South Korea's Hankook Tire will invest US$1.2bn in the tyre industry in Indonesia, confirming an earlier unsourced report. The country's investment agency, which expects up to $10bn of investment from South Korea in the next four years, will issue the firm a permit in December, leading to groundbreaking for a manufacturing plant by the end of next year, industry minister MS Hidayat said.

"They are interested in producing big tyres such as for big trucks or dumper trucks for the mining industry," Hidayat told Reuters. "We have a lot of natural rubber for feedstock."

Indonesia is the world's second largest rubber producer, as well as the world's top exporter of thermal coal and tin.

Officials said earlier this year that Hankook was considering a $1bn investment in a new tyre factory. 

Asian foreign direct investors are looking at the resources and consumer sectors in Indonesia, which is expected to see higher coal output and record car sales this year.

Indonesia expects foreign direct investment to pick up to 126 trillion rupiah ($14.04bn) in 2010, up a third since last year, with Hyundai Motor eyeing the auto sector.

Shares in Indonesia's top tyre maker Gajah Tunggal have more than quadrupled this year, as fund investors bet on prospects for higher sales. The firm told Reuters last month it sees revenue up 15-20% next year.