The government is preparing an industrial concept to turn Indonesia into one of Asia’s automotive production hubs, Industry Minister M.S. Hidayat says.
Hidayat said in Jakarta on Tuesday the concept was being formulated and would propose the provision of fiscal incentives to support automotive component production.
“With such fiscal incentives we hope more automotive component plants and other supporting industries will be established in Indonesia,” Hidayat said after the opening of a transportation equipment exhibition in Jakarta on Tuesday.
At present, the Indonesia’s automotive companies are mostly involved in vehicle assembling activities, while most of the components used are imported.
The long-term plan to turn Indonesia into an automotive production base was needed to allow the country to take advantage of the establishment of the ASEAN common market by 2015.
The establishment of the ASEAN single market, officially known as the ASEAN Economic Community, which will eliminate tariff barriers on goods and services within the region, will create bigger markets for ASEAN member countries, Hidayat said.
“Indonesia should be able to benefit from the single market, and not just become a market for other ASEAN countries,” he said.
Hidayat said as part of the programs in strengthening the country’s automotive industry, the government was working on a plan to produce cheap but environmentally friendly cars.
Several major car producers including several from Japan had been invited to take part in the green car project, he said.
“We have also asked major car producers to relocate their plants to Indonesia,” Hidayat said.
The Industry Ministry has also proposed to the Finance Ministry to provide fiscal incentives to automotive companies involved in the production of “green” cars, he said.
“I have talked to the finance minister about the need to provide fiscal incentives such as tax exemption,” Hidayat said.
According to the Industry Ministry’s latest data, Indonesia’s four-wheeled vehicle production declined by 9.45 percent in 2009 because of a drop in demand. Meanwhile, production of motorcycles increased by 1.25 percent.
The ministry estimates motorcycle production will increase 13.38 percent this year.
In 2009, four-wheeled vehicle assembling companies employed around 194,000 people, while motorcycle producers employed around 172,000 people.
New investments in the four-wheeled-vehicle industry reached Rp 3.39 trillion in 2009, while those in the motorcycle industry totaled around Rp 2.96 trillion.