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. (13)