'Japan unlikely to take RI to WTO'

JAKARTA (JP): The Japanese government may drop its plan to take Indonesia's national car policy to the World Trade Organization (WTO), according to the chief of the Indonesian Business Data Center.

Christianto Wibisono told reporters yesterday that Japan would instead seek a fair, or win-win, solution to end the car dispute.

"A win-win solution could be accepted as long as it will not be like the Carla Hills trade war threat pursued by the United States a few years ago," he said when commenting on Japan's plan to take Indonesia's controversial policy of providing tax breaks for national cars to the WTO.

In the early 1990s, U.S. Trade Representative Carla Hills threatened to impose high import surcharges on Indonesian textiles and plywood if it refused to open its market to U.S. fruits and motion pictures. Indonesia agreed to the U.S. demands.

Japanese Trade Minister Shumpei Tsukahara said in Tokyo last week that Japan intended to take Indonesia to the WTO as soon as it confirmed that the "Timor" cars, imported from South Korea but claimed by Indonesia as national cars had received preferential tariff treatment.

Christianto said yesterday that the win-win arrangement in dealing with the Indonesian car policy should be based purely on a give and take mechanism.

Indonesia, as the consequence of such a deal, should also be ready to compromise by allowing more than one company to develop so-called national cars. The tax breaks, now solely enjoyed by PT Timor Putra, should also be given to other makers of national cars.

"Japan, as part of the proposed comprise, should also allow Indonesia to limit the tax-break facility, for example to only three car makers, to ensure that the Indonesian national car manufacturing program will survive," he said.

Christianto said that if Japan does not seek such a win-win solution and goes ahead with its WTO plan, the Indonesian government is unlikely to drop its national car manufacturing program because it will still have the chance to develop it.

"The trial process in the international trade body will take time, probably more than two and a half years," he said. "It means that Indonesia still has much time to develop the national cars until the WTO is able to prove that Indonesia really breached its free trade principles."

He said that if Japan wins the trial, Indonesia would have to pay compensation to Japanese car makers, he said. "But the national car program will stay because that time, Timor Putra will receive no more special tax treatment," Christianto added.

In February the government granted pioneer status to Timor Putra to produce national cars in cooperation with Kia Motors of South Korea. The status gives the company a series of tax breaks, including exemptions from import duties and luxury taxes.

The tax incentives, which will last for three years, will enable the company to sell its products at half the price of Japanese makes of the same class (with a 1,600cc engine).

Under the national car scheme, Timor Putra must increase local content from 20 percent by the end of the first year to 60 percent at the end of the third year. The company is allowed to import the cars from Kia until the firm's own production factory starts operations.

Around 4,000 of the so-called national cars have arrived here from South Korea and the state-owned Bank Bumi Daya has issued bank guarantees for Timor Putra, so that the cars can be sold in the country. (hen)