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)