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)