'Car policy shouldn't discriminate'

'Car policy shouldn't discriminate'

JAKARTA (JP): Japanese Prime Minister Ryutaro Hashimoto
yesterday expressed his support for Indonesia's plan to develop
an automotive industry, but insisted the development should not
discriminate against foreign car manufacturers.

The issue of Indonesia's much criticized national car project,
cropped up in a 90-minute meeting between Hashimoto and President
Soeharto at the Merdeka Palace yesterday.

A senior Japanese foreign ministry official said Hashimoto
told Soeharto how Japan had developed its automotive industry.

"In the past, Japan in developing its auto industry (also)
provided special treatment... under certain conditions...However
these policies did not discriminate against foreign auto makers,"
said the official who asked not to be named.

Despite the contentious nature of this issue, the talks
remained amiable.

Under Indonesia's national car policy, PT Timor Putra Nasional
-- a firm controlled by Soeharto's youngest son Hutomo Mandala
Putra -- is exempt from the import duties and luxury taxes which
usually add 60 percent to the price of a car.

This exclusive policy allows PT Timor to import cars from
South Korea's Kia Motors tax free until 1998 after which the
Indonesian firm's factory is expected to become operational.

PT Timor, with the help of Kia, will then produce cars with a
60 percent local content.

The policy has been criticized by Japan, the European Union
and the United States who complained about the discriminatory
treatment to the World Trade Organization (WTO).

Japanese car makers have much at stake since they hold a 90
percent share of the Indonesian automobile market.

The Japanese official said Hashimoto told Soeharto that Japan
had no objection to Jakarta encouraging the development of its
auto industry.

"However this had to be done in a manner consistent with WTO
rules," the official said again quoting Hashimoto.

Hashimoto arrived Thursday for a three-day state visit as part
of his five-nation tour of Southeast Asia which includes Brunei,
Malaysia, Vietnam and Singapore.

The national car policy was apparently brought up by Soeharto.

Indonesian Minister/State Secretary Moerdiono said Soeharto
wanted to brief Hashimoto on the background to the policy.

"The president explained that making the national car in
cooperation with South Korea was not necessarily discriminative
to other countries," Moerdiono said without really explaining
himself.

He said it was a question of national interest and the option
of creating a national car with Korea was the only one open.

Neither Indonesian nor Japanese officials would say whether
the two leaders touched on possible solutions or if there was a
possibility of a Japanese firm receiving the same privileges in
order to allay Tokyo's protests.

Moerdiono only said discussions remained very warm and both
leaders agreed the issue would not harm the strong bilateral
ties.

Separately the head of the Indonesian Automotive Industry
Association, Herman Latief, yesterday expressed hope the issue
would be settled amicably.

He said despite the contrasting positions, the dispute should
not unsettle the overall framework of cooperation in other
fields.

As Indonesia's biggest trading partner, largest investor and
donator of aid, Japan is of high strategic importance.

Both leaders said they were pleased with the current state of
relations.

On regional issues, Hashimoto conveyed his desire for a
deepening of ties between Japan and the Association of Southeast
Asian Nations (ASEAN) of which Indonesia is a founding member.

Soeharto reacted positively to the idea of a Japan-ASEAN
summit and said it would be discussed with other ASEAN leaders
later this year.

Hashimoto also touched on the impending entry of Myanmar into
ASEAN. He said he hoped Myanmar's inclusion would be conducive to
progressive change by Yangon.

However the Japanese prime minister also said ASEAN should not
be used as a cover for oppression by Yangon.

Hashimoto departs Jakarta for Hanoi this morning. (mds)