Update COVID-19 in Indonesia: 927,380 confirmed infections, 26,590 deaths (19 January 2021)
19 January 2021 (closed)
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About a week ago Ford Motor Indonesia, the local unit of American car manufacturer Ford Motor Company, announced it decided to exit Indonesia and Japan as the firm is unable to compete with its Japanese counterparts. The Ford dealers in Indonesia are still open, meaning consumers can still buy the existing stock of Ford cars. Ford buyers can also still count on after-sales services or the purchase of spare-parts. Next year, however, these stores will be shut. Ford is still studying how to continue services (including guarantee) after 2017 for those that bought a Ford vehicle.
It is a relatively easy move for Ford to exit Indonesia as the company does not have a costly car manufacturing plant in Indonesia. According to media reports in local newspapers only 35 people will become unemployed due to the exit as the company only has a limited number of dealerships in the country. Regarding its car sales in Indonesia, Ford always imported fully built cars from its plants in Thailand and the Philippines. The company could take advantage of a free trade agreement, hence import duties were 0 percent.
Jongkie Sugiarto, Chairman of the Indonesian Automotive Industry Association (Gaikindo), sees a danger in this free trade agreement especially with the implementation of the ASEAN Economic Community at the start of the year. The danger is that Indonesia - the largest market in Southeast Asia - will merely be regarded as a market to sell foreign-made products. He therefore advises the government to offer a tax holiday to those companies that want to construct car spare-part plants in Indonesia. Vietnam is an example of a country that offered this incentive to lure investors.
Within a short period a couple of well-known global companies have exited or reduced their activities in Indonesia. Apart from Ford Motor Company, also Japan-based Panasonic Corporation and Toshiba Corporation as well as US-based Chevron Corporation announced to reduce their activities in Indonesia.
Achmad Hafisz Tohir, Chairman of House of Representatives Commission VI overseeing industry and state-owned enterprises, said industry relocations are the main reason behind these decisions, sending a signal that Indonesia is considered a less-attractive country for business, particularly because of the nation's high (import) tariffs, taxes and logistics costs. The decision of Panasonic and Toshiba, however, are also due to Japan's shifting focus from home appliances to other goods (such as optic censors and drones).