Analyst doubts restart of Timor project

JAKARTA (JP): A leading automotive analyst expressed skepticism on Tuesday about a plan to revive the suspended national car project, despite a renewed commitment from the former South Korean partner.

Suhari Sargo said the project was no longer viable given the considerable amount of outstanding bad debts of PT Timor Putra National (TPN).

The firm, controlled by president Soeharto's youngest son Hutomo Mandala Putra, was named by the government in 1996 to develop the national car program with Kia Motors Corp. During the first years of its operation, TPN was allowed to import the vehicles from the South Korean company under special tax dispensations.

The company was granted a three-year exemption from import duties and luxury taxes on the condition that the local content of the car, known as the Timor, would reach at least 20 percent in the first year of the program, 40 percent by the end of the second year and 60 percent by the end of the third year.

TPN is now saddled with around Rp 3 trillion (US$416 million) in debts following a sharp decline in sales and a disagreement with the taxation office over allegedly unpaid import duties.

The project unraveled when the World Trade Organization ruled in early 1997 for the removal of the exclusive rights given to the company. Japanese and U.S carmakers had disputed the provisions as unfair.

Suhari said he doubted the South Korean company would remain serious about its commitment considering the amount of unresolved problems with the project.

"It is possible that Kia will back off, if it finds the car project is still in the same mess as when it left last year," he said on the sidelines of an automotive seminar.

He said the government's invitation for Kia to restart the suspended Timor car project was not sincere. He believed it was only a diplomatic tool to convince the South Korean government that Indonesia's new government was willing to provide a good business climate for foreign investors.

Suhari said it was not easy for the government to settle the financial problems of TPN, which was taken over by the Indonesian Bank Restructuring Agency (IBRA) after the government suspended the car project last year.

Kia, which is now owned by South Korean car giant Hyundai Motor Co., withdrew from the project last year.

The Korean company renewed its commitment during President Abdurrahman Wahid's official visit to South Korea in early February. Kia did not mention the amount of investment it would bring back into the project, which has so far entailed about $400 million in investment. However, the government predicted the revival of the project would absorb at least $100 million in fresh funds.

Kia's representatives were scheduled to arrive in Jakarta in early April to start negotiations with IBRA, which is currently undertaking the restructuring process of TPN, to form a new joint venture company to continue with the car project.

Suhari said the government, including IBRA, was slow in restructuring TPN.

Separately, IBRA's deputy head Eko S. Budianto said his office would ask Hutomo to provide fresh funds for TPN or risk losing his ownership.(cst/rei)