Indonesian business group addresses Vietnam factory relocation rumors, highlights transformation speed

Shinta Kamdani, Chairwoman of the Indonesian Employers Association (Apindo), responded to discussions about the potential relocation of automotive component production from Indonesia to Vietnam. She emphasized that such decisions are highly company-specific, influenced by global strategies, cost structures, and market demands. Kamdani noted that global companies are increasingly consolidating production networks, which can involve streamlining capacity in certain countries to focus on more efficient and strategic locations for regional or global markets. She explained that relocation is often part of a broader global supply chain restructuring, driven by technological shifts, production costs, market changes, and national industrial policies. Companies consider not just costs but the entire industrial ecosystem, including regulatory certainty, investment incentives, local supply chains, labor productivity, logistics, land availability, and governmental support. Indonesia's manufacturing value added (MVA) reached $265.07 billion in 2024, ranking it 12th globally and fifth in Asia, indicating a substantial industrial scale. However, Kamdani pointed out that Indonesia's challenge lies in the speed of its industrial transformation, which has been slower than competitors like India and Vietnam between 2020 and 2024. This slower pace, despite Indonesia's larger current manufacturing scale, suggests that Vietnam is more aggressively strengthening its industrial capacity, supply chains, exports, and ecosystem.

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Production relocation decisions are usually very specific and depend on the conditions of each company, global principal strategies, industry type, cost structure, and market demands.