Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Selling to the government of Indonesia generally requires the use of a local agent or representative. Even where not officially required, a qualified local company can provide important insights and maintain the relationships necessary to succeed as well as to minimize cultural trade barriers.
Procurement by the government in Indonesia is regulated and facilitated by the Procurement Agency, LKPP (Lembaga Kebijakan dan Pengadaan Barang/Jasa Pemerintah). LKPP runs an online e-catalog website and a site for government tender information. Companies seeking to sell to the government should consider getting listed in the e-catalog which must be done via a locally registered Indonesian company. Currently the e-catalog includes mostly heavy equipment, medicine and medical equipment, motorized vehicles, and technology (hardware and software). In principle, medicines and medical equipment must have marketing authorization from local regulatory authorities in order to be considered for government procurement. This system is primarily for central government and the parliament, local and provincial governments are gradually expected to start using it.
The five public procurement methods are:
- direct purchase
- direct vendor appointment
- limited tender
- open tender.
Each procedure is specifically regulated, regarding value, availability of local products/services, (international) patent on products/services, ability of a local company to do the job, or other criteria like goods/services for defense or intelligence. In general, exemptions to the procedures are allowed when certain cases before or during procurement activity are met.
Indonesia is not a Party to the WTO Agreement on Government Procurement but has been an observer to the WTO Committee on Government Procurement since October 2012.
Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to “Project Financing” Section in “Trade and Project Financing” for more information.
“U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.”
Financing of Projects
Indonesia has prioritized infrastructure development in its medium-term development plan, or Rencana Pembangunan Jangka Menengah 2020-2024 (RPJM). The Government’s estimate for infrastructure development during this period is U.S. $437 billion, of which 41.25% is expected to come from national and regional government budgets, 22.23% is expected to come from state-owned enterprises, and 36.52% is expected to come from private entities. For more information, visit the website of the Ministry of National Development Planning website.
U.S. firms should familiarize themselves with opportunities available through the Asian Development Bank and with World Bank-funded projects. The U.S. Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the Asian Development Bank and the World Bank. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects, and advocate on behalf of American bidders. Learn more by contacting the Commercial Liaison Offices to the Asian Development Bank and the World Bank.
- Export-Import Bank of the United States
- U.S. International Development Finance Corporation
- U.S. Trade and Development Agency
- Small Business Administration Office of International Trade
- U.S. Department of Agriculture Commodity Credit Corporation
- U.S. Agency for International Development