ndonesia and Thailand’s tussle over Toyota factories shows how weak regional integration could hamper ASEAN’s economic ambitions to become a unified powerhouse and global production base, with member states relying in incentives and restrictions to lure investments away from one another.
The Association of Southeast Asian Nations has spent decades lowering trade barriers and linking supply chains, yet the bloc still struggles to coordinate investment and industrial policy, with members still competing for bigger slices of the common pie.
Earlier this month, Jakarta publicly urged Toyota to consider shifting its regional production base from Thailand to Indonesia, with Finance Minister Purbaya Yudhi Sadewa offering sweeping incentives and regulatory concessions to woo the Japanese carmaker.
“I’ll give you every incentive you want,” Purbaya said, questioning why Thailand remained ASEAN’s automotive manufacturing hub when Indonesia, Southeast Asia’s largest economy with nearly 290 million people, has yet to turn its huge market into a regional manufacturing base.
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Thailand has outpaced Indonesia in attracting global carmakers over the past decades, thanks to its well-established industrial ecosystem and export infrastructure, he said, while Indonesia has struggled to compete due to less attractive incentive packages.
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Bangkok has since responded by planning to overhaul its auto excise regime to make local production more attractive and discourage imports from carmakers without local factories in Thailand. The new rules, covering both combustion-engine and electric vehicles, are expected to take effect by the end of the year.