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Turnover in the Indonesian automotive components industry dropped by 80 in 1998 and the trend continued into 1999 despite efforts to generate exports and the cushion of a slightly more stable aftermarket There were 171 local components manufacturers in 1998 employing 45000 people--down from 65000 the year before Like the vehicle industry the Indonesian components industry now faces its greatest challenge to date--trying to overcome the worst crisis in the automotive sectors history Domestic demand has plummeted and the economy is stalled Trading conditions remain desperately subdued with vehicle production now a tiny fraction of capacity levels Inward investment has been delayed and in some cases diverted to other Asian countries in the light of the political and social instability in the country and despite the elections many political hurdles remain As a result of the troubles many indigenous manufacturers are struggling to contain losses and remain in business Those that have linked with foreign joint-venture partners are more likely to weather the crisis but at a price Most are expected to relinquish control and the industrys need of recapitalisation has provided foreign partners with the opportunity to increase their equity holdings Vehicle manufacturers have also done a lot to support their suppliers in an effort to keep the supply chain intact Nevertheless the industry has been operating at a fraction of capacity with extensive temporary closures and redundancies As the impact of the crisis continues many of these closures are likely to become permanent Assuming that some sort of political and economic stability returns soon-- and that is a major assumption--then the outlook should begin to improve Great challenges lie ahead but the country does offer among the best opportunities for a regional production base with among the lowest-cost labour rates and a domestic market with colossal long-term potential With restored stability investor confidence should eventually return This article is drawn from World automotive components 2000 edition There are many tales of misfortune in
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