13 banks ordered to finance Timor car project

13 banks ordered to finance Timor car project

JAKARTA (JP): The government has ordered three state banks and
10 private banks to lend US$1.3 billion to the producer of the
country's so-called national car, PT Timor Putra Nasional.

Coordinating Minister for Economic and Finance Saleh Afiff
confirmed that the consortium of 13 banks would be directly
supervised by the central bank's governor, J. Soedrajad
Djiwandono.

"The loans to PT Timor will be at market interest rates,"
Afiff said here Monday after chairing a special meeting on the
national car with some ministers.

The three state banks are Bank Dagang Negara, Bank Rakyat
Indonesia and Bank Ekspor Impor Indonesia, Afiff said.

But he declined to name the private banks, saying only that
they were large ones.

The Kontan economic weekly reported last week that the private
banks included Bank Central Asia -- Indonesia's largest private
bank which is controlled by Sudono Salim -- Bank Internasional
Indonesia and Bank Lippo.

Some of the private banks, according to Kontan, were willing
to immediately write off any credit they would give Timor Putra.

Banking sources said earlier that Bank Indonesia would provide
subsidized liquidity credit of up to 70 percent of the funds
needed for the car project.

The sources said the governor was originally opposed to state
banks granting large loans to Timor Putra, given the tight
lending growth limits he imposed on commercial banks for 1997.
But Soedradjad later succumbed to strong pressure to approve the
deal.

Soedradjad dismissed the speculation, saying he supported the
national car program.

"I'm the strongest supporter of the national car program,"
Soedradjad said.

In February 1996, the government announced a preferential car
policy which exempted producers of a national car from import
duty and luxury tax.

However, the government announced that Timor Putra -- a
company controlled by President Soeharto's youngest son Hutomo
Mandala Putra -- was the only company that qualified for the duty
and tax exemptions, at least for three years.

Timor Putra is cooperating with Kia Motors Corp. of South
Korea to produce sedans here, under the brand name Timor.

The protection granted Timor Putra will last for three years
on condition that the car has at least 20 percent local
components by the end of the first year, 40 percent by the end of
the second year and 60 percent by the end of the third year.

But Timor Putra was immediately licensed to import up to
45,000 fully assembled cars from Kia's plant in South Korea and
to sell them in Indonesia as national cars pending the completion
of its assembly plant in West Java.

The policy has been protested by Japan, the United States and
the European Union. Japan is currently seeking arbitration from
the World Trade Organization (WTO) over the car policy, alleging
that Indonesia has breached international trade rules.

Japan's decision to challenge Indonesia's national car policy
at WTO has hardened the government's determination to push ahead
with the national car program.

Following Japan's newest move late last month, President
Soeharto instructed relevant ministers to expedite the program so
it is completed before the WTO panel announces its judgment on
Japan's complaint.

Minister of Industry and Trade Tunky Ariwibowo said the banks'
support would help expedite the program.

He said the funds from the 13 banks would finance the
construction of the assembly plant of PT Kia Timor Motors -- a
venture by Kia and Timor Putra.

With the credit Timor Putra could achieve 60 percent local
content by mid 1999, Tunky said.

Afiff said all parties should support the national car program
so it could be completed on time.

"Everyone must support the program. If necessary, we will
fight Japan's opposition to our national car program," Afiff was
quoted by Antara as saying.

State Minister of Research and Technology Minister B.J.
Habibie raised the possibility of a merger between Timor Putra
and PT Maleo, the developer of a car the state-owned Strategic
Industrial Development Board has been designing for the last few
years.

"It is very possible that Timor Putra could be merged with PT
Maleo under the umbrella of the Industri Mobil Indonesia
(Indonesian Car Industry)," Habibie said.

But he said the details of such a tie-up had yet to be
discussed. (rid)