Japan remains concerned about RI car policy

Japan remains concerned about RI car policy

JAKARTA (JP): Japan remains concerned about Indonesia's national car program even though the controversial issue did not directly affect its loan commitments at the meeting of the Consultative Group on Indonesia (CGI), which has just ended.

Charge d'affaires of the Japanese embassy, Zenji Kaminaga said here yesterday that his government would continue to review Indonesia's national car policy on a bilateral basis.

"We're looking at the national car issue separately from the CGI meeting; Japan's loan commitment at the CGI is to enhance the economic and social development of Indonesia," he told the media here yesterday about the Japanese government's position on Indonesia's controversial car policy.

Speaking to newsmen at the announcement of the Japanese government's loan commitment for Indonesia for the 1996/97 fiscal year, Kaminaga said that bilateral talks about the national car policy, which have been going on since early April, would be continued.

"The negotiations are still in process and I can not predict the outcome," he said, expressing hope that the Indonesian government would encourage transparency and fairness in its economic activities.

The Indonesian government granted "pioneer" status in February to PT Timor Putra Nasional to produce a national car, in cooperation with Kia Motors of South Korea. This "pioneer" status affords the company a series of very useful tax breaks, including exemption from import duty and luxury tax.

These incentives, which will last for three years, will allow the company to sell its products at roughly two-thirds the price of Japanese makes of the same class (1,600cc engine).

The exclusive rights and tax breaks given to Timor Putra in developing the national car has been widely criticized; the company is controlled by President Soeharto's youngest son.

Major automobile giants from Japan, the United States and Europe demanded that the Indonesian government review the national car project, saying that the exclusive treatment given to Timor Putra violates the free trade principles set by the World Trade Organization.

Kaminaga said yesterday that the national car policy is not fair and breaks the WTO's rules, while saying that the closure of the Japanese market to foreign car makers in the past was a different story.

"The international environment is changing. We have all signed up to the WTO's free trade principles," he said. "So from this point of view, we should respect it," he added.

In the CGI's two-day meeting in Paris, the Japanese government pledged to provide Indonesia with US$2.16 billion in financial assistance to for 1996/97 fiscal year.

In term of yen, Japanese loan commitment rose by around 10 percent from last year's level but in dollars, it was almost unchanged from the $2.14 billion pledged in the previous year.

Economic observers had earlier predicted that the Japanese government's opposition to the Indonesian car policy could affect its financial assistance.(hen)