Govt to ax local content on automobiles

JAKARTA (JP): The government plans to scrap all rules and incentives designed to encourage increased local content in automobiles in a wide sweeping revision of policy which will bring the country into compliance with international trade rules, Minister of Industry and Trade Rahardi Ramelan said on Friday.

Under the new regulations, which have yet to be announced, the government will harmonize import duties on vehicles and relax restrictions on imported components in a bid to make the country's automotive industry more competitive, he said.

"This policy will inflict temporary pain on some inefficient automobile and component manufactures, but in the medium to long- term, it will definitely be beneficial to our local auto industries and help them to prepare for an era of free trade.

"The new policy will also help to bring about a more competitive pricing of vehicles, so in that respect it will benefit both consumers and producers," the minister said in a news conference.

Rahardi said that the changes would help to rebuild the local automotive industry, which has been devastated by the economic crisis. Local automobile manufacturers are currently operating at 15 percent of their production capacity, he added.

Under the new policy, Rahardi said import tariffs would no longer be determined by the local content in vehicles and would instead depend on whether vehicles were brought into the country as component parts and assembled here, or imported ready to drive.

The government currently encourages manufacturers to use a higher local content by charging higher duties on vehicles which depend heavily on imported components.

However, under an agreement struck with the International Monetary Fund (IMF), the government is required to abolish all remaining quantitative import restrictions and other non-tariff barriers, including local content regulations, by the year 2000.

Rahardi also said the government would not give special treatment to any automotive projects, including the now defunct national car project under PT Timor Putra Nasional -- a company controlled by former president Soeharto's youngest son, Hutomo Mandala Putra.

"There will be no more national car projects. All car projects will receive the same treatment," he said.

Rahardi also said that he would lead a trade mission of 35 local businesspeople to Japan and Taiwan from May 10 to May 15 to keep the business communities in the two countries well informed about the current situation in Indonesia.

The mission will hold business meetings in Tokyo with representatives from leading companies including Toyota Motors, Honda, Daihatsu Motor Co., Mitsubishi Corp, Hino Motors Ltd. and Isuzu Motors. (gis)