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)