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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