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JAKARTA: JAN 2012 Indonesia automotive components industry is less competitive compared to Thailand as the nearest competitor countries.

Its less competitive due to several factors like inefficiency and incompleteness of its industrial structure. Therefore, Indonesia may have difficulties in narrowing the gap on four-wheel vehicle production from Thailand. According to the report from The Thai Auto-Parts Manufacturers Association (Tapma) obtained by Bisnis, Thailand ranked in 13th position in term of car production globally as much as 1.45 million units throughout last year, while Indonesia stayed at 19th spot with production of 837,948 units. In the report analysis, the countrys complete supporting industrial facilities supports Thailand car production, which is integrated with assembler companies in one special area. Thus, component import can be reduced significantly as almost all the needs of general and main components have been fulfilled domestically. The number of components companies in Thailand reached 2,373 companies in 2011 or 11.26% higher compared to 2,133 companies, including the 102 companies that hits by floods in July 2011. From the total companies, 1,641 small and medium-scale companies engages in tier 1, 2, and 3. Tier 1 industry is core component sector, tier 2 is complement, and tier 3 is addition. Meanwhile, 709 large-scale components engage in tier 1, 2, and 3. All Thailand component companies are the supplier for 23 manufacturers (sole agents) in those tiers. The number of components companies in Indonesia is smaller or 6.53% from the total components companies in Thailand. According to the Association of Car and Motorcycle Equipment Industries (GIAMM), the number of its members reaches 155 companies this year. Far from ideal Head of GIAMM Hadi Surjadipradja said the number of domestic industrial components, although has been calculated by the Ministry of Industry, is far from ideal calculation. His statement is in line with the data from Central Agency of Statistics. The import value of motor vehicle and spare parts jumped 34.2% to US$7.71 billion in January-November 2011 compared to US$5.73 billion in the same period 2010. In order to reach the ideal population scale, Indonesia needs at least 2,395 companies to reduce import. Such calculation includes 245 companies in tier 1, 950 companies in tier 2, and 1,200 companies in tier 3. In term of industrial structure, our components sector is still not complete so that it creates many gaps. Its different with Thailand, which is relatively more complete. Therefore, this sector needs new large investment to increase it, he said yesterday. In term of labors, Thailand components industry is more efficient compared to Indonesia. According to Tapma, Thailand only needs 457,143 labors for 2,373 companies in the country. Meanwhile, based on the data from the Ministry of Industry, the total labors in 800 components companies outside GIAMM reached 646,500 labors. Thus, each component industry in Indonesia employed 808 labors, while Thailand 193 labors in each companies. Tapma Vice President Achana Limpaitoon through his analysis said Indonesia will become the largest competitor for Thailand in components sector as the countrys political stability and investment continues to improve as well as lower labor wages compared to Thailand.

Currently, Thailand components industry is less conducive since Thailand automotive principals urged the government to cut vehicle import duty. (t06/msw)

JAKARTA: The government received 18 proposals from global automotive principals, for expanding into components and assembling industry worth IDR1.26 trillion. The Ministry's Director General of High Technology-Based Superior Industry Budi Darmadi said those foreign investors are eyeing Indonesia as the future production base in automotive supportingindustry starting this year. The governments plan to strengthen automotive components industry is expected to increase investment in the motor vehicle assembling industry, which used 93.11% of its installed capacity last year. In 2011, car assembling industry has produced 837,948 units from the total installed capacity of 900,000 units per annum. Currently, there are 18 proposals for investing in components and assembling industry. Some of them comes from US companies with total investment of IDR1.26 trillion, he said yesterday, without detailing the names of the companies. Thailand is also interested to invest US$1.5 million in motor vehicle spare parts and components industry. However, he declined to provide further detail regarding the component subsector that Thailand and the US investor will develop. Such investment may be used to develop the industry of fast moving components like filters, tire and rubber parts, electric components, safety glass, air conditioning, compressor and evaporator, radiator, battery, and car interior. The automotive supporting industry is currently classified into tier 1 (core components), tier 2 (complements), and tier 3 (additions). The automotive downstream industry supplied 12 assembling plants in Indonesia owned by companies from Japan, Korea, and Germany. The government believes the expansion plan on domestic components industry is a serious matter as the automotive principals had made careful consideration to make Indonesia as its production base for automotive domestic and export. When automotive principals consider to build its production base, it means they are sure that the country has spare-parts supply and supporting facilities for 10 years, apart from assessment on the good prospect and stable economic outlook, he said.

Various incentives In order to develop motor vehicle components industry further, the government is intensively providing various incentives in form of income-tax exemption through the government regulation No. 52/2011 as revision of regulation No. 62/2008.

The export-import ease based on Finance Ministry Decree No. 580/KMK.04/2003 as well as No. 176 /KMK.011/2009 about import duty exemption on machinery, goods and raw materials for establishing the development of industry in the framework of capital investment. The government also provided facility in form of human resources development through technical trainings in manufacturing components. The Association of Indonesia Automotive Industries (Gaikindo) predicted automotive-supporting industry (spare parts), equipments, and sales-chain will add up investment at least IDR9 trillion this year. The component sector development is considered as integrated step to support the investment realization of assembling plant in Indonesia owned by global automotive principals. The data from Indonesian Automotive Parts & Components Industries Association (GIAMM) shows the number of supporting industries is currently reaching 155 companies, i.e. 92 foreign companies and 63 local companies. (t06/ags)

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