Panasonic Plans Hub in Indonesia

Jakarta Globe, Camelia Pasandaran | August 25, 2010

Jakarta. In a meeting with President Susilo Bambang Yudhoyono in Jakarta on Wednesday, the head of Japanese consumer electronics giant Panasonic confirmed that it planned to move its production base to Indonesia, senior Indonesian government officials said.

Panasonic plans to relocate factories in China to
Indonesia, citing drastically lower labor costs.
(EPA Photo)

Gita Wirjawan, chairman of the Investment Coordinating Board (BKPM), said Panasonic president Fumio Ohtsubo told Yudhoyono and Vice President Boediono in separate meetings that the company would move its factories from China and Vietnam to Indonesia to take advantage of lower wages and the booming economy, which is driven by consumer spending.

Gita first revealed that Panasonic was considering such a move in March.

Industry Minister MS Hidayat, who was present at Ohtsubo’s meeting with Boediono, said Panasonic was upbeat about the country’s economic prospects, and would close its factories in China and relocate them here. He did not offer a timeframe or investment value for the move.

“They are committed to making Indonesia the production base for exports as well as for the domestic market,” Hidayat said.

This week, the Wall Street Journal reported that the average wage for factory workers in China is about three times more expensive than in Indonesia — $413 versus $129 a month — while wages in Vietnam were $136.

The report cited research by JP Morgan, CEIC and the International Labor Association.

Rachmat Gobel, the chairman of Panasonic Gobel, the electronics firm’s local unit, also declined to cite an investment value for Panasonic’s factory relocations, saying only that the parent company had been continuously investing in Indonesia, and had already brought the total to $400 million.

Panasonic’s three factories in Indonesia — in Jakarta, Surabaya and Batam — make home appliances, personal electronics and batteries.

“Its current annual turnover [in Indonesia] is $850 million,” Gita said, adding that it is expected to surge to $3 billion by 2014, partly because of its recent acquisition of Sanyo.

Yopie Hidayat, a spokesman for Boediono, said Panasonic told the vice president the company may also develop solar panels domestically.

“It plans to turn houses into self-sufficient energy houses with zero emissions,” Yopie said. “They made the prototype in Japan but are considering whether to develop the industry there or in Indonesia considering the skilled-laborers here and the availability of abundant solar energy. The vice president supports the plan to make Indonesia as the production base, not only as the market.”

“They’re still considering the solar panel development here,” he added. “But the LED factories have been here and there’s also plans to extend the battery production factory.”

Boediono encouraged Panasonic to develop solar energy as it could supply remote regions of the country with electricity.

Gita and Hidayat both said Panasonic’s decision was expected to convince other companies to make Indonesia their production base.