Govt rules out more funding for national car

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.