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Hankook will build $353m tire plant in West Java

Korea-based Hankook Tire announced on Thursday that it would build a tire plant in Bekasi, West Java, with an initial investment of US$353 million (Rp 3

Rangga D. Fadillah (The Jakarta Post)
Jakarta
Fri, January 21, 2011

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Hankook will build $353m tire plant in West Java

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orea-based Hankook Tire announced on Thursday that it would build a tire plant in Bekasi, West Java, with an initial investment of US$353 million (Rp 3.2 trillion) in a production plant also in Bekasi.

The company’s executive vice president, Hyun Bum Cho, expected that the construction of the new plant, which would have a production capacity of 6 million tires a year, could be commenced in the third quarter of this year and be ready for commercial operation in September, 2014.

“We’ll be producing all kinds of tires in Indonesia, but for the first phase of the investment project, we’ll start by producing tires for small trucks,” he said at a press conference at the Investment Coordinating Board (BKPM) in Jakarta.

The $353 million production facility is the first phase of the company’s planned $1.1 billion investment in Indonesia.

Cho said that Indonesia, with its strong political stability and remarkable economic growth in the past decade, was the best place for his company to pour investments. The country was also rich in rubber, the basic raw material needed in tire production, he added.

“By setting up a large-scale production base in Indonesia, we hope we can contribute to the country’s economic development, as we did in China and Hungary,” he said.

The construction of a new manufacturing plant in Indonesia, he continued, would pave the way for Hankook Tire to become the fifth largest tire maker in the world, with an estimated total production of 100 million units by 2014.

Currently, the firm is the world’s seventh largest tire producer.

BKPM head Gita Wirjawan said that Hankook’s investment was vital for the country’s downstream industries development. He hoped that the investment would boost other Korean investors’ confidence in conducting businesses in Indonesia.

“This investment shows that Indonesia has made itself one of the best places to become a base for manufacturing industries,” he said.

Gita estimated that Hankook’s investment would open around 1,400 new jobs by 2014 and 4,200 by 2017. The company would also provide training for its employees to improve the quality of labor, he added.

Industry Minister Mohamad Suleman Hidayat projected that the presence of Hankook’s production facility would spur the growth of the country’s tire industry. The growth could reach 10 percent to 15 percent this year, he predicted.

“The domestic tire need grows around 8 percent per year. The figure shows how bright the future of this industry is,” he said.

Currently, Minister Hidayat continued, Indonesia had 13 local tire makers with a total capacity of producing more than 78 million tires. The country exported around 70 percent of its car tires with a total revenue exceeding $1 billion in 2010.

The government is preparing a revision draft of the 2008 government regulation on tax incentives for investors to support its efforts to accelerate the development of the country’s downstream industries, Gita said.

“The additional incentives may be similar to investment tax allowances,” he said.

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