Indonesia won't quit WTO despite car dispute: Tunky

JAKARTA (JP): Indonesia will not resign its World Trade Organization (WTO) membership and it wants a peaceful solution to its car dispute with the world's three largest trading powers, Minister of Industry and Trade Tunky Ariwibowo said yesterday.

The European Union (EU), Japan and the United States have all protested Indonesia's national car policy.

"We will not quit the WTO just because of our domestic policy (on the national car development)," Tunky told journalists after inaugurating a fragrance factory in Cimanggis, West Java.

He explained that Indonesia, a signatory of the WTO agreement, would continue to support the WTO to help facilitate international fair trade.

A number of experts, including World Bank consultant Hartojo Wignjowijoto, suggested recently that Indonesia should abandon the WTO if it wanted to proceed with its controversial national car program.

Hartojo said that if Indonesia wanted to follow the WTO, it would eventually lose to the three trading powers, considering that the WTO followed their rules of law.

Tunky confirmed yesterday that the United States had submitted its request for formal consultation with Indonesia on Tuesday, following similar moves by the EU and Japan last week.

Consultation

Indonesia expects its dispute with the three powers will be settled through consultation, so that the dispute need not go before a WTO panel, he said.

"I realize that we are facing the world's three economic giants. However, I'm still optimistic that we will win. I also hope this matter can be settled through the bilateral consultations," Tunky said.

Halida Miljani, Indonesian ambassador for special affairs on the WTO in Geneva, said that Indonesia was pursuing a peaceful solution through its formal consultations with the EU, Japan and the United States. She said Indonesia was not promising any compensation for the three powers.

"Why should we give compensation if we are doing the right thing. Our national car policy does not contradict WTO rules," Halida was quoted by Antara as saying yesterday.

She said that WTO rules have been interpreted differently by each member country, especially when a conflict or dispute arose between them.

Indonesia has its own reasons for establishing a national car policy. As a developing country, Halida said, Indonesia had special rights to manage its domestic business affairs, and such rights were recognized by the WTO.

Indonesia's national car policy, announced in February, grants tariff and luxury-tax exemptions for three years to PT Timor Putra Nasional to develop a national car, known as Timor. The company is controlled by Soeharto's youngest son, Hutomo Mandala Putra.

But to qualify for tax concessions, the company must reach a 20 percent local content level in its cars by the end of its first year of production, a 40 percent level by the end of its second year and a 60 percent level by the end of its third.

Earlier this month, Timor Putra began selling its fully imported Timor sedans, made by PT Timor Putra Nasional's joint- venture partner Kia Motors Corp. of South Korea. These cars qualify as Indonesian national cars.

Timor Putra plans to begin assembling Timor cars next March, before fully manufacturing them in 1998.

The three trading powers consider that the national car policy discriminates unfairly: The three powers' own companies have a large share of the booming automobile market in Indonesia.

Halida said that Japan was wrong to claim that Indonesia's car policy breached the WTO's most-favored nations principles.

"The (Indonesian) government did not specifically decide to choose South Korea as the beneficiary of its national car policy. It is the decision of the businessman (Hutomo). So, it does not relate directly with the government's policy," she contended.

In bilateral consultations with the three powers, Indonesia will be represented by Halida and five assisting lawyers, including two from the United States and one from the EU.

Hutomo said yesterday he was willing to help fund the government's efforts to settle its auto dispute with the three trade powers.

"If just to help, it's all right," Hutomo said after witnessing the signing of agreements between PT Kaltim Methanol Industries, an affiliate of his Humpuss Group, and state-owned PT Pupuk Kalimantan Timur.

Tunky said recently that the government would bear all the costs of processing the dispute at the WTO, including the legal costs. (mds/rid)