EC calls for review of car policy

EC calls for review of car policy

JAKARTA (JP): European Commission Vice President Leon Brittan
has asked the Indonesian government to review its new national
car policy.

"We're very concerned over the policy. It is contrary to the
obligations Indonesia has undertaken with the World Trade
Organization (WTO) and the Trade Related Investment Measures," he
said after meeting President Soeharto yesterday.

The new automotive policy, issued in February, grants import
duty and luxury sales tax exemptions to cars which will be
produced by domestic companies and developed with domestic
technology, engineering and design.

But the government has turned down new proposals from
automotive firms to develop national cars, saying that it will
only extend the luxury tax and tariff breaks to PT Timor Putra
Nasional, which is controlled by President Soeharto's youngest
son Hutomo Mandala Putra.

Minister of Industry and Trade Tunky Ariwibowo said recently
that the government wants only one national car producer at a
time. "We want to see how this company progresses, at least, for
a three-year period," he noted.

Timor Putra has announced that it will build a sedan under the
Indonesian brand name "Timor" in cooperation with Kia Motors
Corp. of South Korea.

All other sedans sold in Indonesia face steep import and
luxury good taxes, which make up more than 60 percent of car
prices.

Japan expressed its concern when the policy was announced and
said that it breaches WTO regulations. It has already called on
other countries to join forces to persuade Indonesia to drop the
policy.

Brittan, who arrived here Monday for a two-day visit, noted
that it is not clear whether President Soeharto believes the car
policy is contrary to WTO regulations.

"He (President Soeharto) said that it will be only for three
years and after that Indonesia will comply with the WTO
regulations. He indicated the importance of complying with the
WTO," said Brittan.

According to Brittan, European Union sedan makers will be more
adversely affected by the car policy than their Japanese
counterparts, who dominate the Indonesian car market.

"We have separate and different interests which will not be
satisfied even if the Japanese were accommodated," he said.

He noted that the European Commission wants to take part in
the negotiations being pursued by the Indonesian and the Japanese
governments.

"We want to participate in the negotiations before a final
decision is made," he said.

Indonesia has planned to hold talks with Japan in the coming
weeks to discuss the impact of its car policy.

Brittan cited yesterday that changing regulations will
discourage investments in Indonesia. "If we come here to invest,
we don't want to see a change in regulations that will make our
investment uncertain," he said.

Brittan said that in his meeting with Soeharto, the President
mentioned the dumping charges demanded by European countries.

But Brittan pointed out that the anti-dumping policy in Europe
affected only 0.49 percent of Indonesia's total exports to
Europe. "That means 99.5 percent of Indonesia's exports to Europe
are not affected," he said.

At yesterday's meeting with Soeharto, Brittan also conveyed a
message from last week's 28th Quadrilateral Ministerial Meeting
of Canada, the European Union, Japan and the United States in
Kobe, Japan, which emphasized the need for full implementation of
WTO agreements.

On the last day of the quadrilateral meeting, the trade
representatives from the four parties criticized protective
measures taken by developing countries, particularly in their
automotive markets.

Participants at the meeting were Canada's Trade and Industry
Minister Art Eggleton, European Commission Vice President
Brittan, Japan's Trade and Industry Minister Shumpei Tsukahara,
and acting U.S. Trade Representative Charlene Barshefsky.

During his Indonesian visit, Brittan is also due to hold
meetings with Minister of Industry and Trade Tunky Ariwibowo and
Coordinating Minister for Production and Distribution Hartarto.
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