Indonesia a Sure Bet for Japan

MARCH 23, 2015

Jakarta. Suzuki Motor has pledged a $1.3 billion investment in Indonesia over the next two years, marking a series of deals and ventures that President Joko Widodo seeks to make during his four-day visit to Japan.

Suzuki will build its fourth factory in the Delta Mas industrial estate in Bekasi, east of Jakarta.

The factory will produce 170,000 cars and a million motorcycles per year, said Subronto Laras, the president commissioner of Indomobil Sukses Internasional, Suzuki’s local distributor.

“In the first stage, Suzuki will invest $1 billion, with further quarterly injections before reaching a total of $1.3 billion in 2017,” Subronto said.

The announcement follows that by Toyota, the world’s biggest automotive company, which plans to invest $1 billion in Indonesia by 2017 to expand its factories in the country and encourage exports.

Toyota and Suzuki will use Indonesia as part of their global supply chains, providing a boost to the country’s exports and labor participation.

Suzuki and Toyota are among Japanese companies that are expected to invest a total of $3.4 billion in Indonesia this year, up from last year’s $2.7 billion, according to Franky Sibarani, the chief of Indonesia’s Investment Coordinating Board (BKPM).

Japanese firms have been aggressive in investing in Indonesia in the past three years to counter stagnation at home, while Indonesia seeks to boost its economic growth with more foreign investment.

The BKPM has enlisted the help of the Japan External Trade Organization (JETRO) to facilitate Japanese investors and local companies that have indicated a serious interest in investment.

“We hope the coordination with JETRO can boost Japanese investment to Indonesia,” Franky said.

JETRO, tasked primarily with promoting mutual trade and investment between Japan and the world, has committed to training BKPM staff to provide services to Japanese investors.

Indonesia under the administration of  President Joko Widodo is exploring initiatives to improve the country’s manufacturing capability and integrate it into the global supply chain with help from foreign investment. Still, securing investment commitment is just one part of the battle.

“To be competitive in the global supply chain for exports, it is critical to take advantage of fast and inexpensive imports,” said a collaborative report between the World Economic Forum, business consultancy Bain & Company and the International Trade Center.