Local component firms too weak to back Timor car<\/p>\n
JAKARTA (JP): Without further incentives, PT Timor Putra
\nNasional, the only car firm to get tax and tariff breaks under
\nthe new national car program, will face a serious challenge to
\nmeet local content requirements set by the government, an
\nindustry executive said yesterday.<\/p>\n
Chairman of the Indonesian Automotive Industry Association
\nHerman Z. Latif told a seminar that the existing local auto-
\nsupporting industries are very weak and will struggle to meet the
\ndemands of vehicle producers.<\/p>\n
Additionally, Herman said, most locally-produced components
\nare designed for the production of commercial vehicles, not for
\npassenger cars.<\/p>\n
\"If it (Timor Putra) wants to use the existing local component
\nfirms, they will need further investments to adjust their
\nproduction facilities to its necessities,\" Herman told the
\nseminar, organized by the Institute for the Studies on Free Flow
\nof Information.<\/p>\n
The government announced last month that it would provide
\ntariff and tax breaks to Timor Putra, owned by President
\nSoeharto's youngest son Hutomo Mandala Putra, to develop a sedan
\nunder the Indonesian brand name \"Timor\" in cooperation with Kia
\nMotors Corp. of South Korea.<\/p>\n
The program gives Timor Putra three years to develop a
\nnational car, which has to contain local components of 20 percent
\nby the end of the first year of operation, 40 percent by the end
\nof the second year and 60 percent by the end of the third year.<\/p>\n
Minister of Industry and Trade Tunky Ariwibowo said recently
\nthat the government will penalize Timor Putra by requiring it to
\npay the exempted duties and luxury sales tax if it fails to meet
\nthe requirements on local content.<\/p>\n
The new policy has drawn criticism from various parties,
\nincluding existing car assemblers, because they realize that the
\nnew policy will hit them hardest.<\/p>\n
Herman contended, however, that it will not be easy for Timor
\nPutra to reach the target of 20 percent local content by the end
\nof the first year. Even if all the existing local producers of
\ncomponents are involved, they will contribute not more than 13
\npercent of all components.<\/p>\n
\"It will be far more difficult for Timor Putra to reach the
\n40-percent local content requirement in the second year,\" Herman
\nsaid.<\/p>\n
Supporting Herman's argument, industry analyst Soehari Sargo
\nsaid that the government needs to give further incentives for the
\nexpansion of supporting industries to support the development of
\nthe Timor car.<\/p>\n
\"I hope that the government's policy on the national car will
\nbe followed up by a number of new rulings to encourage the
\ndevelopment of vendor industries,\" Soehari said.<\/p>\n
Herman noted that developing supporting industries is
\nimperative if Indonesia wants to develop its own national car. In
\nmost other countries, he said, supporting industries contribute
\n60 to 70 percent of components to their car production.<\/p>\n
\"From a series of policies already introduced by the
\ngovernment, I can see a thread there that the government wants to
\nmove our automotive industry from the assembling stage to the
\nmanufacturing level.\" Herman said.<\/p>\n
\"However, I see a missing link. When we move from assembling
\nto manufacturing, we are not building a strong basis in the
\nsupporting industries,\" he continued.<\/p>\n
He acknowledged that the country's automotive industry has
\nbeen protected for so long that the industry cannot yet progress
\nto the manufacturing level. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/local-component-firms-too-weak-to-back-timor-car-1447893297",
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"sponsor": "Okusi Associates",
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