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)