RI important to LG's investment map

RI important to LG's investment map

With its vast population, Indonesia remains an important
investment destination for many of the world's business giants,
although poor infrastructure in many parts of the country still
poses a major problem.

LG Electronics, the Korean electronics giant, considers
Indonesia one of the most important countries on its overseas
investment map.

"For us, Indonesia is one of the most important production and
marketing bases in Southeast Asia," LG's vice president and
senior manager of public relations Park Hyeong Ill told visiting
Indonesian journalists at the company's headquarters in Seoul
recently.

With a population of over 200 million and the growing number
of the middle class, it will be too expensive to ignore the
potential of the Indonesian electronics market, he said.

"Indonesia is quite promising for electronics producers
worldwide, and that's why we are committed to further expanding
our operations in the country," Park added.

This positive outlook may be the reason why the company,
through its local subsidiaries, has allocated a lot of money to
expand its production facilities here.

At present, LG has four subsidiaries in Indonesia, including
PT LG Electronics Indonesia, PT GE Electronics Display Devices,
PT LG Philips Display and PT LG Innotek.

PT Electronics Indonesia produces conventional and plasma TVs,
as well as refrigerators, both for the local and overseas market
in its factory in Cirarab, Tangerang.

PT LG Electronics Display, located in the MM2100 industrial
estate in Cibitung, Bekasi, produces computer monitors and audio
video equipment also for the local market and exports.

The third company, PT LG Philips Display, also located in the
MM2100 industrial estate, Cibitung produces TV tubs and TV
monitors to supply both local and overseas markets, while PT LG
Innotek, which operates a factory in Cibitung, Bekasi, produces
tuners and TV components.

LG is among the most aggressive electronics producers in
Indonesia, not only in terms of production activities but also in
marketing efforts.

Such aggressive marketing approaches have produced good
results with a continued increase in the company's market shares
in the Indonesian electronics market.

According to data provided by international surveying company
GfK, at present LG controls about 20 percent of the washing
machine market, 20 percent of the home theater market, 25 percent
of the one-door refrigerator market, 26 percent of the two-door
refrigerator market, 18 percent of the air conditioner market and
20 percent of the TV market.

Its market share in the country's growing mobile phone market
is still relatively small. LG, the world's largest producer of
CDMA-based mobile phones, is among the newcomers to Indonesia's
mobile phone market. But the company plans to boost its market
share by introducing more stylish GSM-based handsets in the
country.

This year, LG expects to book sales revenue of about US$380
million, a 30 percent increase from the company's target in the
previous year, which reached US$330 million.

During the first half of this year, the company's sales
totaled about US$180 million -- about 38 percent of the amount
came from export and the remainder from local sales.

Regarding LG's investment plan in Indonesia, LG Electronics
Indonesia's head of public relations Widi Nugroho Sahib said that
there were a number of business agendas now in the pipelines as
part of the company's expansion program.

One of the agenda is to consolidate LG's operations by merging
PT LG Electronics Indonesia and PT LG Electronics Display Device
Indonesia into a single company in order to integrate the two
companies' production activities.

After the merger, the factory in Cirarab, Legok will focus its
operation on the production of digital appliances, while the
factory in Bekasi will focus on digital display and digital
mobile products.

"The merger of the two companies will be officially
inaugurated by the minister of industry and the chairman of the
Investment Coordinating Board (BKPM) on Jan. 7," he said.

In addition to the consolidation of the two companies, LG also
plans to invest about US$15 million to further boost its
production activities including plasma TVs in the Cirarab
factory.

But Widi said the board of management had considered delaying
the investment plan until the government repaired the road that
links the Cirarab factory in Legok, Tangerang with the Jakarta-
Merak toll road.

"It is quite risky for the company to transport 'sensitive
products', such as plasma TVs, via the road. That's why the plan
has been temporarily delayed," he said.

Minister of Industry Andung Nitimihardja said that he had sent
a letter to the local government to repair the road, not only in
order to support the operation of LG but also of other companies
in the area. But due to financial constraints, the local
government had been unable to repair it.

Besides employing thousands of workers, the country's
electronics industry is one of the major foreign currency
recipients. Indonesia's total electronics and telematics exports
reached a total of US$8.7 billion between January to September
this year.

Indonesia is part of LG's massive global network, which
consists of 76 subsidiaries. The company's overseas operations
contribute more than 80 percent to its total sales, which reached
US$37.7 billion in 2004.

The company's Asian operations alone contributed about 20
percent to the total sales. -- Hendarsyah Tarmizi