Two Japan-based original equipment manufacturers (OEMs) of auto components are set to relocate a portion of production to Vietnam from Indonesia.
From Indonesia to Vietnam
Two major Japanese auto parts OEMs are considering relocating operations from their factories in East Java, Indonesia to Vietnam. This was announced by Special Advisor to the President for Employment and Labor Welfare, Said Iqbal last 21 June.
According to Said, the Japanese OEMs are looking to move their operations after a regional review and a strategic pivot to producing electric vehicle (EV) parts. The preliminary information released by Said sparked waves of concern for employment in Indonesia’s manufacturing sector and most importantly, the country’s capability to support EV production.
Employment concerns
Said emphasised that if the relocation proceeds, thousands of Indonesian employees could be retrenched.
“In Pasuruan and Mojokerto, there are two large companies. From initial information when I visited East Java, those two major automotive component firms could see thousands of workers impacted by layoffs,” he wrote in a statement.
While the situation is alarming and raises concerns about job security in Indonesia’s manufacturing sector, Said clarified that the decision to relocate production has not been finalised yet.
He wrote: “The situation is uncertain, prompting principals in Japan to consider moving to countries with higher productivity and diversifying production. They are focusing on electric vehicles, and development will be carried out in Vietnam rather than Indonesia.”
He explained that the companies are considering Vietnam because of its stronger, more supportive environment, noting the country’s competitive EV landscape and policies.
According to the adviser, the government should improve the country’s current policies on EV manufacturing and competitiveness to avoid the departure of foreign investors. Said claimed that he would directly communicate these issues with President Prabowo Subianto and Indonesia’s State Secretary Prasetyo Hadi and Deputy Speaker of the House SufmI Dasco Ahmad. Additionally, he will also confer with several labour unions to negotiate with the Japanese companies.
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