'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)