South Korea-based Hankook Tire, the world’s seventh-largest tire maker, on Thursday started construction of its seventh plant in Lippo Cikarang in Bekasi, West Java, with an estimated investment of US$353 million.

The construction of the plant, to occupy a 42-hectare area, would be part of the company’s program to make Indonesia its regional hub for the growing market in Asia
and a tire manufacturing base for exports to North America and the Middle East, vice chairman and CEO Seung Hwa-suh said Thursday in Cikarang.

Speaking at the plant ground breaking ceremony, Seung said it would initially produce around 6 million tires annually after it commenced operation in 2014, during which it aimed to manufacture 100 million tires globally.

“The plant will open a path for us to raise our status to the world’s fifth-largest tire producer in 2014,” Seung said during the event attended by Industry Minister MS Hidayat and Investment Coordinating Board (BKPM) chairman Gita Wirjawan.

Seung added that the plant would be the first of four production facilities planned in a total 60- hectare area and part of its total investment of $1.1 billion until 2018, when it expected to produce 16 million tires.

Seung said several factors, including a conducive business climate in Indonesia and its strong domestic market, had gained his firm’s interest in investing in Southeast Asia’s largest economy.

“We can export goods to the Middle East without difficulty, because according to our survey, people there like Indonesian products,
especially Indonesian-made tires,” he said.

Seung said his firm would benefit from Indonesia’s natural rubber and source 100 percent of its natural rubber needs from Indonesia. However, he did not elaborate on the figure of its rubber needs.

The plant was estimated to absorb 1,400 employees in 2014, and use a total of 2,800 employees in 2018, he said.

Meanwhile, the investment board chairman said Hankook’s move to make Indonesia its export hub would boost the development of the country’s downstream industry.

“This is important and very much in line with the spirit and efforts of the government to further downstream upstream activities as the downstream sector of any industry is labor intensive and also has much more value added,” he said.

Indonesia is currently the world’s largest natural rubber producer after Thailand with a total output of 2.85 million tons last year.

Indonesian Tire Producers Association (APBI) says the national total tire production topped 49.5 million tires last year, 70 percent of which was exported.

Gita also expected that Hankook investment would encourage other Korean companies to pour investment in the country.

BKPM data shows that South Korea firms’ total realized investments reached $11.27 billion in 3,471 projects, which made it the sixth-largest foreign investors in the country after Japan, Malaysia, the US, the UK and Singapore

During the first quarter this year, Korean investments totaled $139 million in 109 projects, the sixth-largest investor during the period.

Hankook currently operates six facilities in Korea, China and Hungary and produces a wide range of radial tires, including for passenger cars, light trucks, trucks, buses and special motor sports vehicles.