Dawn of Industrialisation? The Indonesian Automotive Industry

Abstract

This article traces the development of industrial policy towards the Indonesian motor industry within the automotive global value chain. Showing the current dominance of Japanese motor assemblers in Indonesia, it notes the rather undeveloped nature of the locally owned supporting industry, particularly compared with that of neighbouring Thailand. Most investment in auto-parts production has been by foreigners. Nevertheless, Indonesia's rapid domestic-market growth has allowed it to attract foreign automotive investment without having to offer excessively generous incentives. While the continued entry of foreign suppliers of auto parts into Indonesia offers opportunities for local suppliers to upgrade their productive capabilities, it also limits their chances of becoming first-tier suppliers themselves. Japanese automotive investors are optimistic about Indonesia's export potential, more so than Malaysia's.

Foreign Direct Investment in Indonesia: Fifty Years of Discourse

“…Focusing in particular on automotive manufacturing in Indonesia, Natsuda, Otsuka, and Thoburn (2015) stressed the prominence of FDI in this industry, even claiming that the embarrassing failure of the national car program in the mid1990s may have turned out to be a blessing in disguise by paving the way for more commitment of foreign capital. Drawing on a historical sketch since the late colonial period, these authors offered a relatively optimistic assessment of the future expansion of FDI-controlled car production in Indonesia.…”

“…The most prolific author, Ramstetter, consistently linked FDI to other economic variables, in the process being followed by one (Rahmaddi and Ichihashi 2013) on the effects of FDI on foreign trade. Three of the eight articles-by Lipsey and Sjöholm (2011), Magiera (2011), and Natsuda, Otsuka, and Thoburn (2015-elaborated on Indonesia's FDI in an increasingly competitive regional setting, whereas one, my own contribution (Lindblad 2000), focused on a single investor identity. The belated revival of the academic discourse on FDI in Indonesia has brought with it a welcome variety of topics and methods.…”

What Does the Trans-Pacific Partnership Agreement Portend for the Canadian Automotive Industry?

“…12 Imported vehicles could displace domestically produced vehicles and have an attendant negative impact on both domestic assemblers and component suppliers. Japanese automakers have well-developed supplier networks that extend into Vietnam, Indonesia, and, especially, Thailand and China for parts to be assembled into vehicles built in Japan (Kasuga et al 2005;Natsuda, Otsuka, and Thoburn 2015;Tanruangvechjaroon 2013). These networks were developed at the time when Japanese automakers came under pressure to lower production costs because of the appreciating value of the yen.…”

Industry policy in Asia’s demographic giants: China, India and Indonesia compared

“…The first plant was established as early as 1928 by GM, which was later nationalised and, in 1967, purchased by William Soeryadjaya’s Chinese-Indonesian conglomerate, PT Astra International. Another auto operation, PT Indomobil, was bought by the Salim Group, headed by another Chinese-Indonesian entrepreneur, Liem Sioe Liong, in 1980 (Natsuda et al, 2015). Chinese-Indonesian business investment remains central to the Indonesian auto industry.…”