Sat, 03 Jun 2000

Govt lifts ban on imports of luxury cars

JAKARTA (JP): Minister of Industry and Trade Luhut Pandjaitan revoked on Friday a decree that banned the import of luxury cars, but will impose a high rate of duty to replace the ban.

Ministerial Decree No.192/2000 revokes decree No 49/2000, which then minister of industry and trade Yusuf Kalla issued last February to ban the imports of luxury cars.

"To remain consistent with regulations of the WTO (World Trade Organization), we have revoked the ban on imports of luxury cars," Luhut said in his opening speech at the seminar on the evaluation of the 1999 car industry deregulation and its impact.

Yusuf's decree prohibited imports of cars and sport utility vehicles with engine capacities exceeding 4,000 cc and 5,000 respectively, or with price tags of US$40,000 and above.

The decree was based on social consideration, as the import of such luxury cars could increase social jealousy.

Yusuf argued that his decree was not a violation to WTO's principle of an open market, as it did not discriminate between any specific car brands.

But Luhut said that a monitoring team comprising automotive experts, industry practitioners and the government had found it necessary to revoke the decree.

The team concluded that importing luxury cars were harmless to the local automotive industry because of their insignificant sales volume, the ministry's media statement said.

The team further concluded that banning luxury car imports was against WTO's principles and that it also opened opportunities for smuggling activities, the statement said.

"We have to follow the opening global market," Luhut later told reporters.

He said that lifting the ban would not destroy the local automotive industry, and that instead the industry should adapt itself to the conditions of the global market.

To compensate for the lifting of the ban, he added, the government would impose a high rate of duty on the imports of luxury cars.

"Somewhere between 130 percent to 135 percent," Luhut said.

Director general for Machinery, Electronics and Miscellaneous Industries Agus Tjahjana said imposing a 130 percent duty or higher was too high.

Agus said he could not estimate how high the duty rate would be imposed because such a decision would be made by the Ministry of Finance.

However, technical director of customs at the Customs and Excise Office Heriyanto Budisantoso said that thus far he had not heard of any plans to raise the tax rates for luxury cars.

Heriyanto said that with the removal of the ban, the previous import duty of 80 percent should be reimposed.

According to the existing regulation, imports of cars with engine capacity of above 3000 cc are subject to 80 percent import duty.

But chairman of the Association of Indonesian Automotive Industries (Gaikindo) Bambang Trisulo welcomed the move, saying the removal of the ban would create healthy competition in the market.

"It will be a win-win solution," Bambang said, "that could solve many things."

Importers would still be able to sell luxury cars while the government would enjoy greater income without violating WTO's principles, he said.

Bambang also said that the lifting of the ban would not harm the local automotive industry.

"We need the challenge," he said. (bkm)