ABSTRACT
Indonesia has a long story in participating the international automotive production network, but Indonesia is unable to reap gains from the outstanding growth in automotive and auto parts trade. In Southeast Asia region, Indonesia as the biggest economy is even surpassed by Thailand since Thailand has become major production base for many global OEMs. Therefore, this paper aims to answer a question why Indonesia could not become major player in ASEAN region as Thailand did. This paper argues that Indonesian industrial policies are the reason why Indonesian auto industry is lagging behind Thailand. Indonesia’s national car project with its discriminatory policies adversely affects OEMs where they consider Indonesia not as a good place for investment. Empirical studies using fragmentation as logical framework shows the main determinants of Indonesian parts and components exports. The estimation using panel regression method shows improvement in service-link costs, improvement in road and port infrastructure, and availability of skilled labor become important prerequisite to boost parts and components exports, alongside with sound and export-oriented industrial policies.
