ANNOUNCED AS TEMPORARYNo
Public procurement localisation
Article 43 of the law on the defence industry states that the Indonesian military is "required to use defence equipment and security equipment of domestic production" (para. 1, own translation). Paragraph 2 of the article also stipulates that the maintenance and repair of defence and security equipment shall be carried out within Indonesia.
If the defence industry is incapable of meeting the national military demand, foreign products may be procured through a direct channel with the government or the manufacturer (para. 3). In the case of national strategic interest, the procurement will require a "consideration" by the parliament (para. 4). Furthermore, the procurement of foreign products shall be in line with a number of requirements (para. 5):
Paragraph 6 of the article further states that "the participation of the Defense Industry as referred to in paragraph (5) letter b shall be purchased under a trade-off mechanism, including offset."
In conclusion, article 43 of the law de facto states that unless an 85% local content requirement of the procured military products can be satisfied, the selling country will have to "offset" the lost Indonesian production, by purchasing the same value-amount equalling the 85% of Indonesian products.
The law came into affect on 5 October 2012.
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