Fri, 26 Sep 2003

Honda opens two new RI plants

Rendi A. Witular, The Jakarta Post, Karawang, West Java

Japan's second largest automotive company Honda Motor Co., Ltd., officially opened on Thursday two new plants in Karawang, West Java, raising new hopes that some still considered the country an attractive investment destination.

Visiting Honda president Takeo Fukui said the company had decided to establish the plants in Indonesia because it believed that the country would become a major player in automotive spare parts production in the region.

"We are talking about long-term prospects. I know that there are security concerns here, but I believe they will not last long," Fukui told press following the opening ceremony.

He explained that the plants were part of Honda's attempt to establish a highly efficient and flexible global network for production and parts procurement, making the best use of the competitive strength of its plants located in different regions in the world.

However, Honda's Chief Operating Officer for Asia and Oceania Satoshi Toshida told The Jakarta Post that it would really hamper efficiency if its local operation faced disturbances as occurred two years ago when workers staged a massive strike.

"We expect this kind of situation will not happen again," said Toshida.

Budi Setiadharma, president of PT Astra International, Indonesia's largest car marker, welcomed the new investment made by Honda, urging the government to use this momentum to further improve the investment climate to attract more international money in the automotive industry.

Foreign direct investment in the country has plunged since the late 1990s economic crisis. The recent improvement in the country's macroeconomic indicators has not translated into higher investment activities due to lingering problems in other areas such as legal uncertainty, labor disputes, corruption, lack of productivity and poor implementation of the regional autonomy policy.

The government is now under pressure to increase investment to help push economic growth higher to resolve the exploding unemployment problem.

Honda's two new plants are located in Bukit Indah Industrial Park, Karawang --about 70 kilometers southeast of Jakarta. Honda has invested a total of US$134 million to set up the plants and has employed around 3,000 workers.

One of the plants, PT Honda Precision Parts Manufacturing, is Honda's first sophisticated automatic transmission and engine valve manufacturer established outside of Japan or the United States.

Fukui said that automatic transmissions were one of the most sophisticated components of an automobile and they required advanced technologies and human resources.

"We believe that Indonesia is capable of producing such products. That is why we decided to put our trust in this country," he said.

The new plant is expected to achieve an annual production capacity of 250,000 automatic transmissions and 550,000 engine valve sets in 2004.

The transmission and valve products will be mostly supplied to Honda's automobile plants within the South East Asia region and Europe.

The other new plant is called PT Honda Prospect Motor, which will assemble three of Honda's models --the Civic, the CR-V and the Stream.

Indonesia is the only country outside of Japan that produces the Stream minivan.

The plant, which has been operating for several months, has a current production capacity of 20,000 units per year, but the capacity is targeted to reach 40,000 units in 2004, and will mostly be allocated for the export market.