Govt rules out policy changes on automotive sector
Govt rules out policy changes on automotive sector
JAKARTA (JP): Minister of Industry Tunky Ariwibowo ruled out any governmental policy changes in the near future on the automotive industry, saying that the 1993 deregulatory package on the industry is still attractive to private investors.
The fact that three Japan-based automobile companies have committed to investing a total of US$1.25 billion in Indonesia within the next four years indicates that the current policy is still attractive, he said in a hearing with the commission for manufacturing, energy and mining affairs of the House of Representatives here yesterday.
The three companies are Toyota, with a committed investment of $600 million, Isuzu with $400 million and Suzuki with $250 million.
He denied rumors that the government would alter their policy on the automotive industry.
Tunky said the investment commitments by the three Japanese companies would not only increase their market share in Indonesia but also meet the growing demand in the region.
The June 1993 package was an attempt to change the government's program of expanding the country's automotive industry and ease import restrictions on assembled vehicles.
The government presently imposes a 175 percent import duty on sedans and station wagons not assembled in Indonesia. On top of the duty, imported assembled vehicles are also subject to a 100 percent surcharge.
Incentives
To strengthen the structure of the country's automotive industry, Tunky said that, in the long run, the government will give bigger tariff incentives to vehicle assemblers using a large portion of local components.
"The greater the portion of local components, the greater the rewards will be," Tunky said, adding that the government will not change such a policy in the near future.
The new General Agreement on Tariffs and Trade (GATT), which has been in effect since Jan. 1, requires every signatory country to drop their local-content requirements within five years.
The local content portion in automotive vehicles currently ranges from between seven percent and 51 percent, while imports of car components last year reached US$2.1 billion.
After attending the hearing, Tunky briefed journalists on the "completely knocked-down" term, which he said was misunderstood.
In an article published in Kompas yesterday, analyst Kwik Kian Gie suggested that the government make the import tariffs on completely assembled cars the same as those cars that come in "completely knocked-down" as components. This, in his view, would force domestic car assemblers to improve efficiency.
Since deregulation in 1993, said Tunky, vehicle assemblers no longer import "completely knocked-down" cars and, instead, import individual components and already-assembled vehicles.
Tunky also conceded that the government's policy was responsible for pushing automotive prices to the highest levels in the world. The government, he said, takes the largest portion of the increases -- up to 60 percent of sale prices.
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.
Last year the government collected Rp 3.3 trillion ($1.5 billion) from sales tax on automotive vehicles.
Tunky said that the government will continue to cut import tariffs on industrial products, including automotive products, in a bid to prepare local industries for competition on the global market. (rid)