Tue, 13 Jul 2010

South Korean electronics giant LG Electronics is considering making Indonesia its manufacturing hub for Southeast Asia, according to Gita Wirjawan, chairman of the Investment Coordinating Board.

In an interview late on Sunday after meeting LG executives in Seoul, Gita told the Jakarta Globe that such a move would involve more than quadrupling the value of LG’s production here.

“They want their products [distributed in Southeast Asia] to be Indonesian-made products, so it seems positive,” Gita said.

Soonhwang Kwon, LG Electronics’ head of business solutions, told the Globe that the company’s manufacturing base in Indonesia ranked among its top performers in the region.

“Both the quality and quantity of production are among the best in Southeast Asia,” he said.

“The country’s overall atmosphere for investment is also good, which is why we’re seriously considering of increasing our production in Indonesia for our Southeast Asian market.”

Gita said LG was also considering Thailand and Vietnam as regional hubs, but expressed confidence that Indonesia would be chosen.

“The production sales revenue for LG Electronics’ goods manufactured in Indonesia totaled $2.1 billion in 2009, with the majority of [the products] being exported. LG wants to increase it to $10 billion for both export and domestic needs once Indonesia is chosen as the hub,” he said.

Last month, Gita said LG and Caterpillar were among the companies considering investing in or expanding manufacturing facilities in Indonesia, amid rising labor unrest and higher wages in China.

Gita said he promised to provide fiscal and non-fiscal incentives for LG, which leads the electronics market in Indonesia with a 40 percent share.

Gita added that Indonesia’s larger market compared to Thailand and Vietnam also added to the benefit of LG investing here.

In 2009, LG Electronics had $50 billion in sales, a $ 5 billion increase from the year before.

The United States and Europe account about 50 percent of the electronics maker’s sales. In Southeast Asia, which accounts for about 20 percent of LG’s global sales, Indonesia is its biggest market.