Japan will suffer losses if it quits from Indonesia

Japan will suffer losses if it quits from Indonesia

JAKARTA (JP): State Minister of Investment Sanyoto
Sastrowardoyo said yesterday that Japan would suffer losses if it
stopped investing in Indonesia merely because of the national car
program.

"We shouldn't be worried because they would be the losers if
they abandon Indonesia, a huge market with high economic growth
and low production costs," Sanyoto said at his office here.

He responded specifically to a number of Japanese concerns
over Indonesia's national car program, which the Japanese say
discriminates unfairly against foreign firms.

The government announced in February that it was scrapping
import duties on components and a luxury sales tax for local car
makers able to meet local content requirements.

It announced later that PT Timor Putra Nasional, controlled by
President Soeharto's youngest son Hutomo Mandala Putra, would be
the only company to meet the new requirements.

The company has teamed up with Kia Motors Corp. of South
Korea, plans to develop a 1,500 cc sedan, to be called the Timor,
which will be ready for sale public in September.

Both the Japanese government and auto manufacturers, who have
a 90 percent share of the local market, have protested
Indonesia's car program, warning that it will discourage foreign
investment in the automotive sector and quite possibly other
sectors as well.

Sanyoto believes that the policy won't discourage foreign
investors from entering any sector other than the automotive
sector.

Sanyoto said yesterday that proposed Japanese investments
approved by the government as of May 15 had reached US$4.8
billion in 80 projects, more than the Japanese investment
approvals of some $3.7 billion for the whole year of 1995.

Investments

Sanyoto said that Indonesia's national car program serves to
correct the unfavorable way the industry has developed over the
last 20 years, which has seen a growing dependence on foreign
auto technology.

"Our automotive market has been dominated by automobile
producers from Japan, the United States and Europe for 20 years.
They are here only to sell their products; this results in high
imports in the sector," Sanyoto said.

According to official figures, Indonesia has long suffered a
lop-sided trade balance in this sector. Imports of automotive
products reached US$3.6 billion last year, about 10 percent of
total non-oil imports. Meanwhile, exports of automotive products
accounted for less than $250 million.

Sanyoto also blasted companies abroad for making it difficult
for its local partners to export automotive products because, as
he put it: "they only want to sell their products here and none
of the domestic assemblers have ever had any intention of
exporting their products."

Several years ago, Sanyoto recounted, Indonesia proposed
producing a number of components locally to an auto principal in
Japan. However, the company turned down the proposal four times.

Existing car assemblers have criticized the government for
handing a single well-placed company such an enormous advantage,
and argued that the criteria for being classified a "national"
car producer should at the very least be applied fairly to all.
The government has already made clear that the status of national
car will be awarded exclusively to the Timor car for at least
three years, even if other companies were able to meet the same
local-content threshold.

Sanyoto has accused the assemblers of merely talking hot air
when they said they were willing to develop their own national
cars. The latest plan to invest $100 million, for instance, was
only to build another assembly plant, not a manufacturing
facility.

"That's the difference between the existing car assemblers and
the national car program. We want to be independent in our own
automotive industry." Sanyoto was quoted by Antara as saying.
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