Court ruling affects Kia car project<\/p>\n
JAKARTA (JP): The recent ruling by the Supreme Court that
\nordered PT Timor Putra Nasional car company to pay the tax
\ndirectorate general Rp 3.2 trillion (US$326 million) in back
\ntaxes and duties has further put the fate of the Kia car project
\nin limbo, Trade and Industry Minister Luhut Panjaitan said here
\non Wednesday.<\/p>\n
The ruling automatically put the tax directorate general in
\nseniority over the Indonesian Bank Restructuring Agency as
\nregards to the claims on TPN assets, Luhut told a hearing with
\nthe House of Representatives.<\/p>\n
\"This development consequently forced the Indonesia-South
\nKorean taskforce to discontinue its efforts to revive the TPN car
\nproject under a new joint venture company called PT Kia Timor
\nMotors (KTM),\" he added.<\/p>\n
Before the Supreme Court ruling, the government had agreed on
\nrestructuring TPN's $521.5 million debts, resulting in IBRA
\nowning 69 percent of KTM and the remaining stake held by Kia
\nMotor of South Korea and TPN.<\/p>\n
Nonetheless, the ruling overthrew the agreed ownership
\ncomposition and forced the joint taskforce to postpone its work
\non the car project, he said.<\/p>\n
The national car project was initiated in the mid-1990s by TPN
\nwhich was then owned by former president Soeharto's youngest son
\nHutomo Mandala Putra or Tommy, in cooperation with South Korean
\nautomotive company Kia.<\/p>\n
The national car project was exempted from import duties and
\nluxury tax for three years, on condition that the cars' local
\ncontent reached at least 20 percent in the first year of the
\nprogram, 40 percent by the end of the second year and 60 percent
\nby the end of the third year.<\/p>\n
But TPN failed to fulfill the requirement and lost its
\npowerful government support after the ousting of Soeharto in May,
\n1998. It was later ordered to pay Rp 3.2 trillion in back taxes
\nand duties.<\/p>\n
The economic crisis and the condition imposed by the
\nInternational Monetary Fund on its bailout program for Indonesia
\nlater forced the government to suspend the project.<\/p>\n
The government (IBRA) then took over TPN and its debts to
\nprivate and state banks.<\/p>\n
Kia withdrew from the joint venture in 1999, only to re-enter
\nit last year as part of the government's bid to revive the car
\nproject.<\/p>\n
Referring to negotiations with Kia company for reviving the
\ncar project, Luhut said that the Korean car company asked for tax
\nfacilities as one of the preconditions to its additional
\ninvestments to complete the project.<\/p>\n
He added that Kia had asked the government to exempt the
\nnational car project from import duties, luxury taxes, as well as
\noffer it lower bank interest rates on new loans.<\/p>\n
\"We're still evaluating their (Kia's) demands, I can't tell
\nwhether we can accept them,\" Luhut told reporters following the
\nhearing with the House Commission V for trade and industrial
\naffairs.<\/p>\n
He said the government was still assessing as to whether Kia's
\ndemands complied with the rulings of the World Trade Organization
\n(WTO).<\/p>\n
Indonesia came under fire from the WTO when the government
\nfirst introduced tax facilities for Kia at the project's launch
\nin 1996.<\/p>\n
Luhut considered reviving the Timor car project quite an
\nuphill task as the project's cost had grossly been marked up by
\nTPN.<\/p>\n
An audit by Ernst & Young accountancy firm disclosed that TPN
\nhad inflated the amount of investments it claimed to have put in
\nthe project, according to Luhut.<\/p>\n
TPN claimed to have invested $112 million in its assembly
\nplant in West Java but Ernst & Young due diligence estimated the
\ninvestment at only $31 million.<\/p>\n
\"But the government would still try its best to revive the
\nproject in a bid to prevent total losses,\" Luhut added. (bkm)<\/p>",
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