Indonesia unlikely to seek exemption from AFTA

JAKARTA (JP): Indonesia will unlikely ask for an exemption from the ASEAN Free Trade Area (AFTA) for its car industry, Director General for Metal, Machinery, Electronics and Various Industries, Agus Tjahajana, said here on Wednesday.

Agus said the government had so far seen no strong reasons to delay the commitment to AFTA, which was scheduled for full implementation by 2003 for the automotive sector.

"Why do we need to ask for an exemption? We've seen no justification to do so," he said on the sidelines of a meeting with House Commission V in charge of trade and industry.

He said the opening of local car markets would mostly affect the foreign car makers, which now assemble and sale their products in Indonesia as well as in other ASEAN countries, but not Indonesia's own national car production.

"Unlike Malaysia, which has a strong national car project, Proton, we have no national car products to be protected so we don't need to ask for exemption," he said.

Indonesia's national car project was suspended in January 1998 after a strong protest from the World Trade Organization because of the discriminative tax facility given for the project.

Agus said that since Indonesia's car industry is still dominated by foreign brands, it will be the foreign car assemblers who will face tougher competition from other foreign car assemblers operating in other ASEAN countries.

"So the competition will only emerge between and among themselves and I'm sure they will be able to manage it," he added.

Local automotive manufacturers, mostly operating in partnership with Japanese and European car makers, have recently called on the government to ask for exemption from AFTA by two or three years in order for the local car industry to fully recover before opening up the market.

They said Indonesia had two good reasons to ask other ASEAN members to delay AFTA's schedule on the car industry because its car industry has not recovered from the crisis and because the ASEAN members have not achieved a harmonized settlement for the car component sector in the planned liberalization of the auto industry under AFTA.

Agus said his office had not received any complaint about Indonesia's commitment for AFTA from local car producers or experts.

AFTA is a pact among the 10 member countries of the Association of South East Asian Nations (ASEAN), comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Under AFTA, ASEAN countries will see a free flow of automotive products since the import tax on automotive products will be cut to a maximum 20 percent by the year 2000, and will be cut further to between zero and five percent by 2003.

However, local or regional content for ASEAN members must be at least 40 percent of their finished automotive products to be sold within the region.

Malaysia has made a special request that it be allowed to maintain protective tariffs on automobile imports until 2005, saying it needed to further strengthen its Proton national car program before joining AFTA.

ASEAN economic ministers meeting in Yangon earlier in May agreed to consider Malaysia's request and will decide on the matter in October. (cst)