods/device reaches the amount of ≥ 40 per cent, the value of KDN for capex shall be 
assessed at 100 per cent.   
CHAPTER IV 
SELF-ASSESSMENT AND VERIFICATION OF  
DOMESTIC COMPONENT CONTENT  
 
Article 4 
 
1. Telecommunication operator shall be obligat ed to calculate and conduct self-assessment on 
the results of TKDN capex as intended in article (2).   2. Self-assessment on the results of TKDN as intended in paragraph (1) shall be conducted 
based on accountable data from:    
a) Proprietary data;   
b) Data owned by goods/services industry (vendor);  or c) List of inventory of domestic goods/services issued by the Government.   
 3. In the event that in conducting self-assess ment on the results of TKDN as intended in 
paragraph (1), the telecommunication operator fails  to appropriately account  for its supporting data, 
the component presented in the self-assessment shall be declared as foreign component.   
 
Article 5 
 
1. The Director General may verify the valid ity of the results of TKDN subject to self-
assessment by the telecommunication operator.   
2. In conducting verification as intended in pa ragraph (1), the Director General may use 
independent survey institution which is competen t in its field and has been appointed by the 
Government.   3. Verification shall be conducted by usin g post audit system on an annual basis.   
 
CHAPTER V 
REPORTING 
 
Article 6 
 1. The results of TKDN subject to Self-Assessmen t as intended in Article 5 paragraph (1) must 
be reported to the Director General at the end of year.   2. Report on the Result of Domestic Component  Content (TKDN) as intended in paragraph (1) 
must comply with the format as inte nded in the Attachments hereto.   
3. Progress Report on Domestic Component cont ent (TKDN) as intended in paragraph (1) must 
be completed with statement claiming that the report made is valid and accurate as well as signed by 
the President Director on a stamp duty.   
 
Article 7 
 
1. The Director General may establish a team assi gned to conduct coordinatio n, supervision, and 
evaluation on the implementation of guidelines for the utilization of domestic products.   
2. Team as intended in paragraph (1) may con duct monitoring and preside over the production 
process as well as the implementation of domestic product.   3. Team as intended in paragra ph (1) shall report the results of the implementation of duties as 
intended in paragraphs (1) and (2) to the Minister.    G/TRIMS/W/61 
 Page 9 
 
 
  CHAPTER VI 
SANCTION 
 
Article 8 
 
The telecommunication Operator violating the pr ovisions hereof shall be subject to sanction 
in accordance with the applicable pr ovisions of laws and regulations.   
 
CHAPTER VII 
CLOSING PROVISIONS 
 
Article 9 
 
This Regulation shall come into effect as from the date of its stipulation.   
 
Stipulated in: J A K A R T A 
On:   =================================== 
 
MINISTER OF COMMUNICATIONS AND 
INFORMATION TECHNOLOGY  
 
 
MOHAMMAD NUH 
 
 C.C to
: 
 
1. The Coordinating Minister for the Economy;   
2. The Minister of Finance;   
3. The Minister of Law and Human Rights;   
4. The State Secretary;   
5. The Head of State Audit Board;   
6. The Head of National Police;   
7. The Attorney General of the Republic of Indonesia;   
8. The Provincial Governors throughout Indonesia;   
9. The Secretary General, Inspector General, the Di rector Generals and the Heads of Agencies in 
the environment of the Ministry of Communications and Information Technology;   
10. The Head of Bureau and Heads of Central Ag encies in the environment of the Secretary 
General of the Ministry of Communicat ions and Information Technology.   G/TRIMS/W/61 
Page 10  
 
   
 ATTACHMENT : REGULATION OF THE MINISTER OF 
COMMUNICATIONS AND INFORMATION TECHNOLOGY  
 Number : ………/PER/M.KOMINFO/……../……… 
 On :  
 
 
Criteria for the Calculation of Domestic Component Content (TKDN) 
 
I. Composition of Domestic Component contents (TKDN)  
 
 DESCRIPTION KDN 
% KLN 
% WEIGHT 
% TKDN 
% 
1. Engineering   10  
2. Telecommunication 
Material /device    50  
3. Workers   15  
4. Working equipment   10  
5. Supporting services   15  
 Total     
    100  
 
II. Criteria for Domestic Component  
 
1. Engineering  
  a. Citizenship   b. Working on Network Operation project 
  c. Execution of work by third party  
 2. Telecommunication Network Material/Device 
 a. Country of origin of the devices manufacturer  b. Meeting the applicable document requirements 
 c. Telecommunication material/device va lue is calculated upon arrival at the 
location 
 
 3. Manpower 
  a. Types of citizenship:   
- Foreign 
- Local 
  b. Status/position in the project 
  c. Payment system by using third party service 
 
 4. Working equipment 
  No Ownership   Percentage of TKDN 
  1) Domestic  100 per cent 
  2) Domestic + Foreign 75 per cent + proportion of share ownership  
  3) Foreign   0 per cent  G/TRIMS/W/61 
 Page 11 
 
 
   5. Supporting Services 
  a. Project Management 
  b. Construction Service   c. Training Service   d. Consultant Service 
  e. Transportation Service 
  f. Public Service G/TRIMS/W/61 
Page 12  
 
   
 ATTACHMENT : REGULATION OF THE MINISTER OF 
COMMUNICATION AND INFORMATIONS 
 Number : ………/PER/M.KOMINFO/……../………  On :  
 
 
FORMAT OF THE REPORTING OF RESULTS OF DOMESTIC COMPONENT 
CONTENTS (TKDN) ASSESSMENT ON THE NETWORK OPERATOR  
 
N° Capex Component Capex 
Value 
(IDR) KDN Capex
(IDR) KLN Capex 
(IDR) % of 
WEIGHT % of TKDN 
1. Engineering b1 c1 d1  
10 e1 = c1/∑b or  
(b1-d1)/∑b 
2. Telecommunication 
Material/Devices  b2 c2 d2  
50 e2 = c2/∑b or  
(b2-d2)/∑b 
3. Workers b3 c3 d3  
15 e3 = c3/∑b or  
(b3-d3)/∑b 
4. Working equipment b4 c4 d4  
10 e4 = c4/∑b or  
(b4-d4)/∑b 
5. Supporting Services b5 c5 d5  
15 e5 = c5/∑b or  
(b5-d5)/∑b 
 Total ∑b= 
b1+...+b5 ∑c= 
c1+...+c5 ∑d= d1+...+d5 
100 ∑e = ∑c/∑b or 
(∑b-∑d)/∑b 
 
 
............... (place) .........................,  ............ (date and month) ............, 20...... 
 
Signed on a Rp.6000 .- stamp duty 
 
DIRECTOR OF PT..................... 
  
 
__________