The one-car race<\/p>\n
The Indonesian government, as anxiously predicted by car
\nassemblers, has decided to close the national automobile program
\nto new entrants, thereby allowing Hutomo (Tommy) Mandala Putra's
\nPT Timor Putra Nasional to become the sole car company to enjoy
\nthe import tariff and luxury sales tax reliefs at least for the
\nnext three years. The decision was not made because the 15 or
\nmore assemblers are unable to meet the requirements of the
\nprogram -- if PT Timor is the standard then several other
\nassemblers would, with some adjustments, be eligible for the
\nprogram. The decision was made because PT Timor would simply not
\nbe able to survive without complete protection during the first
\nfew years of operation.<\/p>\n
The decision is thus a reflection of the government's
\nperseverance in making the program a success at whatever cost,
\ndespite most assemblers' disgusted view that the measure is
\nadditional discriminative treatment against them.<\/p>\n
The launching of the national automobile program late last
\nmonth actually resulted in the establishment of two completely
\ndifferent playing fields in the car industry: one a bumpy road
\nwith tariff and tax hurdles (based on 1993 regulations), and the
\nother a highway free of tariff and tax obstacles (based on
\nPresidential Instruction No.02\/1996). The marketing of cars
\nproduced under the national automobile program will thus run very
\nmuch like a one-car race.<\/p>\n
Despite the freeway facility PT Timor enjoys, there are at
\nleast three major reasons why it needs complete protection to
\nincrease its chances of success.<\/p>\n
One of the reasons is the brand image which for big-ticket
\nitems as automobiles counts greatly in the market. For example,
\nif Tommy's elder brother Bambang Trihatmodjo was allowed to join
\nthe program with Hyundai, the South Korean car make he
\nrepresents, Timor and its South Korean partner, Kia, would be in
\nbig trouble. Among the Korean carmakers, Hyundai is the market
\nleader both in Korea itself as well as in Europe and North
\nAmerica. The impact would be more devastating if the competitor
\nwas Astra's Toyota Kijang, the best selling car in the country
\nwhich already has a local content of around 50 percent and is
\nsupported by nationwide service networks.<\/p>\n
Another reason is the economies of scale. Car industry
\nanalysts set the minimum annual sales at 50,000 vehicles for a
\ncarmaker to make it commercially feasible to develop a plant. The
\ncountry's market of about 350,000 vehicles (sedans, recreational
\nvehicles and commercial cars) a year is now crowded by more than
\n20 car makes. Hence, the complete protection from competition is
\nexpected to provide a better chance for Timor sedans and jeeps
\nwhich, because of the tariff and tax breaks, will sell at 50
\npercent to 65 percent cheaper than other car makes which do not
\nget the same incentives.<\/p>\n
The third reason is the huge cost of the national automobile
\nprogram. Assuming that Timor can sell 50,000 vehicles a year
\nduring the next three years, the government will lose about Rp 4
\ntrillion (US$1.74 billion) in forfeited tariffs and taxes.<\/p>\n
However, the decision to outrightly grant Timor complete
\nprotection for three years has adverse implications on the
\ncredibility of the government's policy-making system, which
\nIndustry and Trade Minister Tunky Ariwibowo so staunchly defended
\nat a news conference with national and foreign journalists on
\nFriday. The decision presumes that Timor will meet all the
\nrequirements as set in the Presidential Instruction and its
\nsupplementary regulations, notably the 20 percent local content
\nat the end of the first year, 40 percent at the end of the second
\nyear and more than 60 percent at the end of the third year. The
\ndecision also means that the results of the compulsory audit of
\nTimor that is supposed to be conducted at each stage of the
\nlocal-content development would not make any difference at all,
\nin so far as the tariff and tax incentives are concerned.<\/p>\n
However, given the important objective of the national
\nautomobile program and the huge costs involved, it is imperative
\nto subject Timor to independent audits. Audits by only the
\nindustry and trade ministry will lack credibility as it is the
\nsame ministry, together with the finance ministry, that is
\nresponsible for granting the tariff and tax exemptions.<\/p>\n
A transparent and independent audit will not only help force
\nTimor to comply to the government policy, but also help redress
\nthe damage already done to the credibility of the government
\npolicy-making system.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/the-one-car-race-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}