Autoproducers to concentrate on underdeveloped component industry<\/p>\n
Sandy Darmosumarto, The Jakarta Post, Jakarta<\/p>\n
An underdeveloped component industry and poor investor
\nconfidence has hampered Indonesia's efforts to construct a strong
\nautomotive sector and production base for the regional market,
\ndespite the country's advantages in terms of large population,
\nlow-cost labor, and abundant natural resources.<\/p>\n
\"The tendency now is to focus on the component industry as a
\nmeans to establishing a more concrete automotive industry,\" said
\nchairman of the Association of Indonesian Automotive Industries
\n(Gaikindo) Bambang Trisulo.<\/p>\n
He said that the development of the component industry would
\nstimulate growth in the local car industry.<\/p>\n
President of car maker PT Indomobil Sukses Internasional
\nGunadi Sindhuwinata said that the strength of the car industry
\ndepended upon the ability of component suppliers to develop their
\ncapacity and adopt new design techniques to fit the continuously
\nchanging needs of principal companies.<\/p>\n
\"Without the business of supplying components, we would just
\nbe assembling cars. Additionally, we would not be able to design
\nour own components, nor add more value to each output,\" he said.<\/p>\n
Currently, there are two markets that provide automotive
\ncomponents, namely the original equipment market (OEM) and the
\nreplacement equipment market (REM).<\/p>\n
Component makers in the OEM supply original parts directly to
\ncar manufacturers for assembly line purposes. The REM is a larger
\nmarket which caters for businesses performing after-sales
\nservices, such as auto repair shops. Imitated components are also
\npart of the REM.<\/p>\n
According to Gunadi, the 18 to 58 percent of components that
\nhis company's brands use are locally made. The rest are mostly
\nimported from Japan, with some from Thailand.<\/p>\n
Indomobil relies on a total of 162 business units
\nmanufacturing its automotive components. Twelve of them belong to
\nthe Indomobil Group that makes up the in-house production line.<\/p>\n
The remaining units are part of the group's out-house
\nproduction line, that ranges from small and medium enterprises
\n(SME) to large corporations.<\/p>\n
But there are huge challenges ahead in the development of the
\nlocal component industry.<\/p>\n
The implementation of the ASEAN Free Trade Agreement (AFTA) in
\nearly 2003, and the established role of Thailand as the regional
\nhub for the manufacturing of well-known brands -- such as Toyota,
\nHonda, Ford, Mitsubishi, Volvo, Mazda, Nissan, Isuzu, Chevrolet
\nand BMW -- may further narrow Indonesia's opportunity to increase
\nthe proportion of locally made components in cars sold in this
\ncountry, as import now becomes easier and cheaper.<\/p>\n
Under AFTA, the import tariff on most goods has been cut by
\nbetween zero and five percent.<\/p>\n
Another challenge is providing capital, and luring new foreign
\ninvestments.<\/p>\n
Amid deteriorating investor confidence in local labor, relying
\non the large domestic market may not be enough for Indonesia to
\nattract investors.<\/p>\n
\"Principal companies will invest in the country if the
\nconditions in all sectors related to its line of business -- be
\nit communications, labor, transportation, law and order, or
\nsecurity -- constantly improve,\" Budi Setiadharma, president of
\nautomobile company PT Astra International said.<\/p>\n
Industry players have also called on the government to support
\nthe component industry.<\/p>\n
Muhammad Setiono, director of land and air transportation at
\nthe Ministry of Trade and Industry, has previously expressed that
\nthe government was now starting to focus on the local auto-parts
\nindustry, as a step toward strengthening the overall car
\nindustry. Setiono, however, did not provide details on what kind
\nof policies would be implemented by the government in their bid
\nto boost the component industry.<\/p>\n
But despite all the problems, Indonesia is still deemed by
\nsome as an attractive place to develop the automotive industry.<\/p>\n
A.K.Hadi, deputy head of purchasing division with Toyota Motor
\nManufacturing Indonesia said :\"Indonesia is still a target
\ncountry for many investors. We have the potential to find new
\nadvantages.\"<\/p>\n
Indomobil's Gunadi added: \"The country's potential weapon is
\nin its large population and huge land area.\" This means wide open
\nspaces are available for foreigners to invest in manufacturing
\nplants.<\/p>\n
With rising car sales this year relative to last year,
\ncomplemented by an expected rise in sales next year, there are
\nmany indications that the country's automotive market is
\nresponding strongly to the high consumer spending that has
\ncharacterized Indonesia's economy.<\/p>\n
In terms of manufacturing investment, for instance, Honda
\nMotor Corp. of Japan has expanded its operations here by building
\ntwo new factories this year. The automatic transmission factory
\nis under the management of Honda Precision Parts Manufacturing,
\nwhile the assembling factory is under the management of Honda
\nProspect Motor.<\/p>\n
The combined value of both investments reaches Rp 1.13
\ntrillion (US$134 million), absorbing 3,000 workers.<\/p>",
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