EU move on Timor car<\/p>\n
It is now simply a matter of time before the United States,
\nwhich has always claimed to be the vanguard of free trade, joins
\nthe move led by Japan and the European Union in asking the World
\nTrade Organization panel to judge Indonesia's controversial
\nnational car policy. The EU has decided to seek a WTO panel at
\nthe monthly meeting of the WTO Dispute Settlement Body next week.
\nIndonesia can block the EU move as it did with Japan's motion
\nlate last month, but that will only delay the panel's formation
\nfor one month.<\/p>\n
What a pity and waste of government resources for defending a
\nprivate company, which has so far contributed nothing to the
\ndevelopment of the country's automobile industry. In fact, PT
\nTimor Putra Nasional, a complete newcomer to the industry, has
\nyet to complete its assembling plant in West Java within the next
\ntwo years. Timor Putra's competitive advantage now in the
\ndomestic car market is the February 1996 government regulation
\nthat classifies it as the only company qualified for what the
\ngovernment calls a national car program.<\/p>\n
This classification, decided arbitrarily by the government to
\nthe disgust of other domestic car companies and sharp criticisms
\nof almost all private-sector analysts, has entitled Timor Putra
\nto import, without paying import duty and luxury sales tax,
\n45,000 fully assembled Timor sedans from its South Korean joint
\nventure partner, Kia Motors Corp.<\/p>\n
Worse still, the Timor car, though its price is supposed to
\nbe 60 percent lower than domestic competitors due to its duty and
\ntax relief, has performed poorly in the market. Timor Putra has
\nbeen able to sell less than 50 percent of the 45,000 fully
\nassembled Timor sedans it has been licensed to import since last
\nAugust.<\/p>\n
The poor sales, however, have not discouraged the government
\nfrom mobilizing three state banks and 10 major private banks to
\nput up a syndicated loan of almost US$700 million to speed up the
\ncompletion of the Timor car program. Given the power of the
\ngovernment, and in view of the \"national\" label put on the Timor
\ncar program, those banks will have no other choice but to give
\nthe required loans at the great risk of suffering bad credit.
\nPublicly listed banks which will take part in the loan
\nsyndication will be well-noted by the government but may likely
\nbe punished by the Jakarta stock market. Further down the road,
\nthe central bank will have to review the target of bank lending
\ngrowth this year.<\/p>\n
The decisions by Japan and the EU to bring the allegedly
\ndiscriminatory car policy to the WTO panel has propelled the
\nTimor car issue into a new stage with big economic risks for
\nIndonesia itself. Timor's car development has now seemingly been
\nguided more by nationalistic sentiment and politics than by
\nindustrial logic.<\/p>\n
Building the Timor car assembly plant, however, will not end
\nthe problems related to the national car program. Many parties,
\nespecially other car industrialists, are now nervously waiting
\nfor other market distortions the government may create in order
\nto push Timor's marketing.<\/p>\n
Many analysts are still wondering why the government had
\npicked the sedan for the national car program in the first place,
\nand not a light commercial car or utility vehicle whose use would
\nbe much more productive and supportive of national economic
\ndevelopment. The problem is that sedans account for only 10
\npercent to 15 percent of 450,000 automobiles sold annually in the
\ncountry. The Timor car, its image already devastated by the
\npublicity around its special treatment and by international
\ndisputes, is surely facing an uphill battle to make significant
\nsales in the market. Timor has to compete with at least six other
\nsedan makes in the 1,600 cc market.<\/p>\n
A more dreaded consequence is looming ahead pending the
\ncompletion of the dispute settlement process within 16 to 18
\nmonths. If the government loses -- which is seen by most analysts
\nas highly probable -- it will have to withdraw or correct its
\nnational car policy, otherwise the complainants will have the
\nright to take retaliatory measures against Indonesian export
\ncommodities.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/eu-move-on-timor-car-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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