House members question controversial car project

House members question controversial car project

JAKARTA (JP): House of Representatives members suggested
yesterday the government revise its automotive development
policy, a policy which allows "national cars" to be manufactured
in South Korea by a foreign company.

"Regulations related to the national project are inconsistent
and contradict each other," a member of the House Commission VI
for industry, Frans Kerra, said during a hearing with Minister of
Industry and Trade Tunky Ariwibowo.

Frans contended that Presidential Decree No. 42/1996, which
allows the "Timor" car to be made in South Korea as long as
production involves Indonesian workers and includes Indonesian
components, contradicts previous regulations requiring the cars
to be produced in Indonesia by a company wholly owned by
Indonesian citizens.

In February, the government offered to drop import duties and
luxury sales tax on cars containing 20 percent local content by
the end of the first year of production. The domestic carmaker
had to increase this to 40 percent by the end of its second year,
and 60 percent by the end of the third year of production.

The government then appointed PT Timor Putra Nasional, a
company owned by President Soeharto's son Hutomo Mandala Putra,
as the only company eligible to produce the "national car". Timor
agreed to make the car in cooperation with Kia Motors Corp. of
South Korea.

Timor Putra, which didn't have a functioning assembly plant,
found it difficult to convince competitors to help assemble its
privileged automobiles. The President therefore issued Decree No.
42/1996, allowing Timor Putra to have the car manufactured in
Kia's South Korean industrial complex and then imported fully
assembled.

Yesterday, Minister Tunky said the government requires Kia and
Timor Putra to reach a countertrade arrangement. Kia must buy
Indonesian components worth 25 percent of the value of the cars
Timor will import.

He said the government required Timor Putra to establish a
banking guarantee equivalent to the duty and luxury tax that
would have been imposed on the tax-exempt cars.

If Timor Putra fails to meet the Indonesian component
condition, it will have to pay the unpaid duty and luxury tax on
each car imported, he said.

He said state-owned surveying company PT Sucofindo will be in
charge of verifying the local content of Timor Putra's cars.

Another commission member, Soenaryo Haddade, said the
government should drop the "national car" title because the
vehicles are obviously being made in South Korea, not Indonesia.

Responding to the commission members' suggestions, the
minister defended the regulations, saying the national car
project is not contradictory.

"The regulations are probably questionable if you read them
sentence by sentence," he reasoned. "But the idea is consistent
-- to develop the national car project." (kod)

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