Hankook’s new investment plan

Hankook Tire Co Ltd, the biggest tire producer in Korea and seventh largest in the world, are planning to build a tire factory in Indonesia and invest total US$1.1 billion in seven years to 2018. Hyun Bum Cho, executive vice president of Hankook, says the company wants to build a new manufacturing plant in Bekasi, West Java. This expansion will help the company to become the fifth largest tire company in the world.

(Left to right) Industry Minister M.S. Hidayat, Chairman of BKPM Gita Wirjawan, and Executive Vice President of Hankook Tire Hyun Bum Cho during the Q&A session with the press. ©Pudji Lestari

The construction site expands over an area of 60 hectares, which they bought from Lippo. Hankook says the site has convenient access to export logistics as well as to other production infrastructure resources including electricity and workforce. In the first phase, the company will invest US$353 million to build the tire factory.

This investment will scale up to US$1,1 billion until 2018, when the tire plant produce about 10 million tires. The new manufacturing facility is expected to break ground in June-July 2011. The construction is to be completed by September 2014, rolling out sixth million tires per year. “Ultimately the production capacity will rise to 15 million-20 million units in 2020, and for overall we will produce 100 million tires from all our factories around the globe,” says Cho at the Welcoming Ceremony Announcement of Hankook Tire’s Planned Investment in Badan Koordinasi Penanaman Modal (BKPM) or Indonesia Investment Coordinating Board’s office in Thursday, January 20, 2011.

In Indonesia, Hankook are also planning to hire 1,400 workers by 2014, and rise to 4,200 workers by 2018. Cho says Hankook investment will definitely one of the largest investment ever made by Korean companies in Indonesia. Currently, Hankook Tire has five production facilities around the globe that is two in South Korea, two in China, one in Hungary. Additional two will be build in Indonesia and (again) in China. In November 2010, they also announce to expand their factory in Hungary. With the expansion plan, Hankook set a target to produce up to 100 million tires in 2014, from this year’s 88 million.

Indonesia’s Industry Minister M.S. Hidayat says tire industry is a rapidly growing industry. Nationally, there are 13 tire producers with total production capacity reach 50 million car tires and 28 million motorcycle tires. Few of the biggest national tire producer are PT Gajah Tunggal Tbk, PT Goodyear Indonesia Tbk, and PT Multistrada Arah Sarana Tbk. “This industry will keep growing especially with the implementation of the new regulation of Indonesia National Standard on tires usage,” says Hidayat.

In relation with Hankook investment in Indonesia, Chairman of BKPM Gita Wirjawan says this Korean company will be receiving some tax incentives, according to the new regulation Peraturan Pemerintah No. 62 that will be publish soon by the government.

This newly rules will regulate the calculation of investment and credit, which will be offset to be part of the tax payment. “It will realize in the terms of allowance, investment cash allowance. It is not merely given to the tire industry but to the whole industry, as part of the comprehensive action to encourage downstream industries in the country,” says Gita. By doing this, the government hopes in the future Indonesia will no longer export raw materials, but it will be selling ready to use goods and services. Indonesia is the world’s biggest crude palm oil exporters, the second largest natural rubber producer, and also big in coal, which last year expected export more than 210 million tons of coal.

Gita and Hidayat are very happy with the keep coming investment from foreign investors. BKPM together with Industrial Ministry and other ministry is striving to bring investment worth of Rp 2,000 trillion or US$250 billion per year in Indonesia in five years, 2009-2014.

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