Japan asks for car tariff cuts

Japan asks for car tariff cuts

JAKARTA (JP): Minister of Industry and Trade Tunky Ariwibowo
said yesterday Japan had asked for tax and import tariff
reductions during its new round of talks with Indonesia on the
national car policy.

Speaking after meeting with President Soeharto at Bina Graha
presidential office, Tunky said that tariff reductions were in
line with Indonesia's deregulation plans.

"But we have to consider whether (Japan's) requests comply
with our interests within the national car policy... Moreover the
automotive sector has not been targeted in our new deregulation
measures (expected this month)," he said.

The minister did not say which taxes Japan was targeting.

Indonesia is currently holding talks with Japan, the United
States and European Union (EU) following complaints about its
national car policy. The policy grants tax and tariff exemptions
to PT Timor Putra Nasional, a company controlled by President
Soeharto's son, Hutomo Mandala Putra.

Tunky said suggestions for Indonesia to cut taxes, import
duties and other tariffs could not be accepted "just like that".

"We pay attention to every suggestion proposed by the
complainants, but we also have to tend to our national interest
and see to it that our national car project is not disturbed," he
said.

Tunky said every tax and import tariff cut would reduce state
revenue. And state revenue targets passed into law when the
House of Representatives approved the 1997/1998 budget bill in
March.

"So we have to consider two aspects: the national car project
and state revenue from taxes and import duties," he said. He
said his team of negotiators was currently studying Japan's
requests.

Tunky said Indonesia was holding bilateral talks with all
three complainants. Negotiations with Japan were on June 5 and
June 6.

The negotiation team is now in Geneva and was due to hold
talks there with the U.S and the EU yesterday and today.

Tunky said Soeharto had ordered him to continue negotiations
with Japan, the U.S and the EU.

"But the negotiations should not harm our national interest,"
he said, quoting Soeharto.

Reports earlier this week said the World Trade Organization
(WTO) seemed set to create a dispute panel sought by the EU and
Japan on the national car policy.

Both trade powers had put their second requests for separate
panels on the agenda of a meeting of the WTO's Dispute Settlement
Body (DSB) scheduled for Thursday.

Under the trade body's rules a panel will be established
automatically after the second request from a complainant.
Indonesia blocked earlier panel bids by the two, who are strongly
supported by the U.S.

Soeharto, in February last year, ruled that producers of the
so-called national car would be granted import duty and luxury
tax exemptions, which usually account for 60 percent of the
retail price of cars in Indonesia.

Timor Putra was chosen as the sole national car producer on
the condition that it must achieve a local content of at least 60
percent within three years (by 1999).

International criticism of the car policy intensified when the
government allowed Timor Putra to import up to 45,000 fully-
assembled sedans, called Timor, from South Korea's Kia Motor Corp
while its own assembling plant is being built in West Java. (pwn)