Indonesia’s Finance Minister Purbaya Yudhi Sadewa called for Toyota to move its regional production operations out of Thailand.
Taking on Thailand
At the GAIKINDO Indonesia International Automotive Conference (GIAC), Minister Purbaya openly challenged Toyota to move its production away from Thailand and to Indonesia.
Purbaya compared Indonesia’s position as Southeast Asia’s largest economy and population with Thailand’s reputation as “ASEAN’s manufacturing centre.” The minister acknowledged that Indonesia’s potential as a leader in manufacturing among ASEAN countries has yet to come to fruition.
Historically, Thailand’s manufacturing industry has been supported by a strong local supply chain and industrial ecosystem. Meanwhile, Indonesia’s local automotive sector accounts for a fifth of its overall economy, capable of producing up to 2.5 million vehicles annually.
“We are ready to support Toyota, but we ask that you move your main production base from Thailand to Indonesia. I am prepared to offer every incentive you require,” Purbaya said. His offer is based on his comment that Indonesia failed to provide attractive incentive packages for manufacturers.
Attracting investors
Toyota has not yet responded to Purbaya’s challenge, but Indonesia is nonetheless prepared to attract foreign manufacturers.
According to Purbaya, the Indonesian government is developing more attractive incentive packages and committed to streamlining business licensing procedures for automotive manufacturers.
Purbaya introduced a new incentive package, that applies only to electric vehicle (EV) manufacturers. EV makers establish a production base in Indonesia can be exempt from the luxury goods sales tax (PPnBM) of up to 100 per cent. The package also includes a 40 per cent reduction in VAT but will apply only to qualifying vehicles.
The minister did not disclose further details regarding the upcoming incentive package. Instead, Indonesian President Prabowo Subianto is set to make the announcement soon.
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