Inconsistent policy<\/p>\n
The national automobile program, which was announced by Trade
\nand Industry Minister Tunky Ariwibowo on Wednesday came as a
\npainful surprise to car assemblers and everyone who longs for a
\nviable and competitive car manufacturing industry. The new
\nprogram, as stipulated in the Presidential instruction,
\ngovernment regulation and ministerial decrees, is surprising
\nbecause it was completely unexpected. The measure is also
\nextremely baffling because it upsets investment programs already
\ndeveloped from policies introduced between 1986 and 1993.<\/p>\n
The consumers will likely benefit from cheaper sedan prices
\nbut whether the benefit will also result in the development of a
\ncommercially viable and internationally competitive car industry,
\nas we all aspire, remains a big question.<\/p>\n
We cannot understand why this national automobile program
\nfocuses on the development of sedans, which account for only 20
\npercent of the market. It runs contrary to the previous policy,
\nwhich emphasized and gave incentives to the development of
\ncommercial vehicles, notably pick-ups and minibuses. These
\naccount for the bulk of the market demand.<\/p>\n
The government has always been concerned with the rapid
\nincrease in the number of passenger cars, whose journeys are
\nconsumptive rather than productive in nature. Part of that
\nconcern has been reflected in the exorbitant import tariffs and
\ntaxes imposed on sedans. But suddenly PT Timor Putra Nasional, a
\ncompany less than two years old which has yet to prove its
\nrecord, was granted complete import duty and luxury sales tax
\nrelief to assemble and market sedans. The competitive advantage
\nthis will give PT Timor Putra is immense as duties and taxes make
\nup more than 60 percent of the show-room prices of sedans. Many
\ncar makes may eventually be edged out of the market. That would
\nactually be a boon to the automobile industry but since such a
\ndevelopment would occur as a result of a policy seen by most
\nother car companies as unfair, that would surely have an adverse
\nimpact on the credibility of the government's policy making.<\/p>\n
It is also debatable as to whether PT Timor Putra has really
\nfulfilled the three requirements to qualify for pioneer status,
\nthe prerequisite for obtaining the duty and tax relief. The
\nrequirements stipulate: the company must use an Indonesian brand
\nname, the assembly\/production facility is owned wholly by a
\ndomestic company and the production is made using domestic
\ntechnology, engineering and designs, all of which are being
\ndeveloped over time.<\/p>\n
Tunky asserted that PT Timor Putra is a company wholly owned
\nby Indonesians and the sedans it assembles bear the Indonesian
\nbrand name Timor. But we still find it is hard to believe that
\nsuch a young company, which set up a joint venture with South
\nKorean Kia Motor company only a few weeks ago, could have
\nfulfilled the requirements and thereby be entitled to the duty
\nand tax reliefs.<\/p>\n
We have often argued that it is impossible to develop a viable
\ncar manufacturing industry in Indonesia as long as the national
\nmarket of only about 350,000 units a year remains crowded by so
\nmany car makes and so many assemblers.<\/p>\n
Car manufacturing is a highly complex venture which requires
\nsignificant financial, technical, managerial and organizational
\nresources and expertise as well as large production and sales
\nvolume. The high initial investments for research, design,
\ndevelopment, and engineering and the need for reinvestment to
\nmake new models in order to remain competitive makes automobile
\nmanufacture commercially unviable at a low production volume. So
\nif the government really wants a competitive car manufacturing
\nindustry this should be addressed rather than giving tax
\nincentives to manufacturers of sedans.<\/p>\n
There are less than seven years left for us to strengthen our
\ncar industry before we face fierce competition from Thailand and
\nMalaysia with the start of the ASEAN Free Trade Area in 2003. It
\nis a great pity therefore that the new national automobile
\nprogram fails to address what is really needed to develop a
\ncommercially viable and highly competitive car manufacturing
\nindustry.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/inconsistent-policy-1447893297",
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"sponsor": "Okusi Associates",
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