Indonesia risks major losses as auto parts firms eye Vietnam

Indonesia faces the prospect of substantial economic damage should two Japanese automotive component manufacturers decide to move their operations to Vietnam. The Indonesian automotive components industry association, GIAMM, warns that such a move would result in considerable losses for the state.

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The country loses a lot from foreign exchange, worker taxes, and company taxes, besides layoffs.

Rachmat Basuki, Secretary General of GIAMM, stated that the country stands to lose significantly from foreign exchange earnings, worker taxes, and corporate taxes. He also highlighted the potential for mass layoffs if the factories relocate. This concern arises from reports that the companies are focusing on electric vehicle components and perceive Vietnam's policies as more supportive of this burgeoning sector.

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Because electric vehicles are mostly still CBU (completely built up) and simple assembly.

While the specific companies have not been named, reports suggest they are affiliated with the Yazaki Group and produce wiring harnesses. GIAMM acknowledges these are not its members but emphasizes the broader implications for Indonesia's automotive industry. The situation underscores a need for Indonesia to improve its investment climate, addressing issues related to labor, productivity, and policies to remain competitive in attracting and retaining foreign investment, particularly in the rapidly evolving electric vehicle market.

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Many things need to be resolved, such as labor issues, productivity, and so on.