Kia and Timor required to make countertrade deal

By Riyadi

SEOUL (JP): The Indonesian government has asked Kia Motors Corporation of South Korea to buy car components off PT Timor Putra Nasional before exporting the "national cars" to Indonesia.

Kim Seung-ahn, executive vice president of Kia Motors, said here yesterday that Indonesian Minister of Industry and Trade Tunky Ariwibowo had told his company to buy auto parts from Indonesia worth 25 percent of the value of Kia's assembled cars to be exported to Indonesia.

"We are now under negotiations to make contracts between Timor Putra and Kia Motors on how to materialize the countertrade," Kim said in an interview with The Jakarta Post.

Kim said a committee of representatives from Kia Motors, Timor Putra and the Indonesian Ministry of Industry and Trade was discussing which parts to import.

Timor Putra, controlled by President Soeharto's youngest son Hutomo Mandala Putra, is the only company allowed by government to follow the "national car" program. The program grants tariff and tax incentives for three years. Timor Putra and Kia Motors are developing the Timor 1,500 cc car under this program.

Timor Putra initially planned to assemble Timor cars in Indonesia at other car companies' assembly plants, because its own plant in Cikampek, West Java, would not be ready until 1998. The company has not found any suitable plants.

The government then let Timor Putra import its South Korean made cars duty free for one year so long as the cars were assembled here with 20 percent Indonesian content.

Chairman of Kia Motors Kim Sun-hong described the new countertrade requirement as a burden. But he still wants to make Indonesia's national car program successful.

"We understand that there are some limiting factors from our point of view, for instance, the issue that we have to purchase some 25 percent of Indonesian parts. We have to modify our designs," Kim Sun-hong said.

Kim Seung-ahn, who is chief of the Indonesia-Korea project at Kia Motors, confirmed his company would produce Timor cars at its auto factory at Asan bay, Chungchong, South Korea, using some Indonesian trainees.

"They work as trainees here. They are trained directly on the assembly lines. Our people and your people are working together. On one side it is training and on the other side it is a manufacturing process," Kim said.

The first 60 Indonesian trainees would arrive later this month and 1,000 are expected to arrive within a year, he said.

He said the first shipment of Timor cars would arrive in Indonesia early July and be on sale in September.

Kia Motors will ship 4,000 Timor cars per month until March 1997. In April 1997, the cars' components will be exported from Korea and assembled in Indonesia.

"And we will start to manufacture Timor cars in the Cikampek facility in two years from September this year," he said.