Government Gives Incentives for Car Factory in Indonesia

JAKARTA— The Ministry of Industry sees that the incentive scheme for the automotive industry is quite fruitful. This is in accordance with the Government’s policy to open its doors for investment of various brands of cars in order to build a factory in Indonesia.

Director General of Metal, Machinery, Transportation Equipment and Electronics (ILMATE) Ministry of Industry I Gusti Putu Suryawirawan said that the Government is willing to provide a number of conveniences. “For example, through incentives we create, BMW improves its production in Indonesia. They assemble cars, especially luxury car in Indonesia. The government has given way quite a lot,” he said.

There are three principal schemes to build a factory in Indonesia. First, completely knocked down (CKD). All components are prepared in decomposed parts from the country of origin to be reassembled in Indonesia, to be built as a new car.

The second option is incomplete knocked down (IKD). This is similar to CKD, but there are components that are produced locally.

The third is a part by part. Here most of the components are already in local production.

The government does not impose car brands to take either path. Each option is subject to attractive incentive. “The higher they use domestically produced components, the lower the cost of entry,” said Putu.

For example , this works for components of environmentally friendly and fuel-efficient cars(LCGC), including part by part. Components imported into Indonesia are only in contact with the entrance fee rates of zero to five percent.

IKD scheme subject to admission rates of three to seven percent. While CKD hit rate of 10 percent. “The incentives are enormous, enough for brands that utilize as an advantage,” said Putu. (*)