Volkswagen will build its factory in Cikampek, West Java, Hatta said after a meeting with Volkswagen AG representative Christian Kringler here on Thursday.
He said the factory will be Volkswagen's second largest in Asia after one in China.
"They see good prospects in our market and the condition in the country is more favorable than in many other countries," he said.
Construction is expected to start in 2014 to be completed in 2017, he added. He refused to give details about possible incentives for the German car maker .
"We have tax allowance to be offered later. It would be discussed soon," he said. He said Volkswagen AG has no hesitation to do business in Indonesia, despite the country's economic fluctuations. (*/DWA)