Only one car firm to get protection<\/p>\n
JAKARTA (JP): The government is turning down new proposals
\nfrom automotive firms to develop \"national cars\", in order to
\nbenefit from its newest policy which grants luxury tax and duty
\nbreaks.<\/p>\n
Minister of Industry and Trade Tunky Ariwibowo told local and
\nforeign journalists at his office here yesterday that the
\ngovernment will extend such luxury tax and tariff breaks to only
\none car firm at a time.<\/p>\n
\"We want one at a time. We want to see how this company
\nprogresses, at least for a three year period,\" Tunky said,
\nreferring to PT Timor Putra Nasional, which is controlled by
\nPresident Soeharto's youngest son, Hutomo Mandala Putra.<\/p>\n
Tunky said recently that Timor Putra was the only company that
\nmet the conditions set by the government's newest regulations on
\nthe automotive sector.<\/p>\n
The regulations -- a Presidential instruction, a government
\nregulation and two ministerial decrees -- grant import duty and
\nluxury sales tax exemptions to cars which use Indonesian brand
\nnames, are produced by domestic companies and are developed with
\ndomestic technology, engineering and design.<\/p>\n
Timor Putra announced last month that it planned to build a
\nsedan under the Indonesian brand name \"Timor\" in cooperation with
\nKia Motors Corp. of South Korea.<\/p>\n
The new policy gives Timor Putra three years to develop the
\nTimor car. The car has to contain local components of 20 percent
\nby the end of the first year, 40 percent by the end of the second
\nyear and 60 percent by the end of the third year.<\/p>\n
Tunky said yesterday if the company fails to meet the required
\nlocal content, the government will penalize it by requiring it to
\npay the duty and luxury sales taxes after all.<\/p>\n
He confirmed that during the first year of the development of
\nthe Timor car, Timor Putra can import 100 percent of the
\ncomponents without having to pay duties.<\/p>\n
Keen interest<\/p>\n
A number of local car firms have expressed their interest in
\ndeveloping similar national cars to gain duty and tax exemptions.
\nThese include PT Citra Mobil Nusantara, a subsidiary of the
\nBimantara Group which is controlled by Bambang Trihatmodjo --
\nanother son of President Soeharto -- General Motors Buana
\nIndonesia, which is controlled by Soeharto's half-brother
\nProbosutedjo and the Indomobil Group, the second largest local
\ncar assembler which is controlled by business tycoon Liem Sioe
\nLiong, also known as Sudono Salim.<\/p>\n
Bambang said recently that his group hopes to start producing
\nsedans with 1500 cc or 1600 cc engines, to be called Bimantara,
\nlater this year, in cooperation with Hyundai of South Korea.<\/p>\n
\"If the government grants such tax and duty exemptions to
\nother companies, it will jeopardize its tax revenues,\" Tunky
\nargued yesterday.<\/p>\n
From the automotive sector alone, the government receives over
\nUS$2 billion in tax payments per annum. \"If we had more than one
\nfirm like Timor, it would reduce our tax revenues substantially,\"
\nTunky said.<\/p>\n
\"It could also jeopardize existing car makers, because there
\nwould be more cars offered to customers at lower prices,\" he
\ncontinued.<\/p>\n
Indonesia has long suffered a lop-side trade imbalance in the
\nautomotive sector. Imports of automotive products reached US$3.6
\nbillion last year, about 10 percent of the country's total non-
\noil imports. Meanwhile, exports of automotive products totaled
\nless than $250 million.<\/p>\n
The government's move to grant tax and duty exemptions to
\nTimor Putra, however, has hit existing car assemblers. In
\nresponse to the new policy, Japanese and U.S-affiliated car firms
\nhave halted investment here.<\/p>\n
Japanese cars dominate Indonesia's automobile market with a
\nshare of more than 90 percent.<\/p>\n
The Japanese government has said it is investigating the new
\npolicy to determine whether it conflicts with international rules
\non fair trade. Japan is also considering a complaint to the World
\nTrade Organization (WTO) to air its grievance.<\/p>\n
The first secretary for commerce at the Japanese Embassy here,
\nKoji Toyokuni, told The Jakarta Post yesterday that Ambassador
\nTaizo Watanabe met with Minister Tunky on Thursday and expressed
\nconcern about the new policy.<\/p>\n
\"The policy does not reflect the principles of transparency
\nand equality. It can create problems relating to WTO agreements
\nand may have a negative impact on the investment climate in
\nIndonesia,\" Toyokuni quoted his ambassador as saying.<\/p>\n
Tunky, however, contended that Indonesia had not violated WTO
\nrules by introducing the new measures. \"I have studied the rules.
\nWe are not violating WTO rules.\"<\/p>\n
He argued that article 18 of the WTO allows developing
\ncountries to protect their domestic industries until the year
\n2000.<\/p>\n
\"We must be able to use this opportunity. If we do nothing to
\nstrengthen our industrial base, how can we win with open
\ncompetition,\" Tunky said, adding that the policy is aimed at
\nstrengthening the domestic car industry. (kod\/rid)<\/p>\n
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