Indonesia unlikely to seek exemption from AFTA

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)