Japan demands fair auto industry

Japan demands fair auto industry

JAKARTA (JP): The granting of tariff and tax breaks to one single car company, owned by President Soeharto's youngest son, may have a negative impact on the country's investment climate, Japanese Ambassador to Indonesia Taizo Watanabe warned yesterday.

Watanabe told newsmen that Japanese businessmen saw the policy as inconsistent with Indonesia's deregulation measures designed to remove distortions in the market place.

"Not only the automotive industry, but also other industries are watching it carefully," Watanabe told journalists after signing diplomatic notes on Japan's grant assistance worth $15.6 million to Indonesia.

"They are very apprehensive about this. They are worried about what's going on here. And I'm trying to convey this message to the Indonesian government," he continued.

His government, Watanabe added, does not oppose the Indonesian government's "national car" policy as such, but it objects to the way it is being implemented, arguing it does not conform to standards of transparency, equity and fairness.

The government last month unveiled a package of tariff and tax breaks for PT Timor Putra Nasional, owned by Hutomo (Tommy) Mandala Putra, to produce a national car in cooperation with Kia Motors Corp. of South Korea.

A number of the existing car assemblers have expressed their interest in building similar cars to benefit from such tax and tariff incentives. However, Minister of Industry and Trade Tunky Ariwibowo affirmed early this month that the government will extend such tariff and tax breaks to only one company at a time.

Tunky also confirmed that Timor Putra will be the only car company to enjoy tariff and tax exemptions for the next three years.

Problems

Watanabe said that the new measure could create problems related to international agreements such as the World Trade Organization (WTO) and to such requirements as transparency, equity and fairness.

When asked if Japanese car manufacturers will hold back their investment here, Watanabe said, "the automotive industry in Japan is not under government control. So it's up to them to decide whether to stay on or to get out of here."

But he added that there were many other countries for Japanese car manufacturers such as Thailand, Malaysia and the Philippines.

Chairman of the Japan Automobile Manufacturers Association Masami Iwasaki was reported by AFP as saying on Thursday that the association would call on Indonesia not to provide preferential treatment for particular companies under the national car program.

"Fair competition is in the best interest of users," said Iwasaki, who is vice chairman of Toyota Motor Corp.

Iwasaki said the association had already sent a mission to Indonesia earlier this month over the issue.

Japanese cars dominate the market with a share of more than 90 percent.

Meanwhile, Minister Tunky told journalists at his office yesterday that he will explain things and reassure the Japanese car manufacturers next week that the government's basic policy on the automotive sector remains the same.

He also contended that Indonesia had not violated WTO rules by introducing the new measures. He argued that article 18 of the WTO gives leeway to developing countries to protect their domestic industries until the year 2000.

"We must be able to use this opportunity. If we do nothing to strengthen our industrial base, how we can win in open competition ?," Tunky said, adding that the policy is aimed at strengthening the national car industry.

Tunky confirmed that he plans to visit Japan in the near future, but refused to give any further details.

Indonesia has long suffered a lop-sided trade balance in the automotive sector. Imports of automotive products hit US$3.6 billion last year, or about 10 percent of the total non-oil imports. Meanwhile, exports of automotive products added up to less than $250 million. (kod/rid)

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