Compliance Analysis of Indonesia’s LCR Measures: International Trade and Investment Agreement Perspectives

The rise in geopolitical tensions and economic nationalism has contributed to a global shift from a relatively liberal economic order toward a more protectionist regime. Amongst the tools increasingly used by governments are local content requirements (LCRs). Indonesia – recently ranked as the most protectionist country in the 2025 International Trade Barrier Index – has relied heavily on LCRs over the past decade to shield domestic industries and advance along global value chains. These measures are becoming more prevalent, particularly in sectors designated as strategic by the Indonesian government, including mining, manufacturing, pharmaceuticals, telecommunications, and, more recently, the automotive sector (especially electric vehicles). However, the proliferation of LCRs raises concerns about Indonesia’s compliance with its obligations under international trade and investment agreements, including World Trade Organization (WTO) rules and various bilateral and regional treaties. This discussion paper analyses Indonesia’s LCR policies through the lens of international trade and investment law, assessing their consistency with national treatment obligations, prohibitions on performance requirements, and restrictions on subsidies. While certain LCRs may fall under permissible exceptions – such as those related to government procurement – others may be vulnerable to legal challenge. The paper concludes by offering recommendations for the Indonesian government to reassess and recalibrate its LCR policies, with a view to minimising legal risks and avoiding potential trade and investment disputes.