Government to cut import duties on truck, bus components

Government to cut import duties on truck, bus components

By Sylvia Gratia M. Nirang

TOKYO (JP): Indonesia is to cut the import duties imposed on
components to be used in heavy commercial vehicles, such as
trucks and buses, to below 15 percent.

Agus Tjahajana, the director general of metal, machinery,
electronics and automotive industries at Indonesia's Ministry of
Industry and Trade, said here on Tuesday that the lower duties
would be imposed on components which could not be produced
locally.

He said the lower duties are intended to address a growing
concern among Japanese car manufacturers that Indonesia's new
automotive policy, which eliminates tax incentives given to
automotive producers with high local content, would increase the
price of trucks and busses in Indonesia.

"Japanese car manufactures fear they will pay import duties of
15 percent regardless of how much local content in their
products," Agus said after a private meeting with Japanese car
manufacturers.

Under the current automotive policy, Agus said, the government
imposes no import duties on components imported for heavy
commercial vehicles with local content over 30 percent.

But under the new automotive policy to be issued soon, the
local content requirement would be abolished. All automotive
companies, as a consequence, have to pay import duties according
to the existing import tariffs.

The import tariffs for components used for heavy commercial
vehicles is 15 percent.

"They (Japanese car makers) fear that the 15 percent import
tariff will burden them and jack up the prices, which would drag
down the sluggish domestic sales further," he said.

"The government has agreed to lower the import tariffs on
components. But it will be applied only to those which can not be
produced locally. This decision is made after considering that
trucks and buses are economical vehicles and are used to carry
goods and people. The price increase would have an effect on the
distribution of goods."

The meeting with Japanese car manufacturers was held as part
of the Indonesian trade and investment mission to Japan. The
mission, joined by 35 Indonesian companies, is led by Minister of
Industry and Trade Rahardi Ramelan.

The meeting was attended by the Japanese Automobile
Manufacturers Association (JAMA), Isuzu, Toyota Motor
Corporation, Honda Motor Co., Mitsubishi Motor Corporation and
Hino Motors.

Japan has one of the world's strongest car manufacturing
industries, with annual production reaching 10 million vehicles.

The country's car makers with partnership operations in
Indonesia are Daihatsu, Hino, Honda, Isuzu, Mazda, Mitsubishi,
Nissan and Nissan Diesel, Suzuki and Toyota.

Partnerships are in the form of joint ventures, technical
assistance schemes and production contracts.

Rahardi said that Japanese car manufacturers also warned the
government that the new automotive policy should not increase the
price of small commercial vehicles and small sedans.

He added that the Japanese companies also asked the government
not to differentiate the tariffs on diesel and gasoline engines.

"They also urged us to implement the new policy gradually. But
we cannot do it because the new policy is needed to create a more
effective and efficient Indonesian automotive industry," Rahardi
said.

Rahardi said Japan's automotive manufacturers believe the
future of the Indonesian car market will remain bullish despite
the current sluggish market.

He said the Japan-based parent companies would inject their
Indonesian operations with fresh capital, providing loans or
advance payments to assembly plants for car components.

"They are also interested in buying Indonesia's idle assembly
plants," he said.

Rahardi said the Japanese car producers have arranged a number
of approaches, such as shifting the market to overseas and
improving workers' productivity during the crisis.

Many Japanese companies, he said, have told him that they
would use the production slowdown to improve the technology and
human resources of their local partners by providing extensive
training for their workers.

He said Japanese-based car makers would also try to raise
exports of complete vehicles and auto parts products from
Indonesia to offset the sharp drop in domestic sales.