Govt protection for car industry reduced
Govt protection for car industry reduced
JAKARTA (JP): The government yesterday promised to gradually lower the levels of import tariffs on automotive products in a bid to prepare the country's automobile industry to compete on the global market.
"This year, we will again lower our import tariffs on assembled vehicles and automotive components. And We will further lower them gradually every year," Director General of Metal, Machinery and Electronic Industries Effendi Sudarsono told journalists after addressing an automotive seminar yesterday.
Last October, the government lowered the import duty on assembled vehicles whose type is not assembled in Indonesia by 25 points to 175 percent.
On top of the duty, imported assembled vehicles are also subject to a 100 percent surcharge.
When asked, Effendi declined to reveal when and by how much the government would cut the import tariffs this year, saying that his office had no authority to disclose that information.
He explained that such planned deregulatory measures are intended to make the automotive industry more efficient and thus increase the competitiveness of the industry.
"The protection given to the automotive industry has been too much and for too long," Effendi told the seminar. "And consequently the industry is not able to grow well and is not ready to compete in an open market."
The government has given protection to the automotive industry since the early 1970s. Analysts claim that the protection has been misused by car assemblers, who have used the huge profits gained from selling their products at far above the real prices to expand their businesses into other sectors.
"The people are complaining about the high prices of automobiles in Indonesia, as compared to those in neighboring countries," Effendi said.
Domestic sales of automotive vehicles, whose production costs include import duties on components, are subject to a 10 percent value added tax and a luxury tax of up to 35 percent.
Open
Meanwhile, Herman Z. Latif, chairman of the Indonesian Automotive Industry Association, called on domestic car assemblers to prepare themselves for entry into an open market because Indonesia has committed itself to opening its market considerably by 2020 as stipulated by the Bogor Declaration of the Asia Pacific Economic Cooperation (APEC) forum.
At the forum's second summit, held in Bogor last November, APEC leaders agreed to completely liberalize trade and investment in the region by 2020. Developed members have until 2010 to remove all barriers, while APEC's developing members have until 2020.
Once the Indonesian market is open, Herman said, many foreign automotive manufactures will try to sell their vehicles here because Indonesia, with its large population (currently more than 190 million people) is a very attractive market.
Herman predicted that the Indonesian market will absorb at least 500,000 automobiles per annum by the year 2000. Last year, 320,563 units were sold here, representing an increase of 52 percent from 210,679 units in 1993.
To support the automotive industry, Effendi said, the government has adopted an incentive policy for local manufacturers of car components by cutting import tariffs on sub- components, in some cases removing them altogether. Previously, all imports of car components and sub-components had been subject to a 100 percent duty and a 10 percent value added tax.
Effendi said the growth of local automotive manufacturing continued to be hindered because of difficulties faced in the sub-contracting of component manufacture.
Local content of automotive vehicles currently ranges from seven percent to 51 percent, while imports of car components last year reached US$2.1 billion. (rid)