Govt rules out more funding for national car

By Rita A. Widiadana

HONG KONG (JP): Minister of Industry and Trade Tunky Ariwibowo ruled out yesterday any immediate plan for the government to provide more funds for Indonesia's national car project, about which Japan filed a complaint to the World Trade Organization (WTO).

"The US$1.3 billion loan from a 13-bank consortium will, for the time being, be enough to finance the first stage of the plant to produce the national cars," Tunky said on the sidelines of the 13th International Apparel Convention here.

The two-day meeting, attended by more than 400 participants from the 25 member countries of the International Apparel Federation, ended yesterday afternoon.

Tunky acknowledged that establishing the automotive plant needed huge investment but said the existing loan from the consortium would be enough to build an assembly line and a unit to produce engines.

The government, under a presidential decree issued last year, assigned PT Timor Putra National, a company controlled by President Soeharto's youngest son Hutomo Mandala Putra, to produce the national cars.

Until the company finishes building its West Java plant by 1999, the government, also under a presidential decree, is allowing Timor Putra to import cars from its Korean partner, Kia Motors Corp., free from duties and luxury tax -- which are nearly twice the cost of producing a car.

Because Japan took their complaint to WTO's Dispute Settlement Body, the government has decided to help Timor Putra build its plant before 1999 by urging the consortium of local banks -- three state banks and 10 private banks -- to finance it.

Tunky said the government has set up a strong team of lawyers, from Indonesia and overseas, to defend Indonesia's interests at the WTO's dispute body.

When asked about Timor Putra's planned production capacity, Tunky said: "We have yet to decide the final capacity. It will certainly be adjusted to market demand."

Timor Putra was committed to selling up to 4,000 cars a month but its sales have declined significantly since early this year.

The United States and the European Union have also complained about Indonesia's car policy.

But Tunky said again yesterday that the United States had agreed to continue bilateral talks to look for a way of settling the issue.

"We are ready to find a solution satisfactory to both sides," he said.

Textiles

On Indonesia's textile and apparel industry, Tunky said the industry needed restructuring in term of technology, management, marketing and human resources to prepare for tighter market competition next century.

He said Indonesian textile-related manufacturers, for example, should be more market-oriented and quicker to respond to changing demand.

Tunky said Indonesian textile and clothing producers faced many problems including high interest rates.

"But banks are not the only source of finance. Companies can raise funds from other sources, such as the capital market," he said.