EU to seek WTO panel on Timor car policy
EU to seek WTO panel on Timor car policy
GENEVA (Agencies): The European Union will next week ask fellow members of the World Trade Organization (WTO) to agree to set up a panel to look into Indonesia's controversial national car policy, trade diplomats have confirmed.
The move follows a similar request by Japan which was blocked by Indonesia at the last meeting of the WTO's Dispute Settlement Body on April 30.
The United States has had discussions with Indonesia over the policy and is widely expected to seek a panel itself.
All three powers argue that the policy discriminates against their own automobiles.
Indonesia has rejected their complaints, insisting it is not violating WTO's rules.
In February 1996, the government granted import duty and luxury tax exemptions to PT Timor Putra Nasional as the sole producer of a so-called national car, driving its cost down 60 percent less than other cars in Indonesia.
Timor Putra -- controlled by President Soeharto's youngest son, Hutomo Mandala Putra -- is cooperating with Kia Motors Corp of South Korea to produce the national car. It currently imports the car fully assembled from South Korea as its production facilities are still being built.
Last week a Timor Putra official said sports cars would also be imported from Kia Motors from early next year.
Trade envoys in Geneva said the announcement had angered many governments. "It looks as though the Indonesians plan to fight this case right down the line," said one.
Japanese officials said they would not be pressing for a panel at the next meeting of WTO's Dispute Settlement Body on May 23. "This will give Indonesia more time to reconsider what it is doing," one diplomat said.
Had Tokyo persisted, a panel would have been automatically set up as WTO rules only allow members to block a request once.
The dispute at the WTO has strengthened Indonesia's determination to speed up the car program. The government has ordered three state banks and 10 private banks to finance the construction of Timor manufacturing facilities.
The consortium of 13 banks, supervised directly by Bank Indonesia's Governor J. Soedradjad Djiwandono, were initially asked to lend US$1.3 billion to Timor Putra.
But Coordinating Minister for Economy and Finance Saleh Afiff was reported yesterday as saying in Jakarta that the loan would be less because its planned production capacity was based on an overestimate of car sales.
Afiff refused to give details of the credit cut. "What is clear is that it will be significant."
He said Timor Putra's projected sale of 200,000 sedans by 1999 was a big overestimation. He said even the country's best-selling vehicle, Toyota's Kijang van, sells only 70,000 a year.
Sedan sales in Indonesia account for only about 15 percent of auto sales or about 40,000 a year.
"We doubt the estimated sales of Timor cars can be met," Afiff said.
"By decreasing the syndicated loan to Timor, the bank consortium is more willing (to go on with the project). I think that's logical," he said.
In March, Soemitro Soerachmat, president of PT Timor Distributor Nasional -- a subsidiary of Timor Putra -- said the company had cut its monthly sales target from 4,000 vehicles to 2,500 following flagging sales.
Soemitro said yesterday Timor Putra would need only $670 million, not $1.3 billion, to construct its manufacturing plant with an annual capacity of 200,000 vehicles by the year 2000.
Timor Putra would initially produce 70,000 sedans and jeeps a year at its plant in Krawang, West Java, starting in 1998 but would gradually expand production to 200,000 vehicles a year in 2000, Soemitro said.
"This is to anticipate an increase in domestic market demand," Soemitro said as he inspected the assembling of Timor sedans at the Indomobil plant in Tambun, West Java. (rid)
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