UPDATE 1-Hankook to invest $1.2 bln in tyres in Indonesia

* To build manufacturing plant next yr

* To use local rubber output, target mining sector (Updates with details, quote)

JAKARTA, Oct 12 (Reuters) - South Korea's Hankook Tire 000240.KS will invest $1.2 billion in the tyre industry in Indonesia, part of a wave of increasing Asian foreign direct investment in Southeast Asia's biggest economy. Indonesia's investment agency, which expects up to $10 billion 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 on Tuesday.

“They are interested in producing big tyres such as for big trucks or dumper trucks for the mining industry,” Hidayat said. “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 $1 billion 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 ($14.04 billion) in 2010, up a third since last year, with Hyundai Motor 005380.KS eyeing the auto sector.

Shares in Indonesia's top tyre maker Gajah Tunggal GJTL.JK have more than quadrupled this year, as fund investors bet on prospects for higher sales. The firm told Reuters in an interview last month it sees revenue up 15-20 percent next year. [ID:nJKB003995] (Reporting by Yayat Supriatna; Writing by Neil Chatterjee)