Controversy continues over Timor car program<\/p>\n
By Riyadi<\/p>\n
JAKARTA (JP): Indonesia's national car program has long driven
\ncontroversy domestically and internationally.<\/p>\n
But the controversy has died domestically with the remaining
\nquestion being whether or not the program will succeed on time.<\/p>\n
Internationally the controversy continues. It made news
\nheadlines again when Japan asked late last month the World Trade
\nOrganization (WTO) to form a panel to examine the policy.<\/p>\n
Japan says Indonesia's national car policy, which exempts PT
\nTimor Putra Nasional from paying duty and tax for three years to
\nmanufacture the national car, breaches WTO's provisions.<\/p>\n
Although Indonesia has blocked Japan's attempt, it is almost
\ncertain the WTO will eventually form a panel to examine the
\npolicy, as Japan is backed by the European Union and the United
\nStates.<\/p>\n
But Indonesia can simply prolong the WTO deliberation process
\nso it can finish the national car program before the WTO rules on
\nthe matter.<\/p>\n
In February 1996, the government announced a preferential car
\npolicy which exempted producers of a national car from import
\nduties and luxury taxes.<\/p>\n
It said only Timor Putra -- a company controlled by President
\nSoeharto's youngest son Hutomo Mandala Putra -- qualified for the
\nexemptions.<\/p>\n
Timor Putra is cooperating with Kia Motors Corp. of South
\nKorea to produce sedans here, under the name Timor.<\/p>\n
Japan's decision to challenge the national car policy at a WTO
\npanel has simply fueled Indonesia's incentive to expedite the
\nprogram.<\/p>\n
President Soeharto instructed relevant ministers to expedite
\nthe program so it is completed before the WTO rules on Japan's
\ncomplaint in 1999.<\/p>\n
Minister of Industry and Trade Tunky Ariwibowo said the
\ngovernment would provide any assistance Timor Putra needed to
\ndevelop the car.<\/p>\n
He said the government would assign state banks to financially
\nassist Timor Putra.<\/p>\n
The latest reports said the government had assigned three
\nstate banks -- Bank Dagang Negara, Bank Expor Impor Indonesia and
\nBank Rakyat Indonesia -- to form a consortium to provide US$1.2
\nbillion in credit to Timor Putra.<\/p>\n
Banking sources said 70 percent would be provided by Bank
\nIndonesia through subsidized liquidity credit.<\/p>\n
Bank Negara Indonesia (BNI) 1946 was excluded because it is a
\nlisted bank.<\/p>\n
Bank Bumi Daya was also excluded because it financed the
\nimportation of Timor cars from South Korea.<\/p>\n
Automotive analyst Suhari Sargo agreed with the government's
\npersistent efforts to defend and expedite the program but
\nquestioned the works of Timor Putra in materializing the program.<\/p>\n
Many parties, including domestic component producers, shared
\nSuhari's view and questioned whether Timor Putra could finish the
\nprogram on time.<\/p>\n
The chairman of the Indonesian Automotive Parts and Components
\nIndustries Association, A. Safiun, said it would be difficult for
\nTimor Putra to achieve the 60 percent local content.<\/p>\n
Timor Putra has so far ordered components from 36 local
\nvendors to meet the required 20 percent local content by the end
\nof the first year.<\/p>\n
The protection granted Timor Putra lasts for three years on
\ncondition that the 20 percent local component rule is met by the
\nend of the first year, 40 percent by the end of the second year
\nand 60 percent by the end of the third year.<\/p>\n
But local component producers needed at least nine months to
\nproduce the components, Safiun said.<\/p>\n
He said even if every existing local auto component producer,
\nthere are about 110 firms, was involved, they could only supply
\nabout 40 percent of the car's components.<\/p>\n
But Timor Putra seems to have its own agenda.<\/p>\n
Soemitro Soerachmad, president of PT Timor Distributor
\nNasional, a subsidiary of Timor Putra, said the company planned
\nthree stages to manufacture the car.<\/p>\n
The first stage was product socialization and market
\npenetration by selling imported Timor sedans on the domestic
\nmarket, he said.<\/p>\n
Currently Timor Putra imports Timor sedans from its main
\npartner, Kia Motors Corp. of South Korea.<\/p>\n
Timor Distributor has over 60 distribution outlets across the
\ncountry, some offer after sales service. It also cooperates with
\n226 spare parts shops across the country to sell Timor parts.<\/p>\n
Timor Distributor sold about 12,500 Timor sedans between last
\nOctober and March, 2,500 a month. This was below its original
\ntarget of 4,000 a month.<\/p>\n
But the Indonesian Automotive Industries Association said
\nTimor sedans dominated the market of 1,300cc- to 1,600cc-engine
\nsedans by 49.23 percent last year.<\/p>\n
The second stage is the domestic assembly of Timor sedans.
\nTimor Putra has leased two lines of assembly facilities of local
\nautomotive assembler PT Indomobil, a subsidiary of the giant
\nSalim Group.<\/p>\n
Soemitro said this month that Timor Putra would start
\nimporting completely-knocked down Timor cars and assemble them at
\nIndomobil's assembly facilities.<\/p>\n
He predicted that by October, Timor sedans would have a 24.7
\npercent local content, including universal components and engine,
\ntransmission, drive axle, steering system, clutch, chassis and
\nbody, suspension and brake system parts.<\/p>\n
The next stage would be the complete manufacture of Timor
\nsedans. Currently Timor Putra, through its joint venture with Kia
\nPT Kia Timor Motors, is building manufacturing facilities in
\nCikampek, West Java. They should be ready by next year.<\/p>\n
Timor Putra, through its subsidiary PT Timor Industri
\nKomponen, is cooperating with local and foreign component
\nproducers to producer Timor components and parts.<\/p>\n
Timor Industri Komponen is also building its own component
\nindustry, aiming to supply around 25 percent of the components.
\nIt will out-source the other 75 percent.<\/p>\n
Soemitro said he was confident that despite the controversy
\nTimor Putra would be able to manufacture Timor sedans by early
\n1999.<\/p>",
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