Car policy faces new criticism

Car policy faces new criticism

JAKARTA (JP): Indonesia's controversial national car policy is
under the international spotlight once again following renewed
complaints about it from Japan and the United States.

Japan confirmed yesterday that it would take Indonesia's car
policy to the World Trade Organization (WTO), and the United
States targeted Indonesia, along with three other nations, for
investigations on charges of unfair auto trade practices.

Indonesia, however, remains defiant and says it is ready to
defend its national car policy against any action at the WTO.

"If there is an official complaint (to the WTO), we are ready.
We have our own arguments," Minister of Industry and Trade Tunky
Ariwibowo told journalists before a monthly cabinet meeting on
the economy yesterday.

Japan's international trade and industry ministry plans to
file a complaint with the WTO over Indonesia's national car
policy within a week or two.

"We have decided to take our complaint to the WTO," a ministry
official was quoted by AFP as saying in Tokyo yesterday.

Tunky, however, said that he has not yet received official
news of any action at the WTO.

He said a complaint should be filed at the WTO headquarters in
Geneva rather than at the organization's inaugural ministerial
meeting scheduled for December in Singapore.

Tokyo's complaint follows the Indonesian government's decision
to release for sale cars made by South Korea's Kia Motors Corp.,
for the Indonesian company PT Timor Putra Nasional, without
levying import duties and luxury taxes on the vehicles.

"We made the decision after we confirmed that those cars were
marketed without being subject to the import tax," the Japanese
ministry official said.

The cars were released by the Indonesian customs authorities
Monday and were delivered to buyers Tuesday. Their cost is
roughly half the price charged for similar foreign cars.

A decree issued by President Soeharto in February ruled that
producers of a so-called national car would be granted exemptions
from import duties and luxury taxes, which add about 60 percent
to the price of other cars in Indonesia.

Timor Putra -- a company controlled by Soeharto's youngest son
Hutomo Mandala Putra -- was chosen as the first national car
supplier and is required to clear an eventual goal of a local
content of more than 60 percent within three years.

In a joint venture with Kia Motors, Timor Putra is allowed to
import such cars from South Korea until its own factory becomes
operational in 1998.

The Japanese official said Tokyo's first step would be to open
bilateral negotiations with Jakarta under WTO auspices.

"The Indonesian government obviously violated the WTO rules.
We cannot help but file this complaint," the official said. "But
at the same time we hear their stance is very firm."

Investigation

In Washington, Acting U.S. Trade Representative Charlene
Barshefsky said her country would investigate Indonesia's
national car policy under Section 301 of the U.S. trade law,
which allows sanctions to be imposed if bilateral and
multilateral efforts to lift trade barriers are exhausted.

"In light of the importance of the U.S. auto industry to the
U.S. economy, eliminating foreign barriers to U.S. exports of
autos and auto parts is of vital importance to the industry's
economic growth and to U.S. national economic interests,"
Barshefsky said.

The other three countries that are to face similar
investigations are Argentina, Australia and Brazil.

Meanwhile, deputy U.S. trade representative Jeffrey Lang said
in Singapore yesterday that he would come here in a day or two to
discuss the policy with his Indonesian counterpart.

"We are concerned about the Indonesian program and we are
studying our options now," Lang said.

GSP

Meanwhile, 29 U.S. legislators, through a letter to Barshefsky
dated Sept. 27, asked the acting U.S. trade representative to
reinstate a formal review of favorable tariffs on Indonesian
exports to the United States under the Generalized System of
Preferences (GSP) owing to what they describe as Indonesia's
ongoing crackdown on labor and political activities.

"Although the review of Indonesia's GSP status began in 1992
and was suspended in February 1994, Indonesia has only made
cosmetic changes in its workers' rights practices," the letter, a
copy of which was made available here yesterday, read.

It cited the detention of labor activist Muchtar Pakpahan on
capital charges of subversion as an example of Indonesia's poor
record on human and workers' rights. (rid)